Microsoft’s AI Security Bombshell: Is Copilot a $20B Game-Changer for MSFT Stock?

Rich Duprey
4 min read
0
In this article:

Artificial intelligence has been a driving force throughout the $223 billion cybersecurity industry. Harnessing its power to sift through trillions of events and quickly recognize and respond to potential threats, AI is able to learn, grow and become even more efficient over time. This will have important implications for Microsoft (NASDAQ:MSFT) stock.

MSFT stock is about to enter the cybersecurity market with Copilot for Security. It’s a ChatGPT generative AI-powered chatbot that uses natural language inputs to deliver tailored insights and guide a company’s next steps. Built on the tech giant’s existing threat intelligence gathering, Copilot for Security gives IT professionals access to the latest information on security threats and Microsoft’s 78 trillion daily signals that the company already collects.

Cybersecurity has been a growing business for MSFT stock for some time. It accounted for more than $20 billion in fiscal year 2022 revenue, greater than gaming or search advertising. The new AI-powered solution could become a massive business opportunity that could present a serious challenge to the likes of CrowdStrike (NASDAQ:CRWD), Cloudflare (NYSE:NET), Zscaler (NYSE:ZS) and others in the space.

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Everything AI

Since investing billions of dollars into OpenAI, Microsoft integrated the outfit’s generative AI chatbot service into all of its services. It makes these Copilot add-ons available to customers for a monthly fee. The Bing search engine Copilot may be the most consumer-facing iteration of how AI has been infused into the company but it is also present throughout the Azure cloud service business and Office 365 platform.

Fourth quarter revenue surged 18% in 2023, its best showing in two years, due to artificial intelligence boosting adoption of its products. Azure revenue alone jumped 30%. CEO Satya Nadella said in a statement, “We’ve moved from talking about AI to applying AI at scale.” Because the technology is only just beginning to flow through the company future quarters could see even greater growth. Copilot of Security could magnify the effect even more.

Making cybersecurity a top priority

MSFT stock is adopting a subscription-based pricing model for using the new cybersecurity tool based on actual usage. When the service becomes widely available on Apr. 1, the tech giant will charge $4 per “security compute unit” allowing customers to buy only what they actually need. As the business grows, they can buy more. But more importantly, the pricing option could allow more businesses to adopt the Copilot module as they first test out the service and then move on to become advanced users of the service. The pricing could make it much more accessible to businesses allowing Microsoft to leapfrog its way into an industry-leading position.

Oil giant BP (NYSE:BP) was an early user of Copilot for Security. CNBC quotes its vice president of cyber defense Chip Calhoun as saying, “Copilot has made us more efficient and helped us to find attack patterns that could easily be missed without specific use cases.”

It takes a lot to get it right

Microsoft is not the first to put artificial intelligence to work in cybersecurity. CrowdStrike offers Charlotte AI, a generative AI security tool that can process over 2 trillion events per day making 180 million indications of attack decision every second. Zscaler just acquired AI security startup Avalor to bolster its own AI-driven protections.

Similarly, SenitnelOne (NYSE:S) offers AI-enhanced protections while Cloudflare introduced a suite of protections that generative AI can introduce into a system. For example, Firewall for AI is “a protection layer that can be deployed in front of large language models to identify abuses before they reach the models.”

And yet Microsoft suffered a large data breach in its executive emails earlier this year. It also affected the systems of the tech giant’s cybersecurity and legal teams. It could be a sobering moment for Microsoft that it claims to protect your business but can’t even stop a breach of its own systems.

Copilot for Security could be a big opportunity for Microsoft but competition is fierce here. Just because MSFT might be the biggest name in the business doesn’t mean it will upend the market. It should provide incremental growth for the tech leader but existing providers have nothing to worry about. At least not yet.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.

More From InvestorPlace

The post Microsoft’s AI Security Bombshell: Is Copilot a $20B Game-Changer for MSFT Stock? appeared first on InvestorPlace.

Advertisement

Recommended Stories