Piper Sandler is bullish on Microsoft ‘s artificial intelligence potential. Analyst Brent Bracelin raised his price target on shares to $400 from $348, saying he was increasing estimates “for an AI all-star.” The new price target implies 20.7% upside from where the stock closed Tuesday. He also maintained his overweight rating on the stock, noting the company’s AI tailwinds have parallels to its large Cloud division. “We have increasing confidence that MSFT has the courage, conviction, and history to bring AI to the masses based on bullish commentary coming from 3P data for April and the Build developer conference in Seattle. Recall, Microsoft Cloud is poised to exceed $110B in F2023 which is larger than the entire business in F2013 at $78B. We think the Microsoft AI opportunity could be bigger than cloud,” Bracelin wrote in a Tuesday note. Microsoft shares have been on fire this year, surging more than 38%, as excitement grows around the prospects of AI. MSFT YTD mountain MSFT in 2023 Bracelin said elevated AI investments could result in a “gross margin drag,” which he noted could be offset by tighter operating expense management. He lowered his earnings per share forecasts 5 cents and 7 cents, respectively, for the 2024 and 2025 fiscal years. The analyst added, however, “AI tailwinds can justify further multiple expansion as AI news flows further converts into higher confidence in out-year growth.” — CNBC’s Michael Bloom contributed to this report.