Microsoft Attracts Analysts’ Buy Ratings Despite High AI Capex Plans

Tech giant Microsoft (MSFT) continues to attract Buy ratings from analysts despite high capital expenditure plans, with significant investments in AI (artificial intelligence). On January 4, Microsoft announced that it will spend roughly $80 billion on AI infrastructure and data centers in 2025 to handle advanced AI workloads. The news was seen as a catalyst for MSFT’s growth prospects, compelling Wall Street analysts from four renowned firms to reiterate their Buy views on the stock.

Let’s take a quick look at their views:

• Bernstein Lifts Price Target – Five-star analyst Mark Moerdler lifted the price target on MSFT stock to $516 from $511, implying 22.2% upside potential from current levels. The analyst pointed out that investors are worried about Microsoft’s ability to convert high capex spending into revenue. However, he believes that Microsoft is rightly investing in growing its global capacity for inferencing needs instead of investing in compute. Moreover, Moerdler believes that the capex growth is expected to slow in the near term and that Azure Cloud revenue is expected to bolster by 35%-40% year-over-year in the first half of 2025.
• Jefferies Sticks to its Street High Price Target – Analyst Brent Thill has the highest price target so far on Microsoft stock, putting into perspective his strong conviction in the company’s future potential. The price target of $550 implies an impressive 30.2% upside potential. The analyst remains confident about MSFT’s return on AI/capex investments, although he believes that the gains will be long-term rather than near-term.
• Citi Bullish on Strategic AI Investments – Citi analyst Tyler Radke maintained a $497 price target on MSFT stock owing to its strategic AI investments and solid growth prospects from Azure. Radke pointed to MSFT’s $80 billion spend as a firm commitment to strengthen its AI capabilities in 2025. He also sees Azure gaining momentum in the second half of Fiscal 2025 as capacity constraints ease.
• Piper Sandler Hikes PT – Analyst Brent Bracelin hiked the price target to $520 from $470, implying 23.1% upside, calling MSFT one of the Top Picks for 2025. Bracelin is highly optimistic about large vendors set to benefit from the AI boom. Although the analyst sees multiples and earnings remaining pressured in the short term, MSFT’s head-start in AI gives it an edge to drive massive profit growth in the long run.

Overall, the four analysts are highly encouraged by Microsoft’s growth prospects in the AI realm even though it calls for huge capex spend currently. In the long term, analysts see Microsoft as one of the largest beneficiaries of the AI revolution.

Is MSFT a Strong Buy?

As can be seen from the above views, analysts are highly bullish on Microsoft stock. On TipRanks, MSFT stock commands a Strong Buy consensus rating based on 27 Buys and two Hold ratings. Also, the average Microsoft stock price target of $503.61 implies 19.2% upside potential from current levels. In the past year, MSFT shares have gained 13.6%.

See more MSFT analyst ratings

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