Will Chatbot Monetization Move the Needle for MSFT Stock?

It’s only been a month since Microsoft solidified its partnership with OpenAI. That’s when the company announced its multi-billion-dollar investment in the ChatGPT developer. Thanks to this deal, Microsoft has secured the ability to integrate the AI lab’s technology into Bing and other platforms.
But now, given the monetization news, the company may soon be able to receive a payoff from its massive investment in this potentially disruptive technology. Admittedly, at this point, it is difficult to determine how much increased revenue/profitability may result from Microsoft’s chatbot endeavors.
However, the company has stated that each additional percentage point of market share that Bing gains in the search market equates to $2 billion in additional revenue. If generative AI search enables Bing to increase its advertising conversion rate, it’s possible that the platform may also be able to increase how much revenue it generates per click.
Although AI-powered search queries cost 10 times more than traditional keyword searches, the incremental margins will likely be high. So, what does the prospect of accelerated growth for Bing mean for MSFT stock in the near to medium term? Again, it’s up for debate.

Since the chatbot monetization story broke last week, one sell-side analyst (Wedbush’s Dan Ives) has already come out with a take on what this development means for shares moving forward.
According to Ives, Microsoft’s monetization of this technology could add $20 per share to the MSFT stock price over the next 12 to 18 months. That said, one could argue that MSFT’s lift in price since late January at least partially prices in the chatbot monetization catalyst.
Although shares have pulled back in recent days, MSFT remains up by around $12 per share, compared to where it was before the OpenAI deal was announced on Jan. 23. However, there may be a silver lining to this: Microsoft’s current “AI premium” could evaporate as focus shifts back to near-term headwinds.
As I recently argued, upcoming results and guidance updates may dampen confidence in the company’s ability to re-accelerate growth starting in 2024, even if recent A.I. monetization efforts drive growth for Bing this year. If this happens, Microsoft shares could cough back all of their latest gains — and then some.