What happened
Shares of Salesforce (CRM +2.00%) rose by as much as 4.7% on Wednesday before settling back to a 2.7% gain as of 2:24 p.m. ET.
Salesforce had already enjoyed a nice recovery in 2023, and the stock is now up more than 76% on the year. But the leading customer relationship management (CRM) software-as-a-service player added to its rally after unveiling pricing for its new generative AI tools.
As we saw with Microsoft (MSFT 1.40%) Tuesday, tech companies putting the price tags on their new AI products seems to be a ticket to stock price gains.
NYSE: CRM
Key Data Points
So what
On Wednesday, Salesforce unveiled prices for new generative AI products that it will be infusing across its sales and service offerings. The Sales GPT and Service GPT services will each be $50 per month per user, and each will come with a limited number of Einstein GPT credits. (Einstein is Salesforce's name for its artificial intelligence platform, which it had already been using to make its leading enterprise software offerings smarter.)
One example of what Sales GPT can do is generate personalized emails automatically based on contextualized consumer data, while Service GPT can generate automatic responses to customers and auto-summaries of customer interactions.
In any case, Salesforce rose one day after Microsoft announced it would be making its AI CoPilot feature available within its Office software suite for an extra $30 per user per month.
While these products and pricing are just being introduced to customers, it appears investors are appreciating the marriage of AI hype to actual revenues and profits.
It's worth noting that Salesforce doesn't have its own generative AI models. According to an announcement back in June, Salesforce will be using large language models (LLMs) from the Amazon Web Services marketplace, including start-ups Anthropic, Cohere, and others. In addition, Salesforce said it has an agreement with Microsoft investee OpenAI -- even though Microsoft and Salesforce are rivals in the CRM space.
So what does Salesforce bring to the table? Management notes that its EinsteinGPT Trust layer assures customers their proprietary sales data will be separated from the open LLMs. And since Salesforce is the largest CRM company in the world, it possesses a treasure trove of proprietary data that it can bring to bear to help its clients more efficiently reach and interact with their customers, while efficiently cataloging, tracking, and making sense of their interactions.
Now what
It was a good day for Salesforce, but we are still early in the generative AI era. And while Salesforce isn't a cloud infrastructure provider or LLM developer, it may be advantaged by virtue of its leading market share in the CRM space.
For an optimistic take, it's possible that generalized LLMs will become somewhat commoditized, and that the biggest beneficiaries of AI will be companies that have the largest amounts of proprietary data. With the leading CRM market share and its massive $32 billion in revenue, that would put Salesforce in a good position.
On the other hand, Microsoft is also a player in CRM, albeit a smaller one. And large, well-managed tech giants like Oracle, Adobe, and HubSpot are also challengers. Could Microsoft's direct investment in OpenAI give it an advantage over Salesforce? Or could other players leap on AI capabilities to gain newfound strength and take market share? Time will tell.
