Bernstein sees DeepSeek AI as a boon for Microsoft stock

Wednesday, Bernstein analysts discussed the potential impacts of the new DeepSeek™ Generative AI models on the software industry, noting that the technology could be particularly beneficial for Microsoft Corporation (NASDAQ:MSFT). For investors seeking deeper insights into the AI revolution’s impact on software companies, InvestingPro offers comprehensive analysis of 1,400+ US stocks, including detailed AI exposure metrics and growth potential assessments. The analysts believe that Microsoft’s focus on AI applications and inferencing will not be hindered by the advent of DeepSeek, and may, in fact, result in cost savings and increased adoption due to potential reductions in the cost of building and operating AI models.

Microsoft’s AI business is poised to benefit from lower costs associated with AI model training and inferencing. The analysts predict that this could lead to a decrease in Microsoft’s cost of goods sold (COGs), enabling the company to offer more competitive pricing, which could drive higher customer satisfaction and adoption rates. The impact of these developments is expected to be discussed further during Microsoft’s earnings report tomorrow.

Oracle Corporation (NYSE:ORCL), on the other hand, experienced a downturn as the recent surge in valuation attributed to the Stargate initiative was reversed, with the stock falling nearly 11% over the past week. According to InvestingPro data, Oracle maintains strong financials with $54.93B in revenue over the last twelve months, though current valuations appear stretched based on multiple metrics. Despite this, Bernstein analysts maintain that the impact on Oracle’s recognized performance obligations (RPO) will be minimal, as revenue from Stargate has not been significant thus far. They also expect OpenAI to continue training models, which could reduce costs and lead to the creation of more models.

Adobe Inc. (NASDAQ:ADBE) has developed its own specialized AI models, and the firm suggests that while lower training costs could potentially increase competition, Adobe’s industry knowledge, access to creative content, and extensive non-Generative AI capabilities provide a competitive edge. Moreover, smaller AI models could enable Adobe to enhance end-point functionality, stimulating demand and reducing costs.

The analysis also indicates that MongoDB , Inc. (NASDAQ:MDB) and Snowflake Inc . (NYSE:SNOW) could gain from an increase in inferencing, as more companies build Generative AI applications, potentially leading to a rise in database queries. Similarly, companies like Salesforce.com, Inc. (NYSE:CRM), SAP SE (NYSE:SAP), and Workday, Inc. (NASDAQ:WDAY) are expected to benefit from decreased inferencing costs and the availability of specialized models, which could lower operational costs and, in turn, prices for customers, while also increasing inferencing activity. Get exclusive access to detailed financial health scores and comprehensive analysis of these software leaders through InvestingPro’s extensive database of financial metrics and expert insights.

In other recent news, Oracle Corporation has seen significant developments. The software giant recently partnered with SpaceX’s Starlink to enhance its Enterprise Communications Platform, providing global broadband connectivity to its customers. This strategic move allows Oracle’s customers in over 100 countries to utilize satellite connectivity, facilitating operations across various sectors.

Oracle also reported a robust financial performance, with a gross profit margin of 71.26% and annual revenue of $54.93 billion, marking a 6.4% year-over-year growth rate. In analyst notes, Oracle experienced a mix of ratings, with Mizuho (NYSE:MFG) Securities reiterating an Outperform rating while Monness, Crespi, Hardt downgraded its shares from Neutral to Sell.

The company also participated in the Stargate AI project, a massive initiative that has received commitments from tech giants like Microsoft and SoftBank (TYO:9984) Group. This project aims to channel up to $500 billion into AI development.

Furthermore, Oracle emerged victorious in a Delaware Supreme Court case related to its acquisition of NetSuite Inc., lifting uncertainty that had been hovering over the company’s executive leadership. These are the recent developments in Oracle Corporation.

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