Microsoft is primed to enjoy its next cycle of growth. On Wednesday, the company started selling the Microsoft 365 Copilot artificial intelligence add-on for its Office app subscriptions targeting businesses.
The feature that appears in Word, Excel and other Office programs will cost $30 per person per month. That can add up to over $10 billion in annualized revenue by 2026, Piper Sandler analysts Brent Bracelin and Hannah Rudoff wrote in a note to clients earlier this week.
Microsoft aims to make the most of its commanding lead in the productivity software market, where Google has been working to gain share. Google, meanwhile, is selling the Duet AI enhancement for subscriptions to its Workspace tools.
Piper Sandler’s model assumes that 18% of eligible users will use Copilot. That might be aggressive, but “there’s going to be a FOMO element to this,” Bracelin told CNBC in an interview on Tuesday, using the acronym for fear of missing out. “If you’re in an industry competing against someone that has Copilot and you don’t, you’re at a disadvantage.”
Piper Sandler has the equivalent of a buy rating on Microsoft shares, which are up 41% this year, compared with a gain of 9% for the S&P 500 index, of which it’s included.
“Customers tell us that once they use Copilot, they can’t imagine work without it,” Microsoft CEO Satya Nadella told analysts on a conference call last week.
After revealing plans for Copilot in March, Microsoft announced in September that it would first target the largest companies. On last week’s call, Nadella said 40% of the companies in the Fortune 100, a ranking of U.S. companies by revenue, were using Copilot in an invitation-only paid early-access program announced in May, calling out five clients by name: Bayer, KPMG, Mayo Clinic, Suncorp and Visa.
The preview was announced in May, less than six months ago. As a result, there isn’t a wealth of data on how Copilot affects performance.
“A lot of the conversations we’ve had even with the early-access customers is too short a timeframe to really look at the qualitative aspects of how they’re using the tools,” said Jason Wong, an analyst at technology industry researcher Gartner.
Companies need at least 300 licenses for employees to get access to Copilot. The challenge for Microsoft is to go beyond a small core of end users and land a wide deployment. That could take time.
Wong said Gartner encourages organizations to experiment with generative AI, which can create synthetic images and text with just a few words of human input.
“I think getting to 20% will be reasonable within two to three years for technologies like Copilot, because there’s going to be early adopters, and there’s going to be fast followers,” he said.
It might be easiest for companies to distribute Copilot to the mostly highly paid executives, whose time is precious, said Piper Sandler’s Bracelin. The tool could help them prioritize email messages and quickly understand documents.
But the top brass might end up causing headaches for tech support, Wong said. It might be wiser to first give Copilot to technically savvy employees who have drawn on generative AI for personal use and are familiar with shortcomings such as the potential to spout inaccurate information, Wong said. Microsoft acknowledges on its website that “the responses that generative AI produces aren’t guaranteed to be 100% factual.”
That hasn’t discouraged people from using ChatGPT, the chatbot from Microsoft-backed OpenAI whose language models are at the core of Copilot. After ChatGPT launched in November 2022, Microsoft and other large software companies moved quickly to incorporate similar generative features. Microsoft says prompts and responses in Copilot aren’t used to train language models and adhere to the company’s privacy standards.
Microsoft won’t only benefit from the new monthly Copilot fees. While setting up the tool, companies might end up using additional Azure cloud services, such as Purview for managing data, Wong said.
(L-R) Apple CEO Tim Cook, Vivek Ramaswamy and Secretary of Homeland Security Kristi Noem attend the inauguration ceremony before Donald Trump is sworn in as the 47th U.S. President in the U.S. Capitol Rotunda in Washington, D.C., on Jan. 20, 2025.
Saul Loeb | Afp | Getty Images
While the stock market broadly fared better on Monday than in the prior two trading days, Apple got hammered once again, losing 3.7%, as concerns mounted that the company will take a major hit from President Donald Trump’s tariffs.
The sell-off brings Apple’s three-day rout to 19%, a downdraft that has wiped out $638 billion in market cap.
Apple is one of the most exposed companies to a trade war, analyst say, due largely to its reliance on China, which is facing 54% tariffs. Although Apple has production in India, Vietnam and Thailand, those countries also face increased tariffs as part of Trump’s sweeping plan.
Among tech’s megacap companies, Apple is having the roughest stretch. On Monday, the only stocks to drop in that group of seven were Apple, Microsoft and Tesla.
The Nasdaq finished almost barely up on Monday after plummeting 10% last week, its worst performance in more than five years.
Analysts say Apple will likely either need to raise prices or eat additional tariff costs when the new duties come into effect. UBS analysts estimated on Monday that Apple’s highest-end iPhone could rise in price by about $350, or around 30%, from its current price of $1,199.
Barclays analyst Tim Long wrote that he expects Apple to raise prices, or the company could suffer as much as a 15% cut to earnings per share. Apple may also be able to rearrange its supply chain so that imports to the U.S. come from other countries with lower tariffs.
