From infrastructure gold mining to application monetization! Goldman Sachs Group, Inc. assesses: the AI sector is entering a significant transition, with Microsoft Corporation (MSFT.US) expected to be a key beneficiary.

The AI bull market is reaching an important turning point. Over the past two years, investors have flocked to AI "tools" such as chip and network equipment suppliers, but the winds are shifting. Investors are no longer simply chasing larger models or data centers; instead, they are demanding that AI deliver quantifiable real returns. Goldman Sachs Group, Inc. pointed out that Microsoft Corporation (MSFT.US) is poised to become a core beneficiary of this style shift due to its deep integration into the daily work software ecosystem of billions of workers. In its latest monthly report, Goldman Sachs Group, Inc. has included Microsoft Corporation in its U.S. "Conviction List," maintaining a "Buy" rating for the stock and raising its target price from $610 to $640, which is 31% higher than the current stock price level. More importantly, the "Conviction List" highlights the investment targets with the highest potential for appreciation and the highest confidence level, indicating that Goldman Sachs Group, Inc. is more optimistic about Microsoft Corporation than about typical "Buy" ratings. Gabriela Borges, a software industry analyst at Goldman Sachs Group, Inc., noted that the narrative around AI investment is experiencing a subtle yet significant shift: the focus of funding is gradually shifting from AI model training infrastructure suppliers to platforms that can transform AI into sustainable enterprise revenue. Enterprise AI applications are becoming Microsoft Corporation's biggest opportunity. The enterprise AI track is seen as Microsoft Corporation's most important growth line at present. In the past, market speculation around AI concentrated on underlying computing power infrastructure; as the industry pushes into a new phase, the key to success lies in how to implement commercially viable AI services across a vast number of enterprises. Microsoft Corporation's latest quarterly earnings report has already provided clear evidence that AI investments are beginning to substantial returns. The report indicated that Microsoft Corporation's Q4 revenue reached $90.01 billion, an 18% year-on-year increase, significantly exceeding analysts' expectations of $87.7 billion. Among these, revenue from Azure and other cloud services grew by 43% year-on-year, marking the fastest growth rate since 2022. Microsoft Corporation also revealed that Azure's annual revenue has exceeded $100 billion for the first time, becoming the company's third "billion-dollar" business pillar after Office and Windows. Currently, Alphabet Inc.'s Class C parent company Alphabet dominates the enterprise AI application field, with nearly 90% of the Fortune 100 companies adopting its Gemini enterprise version. However, Microsoft Corporation disclosed in its latest earnings report that its paid seats for 365 Copilot have surpassed 30 million, a significant increase from about 20 million three months ago, indicating a continuous rise in adoption rates of its flagship AI assistant in enterprise settings. This data is crucial because Azure is no longer just a cloud server leasing provider. It has become the foundation for Microsoft Corporation's AI services, while Microsoft 365 Copilot provides enterprises with practical ways to deploy AI in emails, spreadsheets, programming, meetings, and business workflows. This is precisely why Goldman Sachs Group, Inc. is optimistic about Microsoft Corporation's business model: training large AI models requires substantial capital investment, but selling AI-powered productivity software based on a subscription model can create sustainable, high-margin recurring business revenue. Borges pointed out that "one of the main arguments for the market being bearish on Microsoft Corporation in the past 6 to 12 months was that the Copilot product had yet to reach its ideal state." However, she added that product quality is constantly improving, and the increase in user numbers helps to create a "positive feedback loop." Goldman Sachs Group, Inc. expects that as Copilot continues to penetrate the market, AI operational efficiency continues to optimize, and enterprise-wide deployments become the norm, the earnings per share growth for Microsoft Corporation will rise from about 12% in fiscal year 2027 to over 20% in fiscal year 2029. AI investment shifts: the first wave of winners is infrastructure, the next wave belongs to software. Over the past two years, the biggest winners in the AI market have concentrated in the infrastructure sector. Chip manufacturers and hardware suppliers have profited immensely as businesses require computing power to deploy AI. However, the market landscape is changing. As enterprise clients transition from the AI experimental stage to large-scale deployment, the advantages of software platforms that have already established deep relationships with clients are continuously emerging. Microsoft Corporation reaches hundreds of millions of commercial users through platforms such as Windows, Microsoft 365, Teams, Dynamics, GitHub, and Azure. Adding AI capabilities to existing mature products that clients are already paying for is far easier than persuading companies to adopt an entirely new system. Of course, Microsoft Corporation still faces multiple challenges ahead: capital expenditures for AI infrastructure remain high; competition from cloud providers such as Alphabet Inc.'s Class C and Amazon.com, Inc. is intensifying; and the pace of enterprise AI implementation may lag behind market optimism, slowing the speed of commercialization. The AI boom is expected to continue, and Wall Street analysts are strongly bullish on Microsoft Corporation. In short, Goldman Sachs Group, Inc. does not believe that the AI infrastructure boom will come to an end here; however, the biggest investment opportunities are shifting: the market will increasingly favor companies that can translate computing power investments into long-term stable enterprise revenue. Microsoft Corporation's strong earnings report, Azure achieving a billion-dollar annual revenue milestone, and Copilot's paid seats exceeding 30 million indicate that this transformation has already begun. For long-term investors, this is a line of investment with stronger sustainability. Building AI infrastructure has created the winners of the first round of the AI bull market, while helping enterprises apply AI in daily operations could spark the next batch of winners. Goldman Sachs Group, Inc. is optimistic about Microsoft Corporation seizing the initiative in this track. Tipranks data shows that the vast majority of Wall Street analysts are optimistic about Microsoft Corporation, with a consensus rating of "Strong Buy" and an average target price of $560.22, corresponding to a potential upside of approximately 15%.