Wells Fargo & Company: The wave of open-source models is sweeping through the AI community, and Microsoft Corporation (MSFT.US) and ServiceNow (NOW.US) will become major winners.

Wells Fargo & Company recently released a research report stating that the continued advancement of open-source models is a positive development for large legacy platforms such as Microsoft Corporation (MSFT.US) and ServiceNow (NOW.US). The analyst team led by Michael Turrin indicated that the development of open-source models is accelerating, with representative projects including Moonshot AI's Kimi K3, Z.AIAI (Z.ai)'s GLM 5.2, and DeepSeek's DeepSeek V4. The team anticipates that the U.S. market will also heat up, with projects like Meta (META.US)'s "Thinking Machines" and vendors such as NVIDIA Corporation (NVDA.US) also deserving attention. The Turrin team noted, "An increasing number of market participants advocate embracing open-source models, as evidenced by the open letter issued by NVIDIA Corporation on July 24, endorsed by Microsoft Corporation, Meta, Palantir, ServiceNow, and IBM. Although the attitudes of leading U.S. laboratories are more cautious, overall acceptance of open-source models is positive for the entire ecosystem, as it will effectively lower intelligence costs and expand the access and use of AI." The analysts further explained that the industry is shifting from "focusing on the number of tokens" to "focusing on value output." Their research results show that open-source models are increasingly favored by users due to lower costs, weaker lock-in effects, and greater security and controllability. Clients are increasingly willing to turn to "good enough" open-source models to supplement the high costs of cutting-edge models, seeking a more balanced trade-off between cost and performance. This trend indicates that market preferences are gradually shifting toward output quality and actual value, driving cost curve optimization, which ultimately benefits the AI consumer end. The Turrin team believes that the evolution of open-source models is a positive signal for large legacy software vendors, as AI is naturally integrated into workflows. "The reduction in reasoning costs means that the threshold for acquiring intelligence within familiar, mature applications is lower, while the market risk of a 'one model fits all' approach is also reduced. A typical example is Microsoft Corporation's Copilot, where enhanced intelligence capabilities provide additional value to its already solid security and enterprise-level positioning." Moreover, the reduction in intelligence costs will also stimulate software development activities, positively impacting companies such as Datadog (DDOG.US), MongoDB (MDB.US), Atlassian (TEAM.US), and GitLab (GTLB.US), but it will accelerate the squeeze on the survival space of small to mid-sized and niche players.