Salesforce, Microsoft and the great AI agent race

The artificial intelligence software industry is witnessing an intensifying competition between tech giants Salesforce and Microsoft, with both companies developing AI agent tools aimed at automating business tasks.

Market developments: Deutsche Bank has raised its price target on Salesforce to $365, citing the company’s new AI suite, Agentforce, as a key growth driver.

• Salesforce shares have surged more than 30% since mid-September when Agentforce was unveiled at the company’s annual conference
• The stock is trading near its all-time high of $341.73, with a year-to-date gain of 28%
• Industry conversations indicate strong interest in Agentforce, with reports of a mid-seven figure deal already secured

Technical innovation: Agentforce represents Salesforce’s second major attempt to leverage generative AI technology, following the relatively unsuccessful Einstein Copilot initiative.

• Agentforce enables the creation of autonomous AI agents that can complete tasks without supervision, such as updating shipping addresses on placed orders
• The platform became generally available on October 25, marking Salesforce’s entry into the next frontier of AI beyond basic chatbots
• This advancement positions Salesforce in the emerging field of AI agents, which are designed to take action rather than just provide responses

Competitive dynamics: Microsoft has responded with its own suite of AI agent tools announced at the Ignite conference, intensifying the rivalry between the two tech giants.

• Salesforce CEO Marc Benioff has publicly criticized Microsoft’s AI offerings, particularly its Copilot tool, comparing it to the outdated Clippy assistant
• Microsoft CEO Satya Nadella has highlighted Copilot’s success, claiming it’s the fastest-adopted Microsoft 365 suite with 70% penetration among Fortune 500 companies
• Microsoft’s stock has gained approximately 9% since the start of 2024, lagging behind Salesforce’s performance

Strategic implications: The success of Agentforce could mark a significant shift in Salesforce’s growth strategy.

• The company has historically relied on major acquisitions like Slack and Mulesoft to drive growth
• A successful Agentforce rollout would validate Salesforce’s internal innovation capabilities
• Analysts caution against overestimating the immediate impact, noting that the technology is still in its early stages

Looking beyond the rivalry: Despite the heated competition and Benioff’s criticisms, industry experts suggest both companies have strong potential in the AI space.

• Microsoft’s track record of successful pivots and deep technical expertise suggests it shouldn’t be underestimated
• The early stage of AI agent technology leaves room for multiple successful players in the market
• Investors may benefit from maintaining positions in both companies rather than choosing sides in this technological race