Microsoft (MSFT 0.22%) has been one of the clear early winners of the shift to artificial intelligence (AI). It was quick to recognize the potential implications and developed generative AI tools that are integrated across Microsoft's vast portfolio of products and services.

Despite being the world's most valuable company (in terms of market cap), one Wall Street investment bank believes there's more upside to come.

Microsoft can fly higher from here thanks to Copilot

RBC Capital analyst Rishi Jaluria raised his price target on Microsoft to $500 while maintaining an outperform (buy) rating on the stock. For those keeping score at home, that represents potential upside of 18% compared to its closing price on Monday. Furthermore, with 7.4 billion shares outstanding, a $500 stock price would push Microsoft's market cap to $3.7 trillion.

The analyst cited a meeting with Microsoft's investor relations chiefs for fueling his bullish take. The discussion centered on the company's AI "leadership" and the vast opportunity ahead. It isn't surprising that AI was the main topic of conversation, especially given several announcements at this week's Microsoft Build 2024 developer conference.

The company introduced a new lineup of AI-powered devices, dubbed Copilot+ PCs, that will hit shelves next month. The company also expanded its Copilot lineup to include a version for Microsoft Teams, which aims to help users be more productive.

The evidence suggests the analysts are on to something. The company's flagship Copilot for Microsoft 365 was just the start. The company has quickly developed a roster of Copilots specifically designed for IT, sales, service, and finance, with more on the drawing board.

Microsoft's Azure Cloud is another example of an early lead in AI. Azure took market share from its cloud infrastructure rivals in each of the two most recent calendar quarters. Management noted that AI services "contributed seven points" to Azure's cloud growth in the quarter ended March 31.

At just 36 times forward earnings, Microsoft stock is a steal, particularly given its AI-fueled growth.