Tech giant Microsoft (MSFT) has become a buying opportunity following concerns over its data center and AI rollout plans.
Falling Stock Price is a “Misread”
Darren Aftahi, analyst at Roth, said investors were “misreading” reports that Microsoft had canceled the leases of at least two new data centers with a total capacity of 200MW. This had raised concerns that OpenAI was shifting workloads from Microsoft to the Stargate partnership with Oracle and Softbank and that MSFT had over-inflated its potential AI demand.
Microsoft said that it was still committed to spending around $80 billion on data centers this year but investors appear wary. Its stock fell 1% in early trading today. In the last five days, it is down around 4%. The uncertainty has also spread to companies levered to AI data centers and power generation. Computer networking company Arista Networks (ANET) was down 2% in early trading with energy company Vistra (VST) slumping 6%.
No Change in Demand for MSFT
Aftahi said that the capacity decision had been made because of Microsoft’s changed relationship with OpenAI and not from a drop off in demand. Indeed, he said the “supply/demand imbalance is very much real and will be for the foreseeable future.” He said MSFT was actually expanding its Data Center capacity in areas such as San Antonio and Poland. He added: “The MSFT news is concerning and because of who it is, is exacerbating weakness in the space. So what do we do? We buy the opportunity.”
Bank of America also retained its Buy rating and $510 price target for the MSFT stock. It said that although the company may strategically adjust their infrastructure spending it is not “easing up on Capex in any material way.”
Is MSFT a Good Stock to Buy Now?
On TipRanks, MSFT has a Strong Buy consensus based on 29 Buy and 3 Hold ratings. Its highest price target is $600. MSFT stock’s consensus price target is $510.38 implying an 27.79% upside.
