Club names Salesforce (CRM), Microsoft (MSFT) and Apple (AAPL) are showing their AI pricing power, as Big Tech expands its efforts to make a profit from rapidly evolving technology. Over the past year, the AI ​​arms race has bolstered the tech sector on Wall Street, with major companies announcing successive plans to incorporate new iterations into their businesses. The tech-heavy Nasdaq Composite has climbed more than 38% year-to-date on AI, fueling optimism on the streets and in Silicon Valley. The AI ​​boom offers a $6 trillion opportunity for tech companies, according to an April Morgan Stanley report, citing the potential for the budding technology to revolutionize online search, e-commerce and content for major players. Here are the latest AI developments at Salesforce, Apple and Microsoft, as well as our take on the news. MSFT YTD Mountain Microsoft (MSFT) since the beginning of the year. The news: Microsoft unveiled costs for its new Generative AI subscription service on Tuesday, which will charge users an additional $30 per month to use the feature with popular products like Word, Excel and Teams. Microsoft’s co-pilot could increase monthly prices for customers by up to 83%, according to the company. Microsoft shares jumped 4% on the news, before giving up a fraction of those gains on Wednesday. Following the announcement, Barclays raised its price target on Microsoft to $445 per share from $336 previously. Elsewhere, Wells Fargo has predicted an additional $60 billion revenue opportunity for the product. The Club’s view: Microsoft will likely generate additional revenue from the software giant’s recurring subscriptions to its enterprise customers. The product’s $30 monthly costs are well above the $10 estimates, showing that Microsoft has the pricing power needed for its mission-critical software and generative AI services. The stock will likely rise accordingly, and we advise investors not to sell stocks at this time. “My friends, who work in this business (of) software, think the Copilot is amazing and they’ll pay the $30 no problem,” Jim Cramer said Wednesday. “It’s very progressive. It’s a remarkable product.” AAPL YTD Mountain Apple (AAPL) since the beginning of the year. The news: On Wednesday, Bloomberg reported that Apple was working on its own generative AI software, which could put the iPhone maker in direct competition with Microsoft and Alphabet (GOOGL) Google. While the report notes that a generative AI chatbot that “essentially replicates Bard, ChatGPT, and Bing AI, and includes no new features or technologies” is already in use internally, it’s less clear what Apple’s consumer-facing angle might be for the new technology. The Club’s take: It’s no surprise that we’re obviously delighted to hear that Apple is working on its own generative AI product. Although the company has implemented some form of artificial intelligence throughout its ecosystem, we have yet to see an AI product comparable to or as directly interactive as OpenAI’s ChatGPT – the technology Microsoft has integrated into its Bing search engine – or Google’s BARD. A generative AI experience built into Apple devices, however, would be a brand new feature for users. Apple’s intelligent assistant Siri would be the natural place to implement generative AI within the Apple ecosystem. One challenge, however, is that Apple takes user privacy seriously. Since a large language model comparable to ChatGPT and BARD would need to learn and remember past user interactions, the privacy element is likely under review within the company and indicates a longer time to market. But if they clear that hurdle, it could be a game-changer for the company’s product offerings. CRM YTD Mountain Salesforce (CRM) since the beginning of the year. The news: Salesforce has officially brought generative AI capabilities to two flagship products, Sales Cloud and Service Cloud, advancing the enterprise software company’s revenue strategy for the hot tech trend. In a press release Wednesday, Salesforce said its Sales GPT and Service GPT tools are now more widely available, ending the pilot phase that granted access to a limited number of customers. Salesforce shares rose more than 2% on Wednesday, to more than $233 apiece. Sales GPT and Service GPT are included in the company’s Sales Cloud Einstein and Service Cloud Einstein products, respectively, which cost $50 per month per user. Einstein is the brand name for Salesforce’s existing basket of AI tools, such as predictive models, and was first unveiled in 2016. The company promotes both generative AI tools as a way to improve productivity. Club Takeaway: By expanding the availability of Sales and Service GPT, Salesforce is making its existing offerings even more compelling and essential for customers. We’ve long believed this to be true — and that’s why we welcomed Salesforce’s price hike announcement last week with open arms — but Wednesday’s generative AI incremental updates reinforce our belief. Consider that a recent KeyBanc Capital Markets survey of more than 100 small and medium-sized businesses found that more than 75% of respondents believe it’s important to assess software vendors’ generative AI capabilities. The same survey also revealed that spending on customer relationship management software is among the highest budget priorities. Morgan Stanley’s CIO survey came to a similar conclusion last week. In this context, it is encouraging to see Salesforce using AI to ensure that its customer relationship management offerings maintain their competitive position. This should contribute to its reputation not only with existing customers, but also with potential new customers. (Jim Cramer’s Charitable Trust is long MSFT, AAPL, CRM, GOOGL. See here for a full stock list.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
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Club names Selling power (CRM), Microsoft (MSFT) and Apple (AAPL) are showing off their AI pricing power, as Big Tech expands its efforts to make a profit with the rapidly changing technology.