A customer checks Apple’s latest iPhone 16 Plus (right) and Apple’s latest iPhone 16 Pro Max (left) series displayed for sale at Master Arts Shop in Srinagar, Jammu and Kashmir, on Sept. 26, 2024.
Firdous Nazir | Nurphoto | Getty Images
President Donald Trump’s reciprocal tariffs could lead Apple to raise the price of the iPhone 16 Pro Max by as much as $350 in the U.S., UBS analysts estimated Monday.
The iPhone 16 Pro Max is Apple’s highest-end iPhone on the market, and currently retails for $1,199. UBS is predicting a nearly 30% increase in retail price for units that were manufactured in China.
Apple’s $999 phone, the iPhone 16 Pro, could see a smaller $120 price increase, if the company has it manufactured in India, the UBS analysts wrote.
Shares of Apple have plummeted 20% over the past three trading days, wiping out nearly $640 billion in market cap, on concern that Trump’s tariffs will force the company to raise prices just as consumers are losing buying power.
“Based on the checks we have done at a company level, there is a lot of uncertainty about how the increased cost sharing will be done with suppliers, the extent to which costs can be passed on to end-customers, and the duration of tariffs,” UBS analyst Sundeep Gantori wrote in the note.
Apple, which does the majority of its manufacturing in China, is one of the most exposed companies to a trade war. China has a potential incoming 54% tariff rate — before new increases were proposed Monday. Smaller tariffs were also placed on secondary production locations, such as India, Vietnam and Thailand.
JPMorgan Chase analysts predicted last week that Apple could raise its prices 6% across the world to offset the U.S. tariffs. Barclays analyst Tim Long wrote that he expects Apple to raise prices, or it could suffer as much as a 15% cut to earnings per share.
If Apple were to relocate iPhone production to the U.S. — a move that most supply chain experts say is impossible — Wedbush’s Dan Ives predicts an iPhone could cost $3,500.
Morgan Stanley analysts on Friday said Apple could absorb additional tariff costs of about $34 billion annually. They wrote that although Apple has diversified its production in recent years to additional countries — so-called friendshoring — those countries could also end up with tariffs, reducing Apple’s flexibility.
After last week’s “reciprocal tariff announcement, there becomes very little differentiation in friend shoring vs. manufacturing in China — if the product is not made in the US, it will be subject to a hefty import tariff,” Morgan Stanley wrote.
Last week, the firm estimated that Apple may raise its prices across its product lines in the U.S. by 17% to 18%. Apple could also get exemptions from the U.S. government for its products.
Kimbal Musk, co-founder of The Kitchen Community, speaks during the annual Milken Institute Global Conference in Beverly Hills, California, May 3, 2016.
Patrick T. Fallon | Bloomberg | Getty Images
Elon Musk’s younger brother, Kimbal, took to the social network X on Monday to lambaste President Donald Trump’s tariffs, calling them a “structural, permanent tax on the American consumer.” He also said Trump appears to be the “most high tax American President in generations.”
“Even if he is successful in bringing jobs on shore through the tariff tax, prices will remain high and the tax on consumption will remain the form of higher prices because we are simply not as good at making things,” Kimbal Musk wrote on X, one of the companies in his brother’s extensive portfolio.
The younger Musk owns a restaurant chain called The Kitchen, is a board member at Tesla and a former director at SpaceX and Chipotle. He has also co-founded and invested in other food and tech startups, including Square Roots, an indoor farming company, and Nova Sky Stories, a creator of drone light shows that he bought from Intel.
Elon Musk is a top advisor to Trump, overseeing the so-called Department of Government Efficiency, or DOGE, an effort to drastically cut federal spending, largely through layoffs, and consolidate or eliminate agencies and regulations. However, his relationship with some key figures in the Trump administration has been showing signs of strain in recent days as the president’s sweeping tariffs have led to a dramatic selloff in stocks, including for Tesla, which is down 42% this year and just wrapped up its worst quarter since 2022.
Over the weekend, Elon Musk took aim at Trump trade advisor Peter Navarro, disparaging his qualifications in a post on X.
“A PhD in Econ from Harvard is a bad thing, not a good thing,” Musk wrote, after Navarro told CNN on Saturday that “The market will find a bottom” and that the Dow will “hit 50,000 during Trump’s term.” It’s currently at about 38,200.
Musk also said that Navarro hasn’t built “sh—.” Navarro told CNBC on Monday that Musk is “not a car manufacturer” but rather a “car assembler,” dependent on parts from Japan, China and Taiwan.
Tesla was seeking a more moderate approach to trade and tariffs in a recent letter to the U.S. Trade Representative.
According to Federal Election Commission filings, Kimbal Musk this year has contributed funds to the Libertarian National Committee and Libertarian Party of Connecticut. In 2024, while his brother became the biggest financial backer and promoter of Trump, Kimbal donated to Unite America PAC, a group that markets itself as a “philanthropic venture fund that invests in nonpartisan election reform to foster a more representative and functional government.”
A representative for Kimbal Musk didn’t immediately respond to a request for comment.