Microsoft could see solid gains on the back of the company’s artificial intelligence products, according to Cantor Fitzgerald. The investment firm initiated shares of the “Magnificent Seven” tech titan at an overweight rating and set a price target of $509. This implies nearly 20% upside from Thursday’s close. Analyst Thomas Blakey pointed to Microsoft’s status as an artificial intelligence beneficiary as a catalyst for the bullish call. “Azure is benefiting from AI-related revenues growing triple digits of late with expectations strong growth will continue in the NT,” he wrote. “Supply constraints may be easing in 2HF25 (FYE June) with other hyperscalers along with Microsoft expecting a ramp in AI-related revenue as supply comes online for already-booked business.” Copilot, Microsoft’s AI chatbot, also offers “multi-hundred-billion dollar” opportunities for the company and revenues with “huge growth potential” which could lead to multiple expansion, the analyst added. Blakey added that lower capital expenditures for the company could spark volatility and likely lead to an initial decline for shares. “We would view this as a buying opportunity provided our view the company is more geared to inference-related, recurring AI workflows and, of course, Copilot, where the lower capex could translate into positive FCF revisions and a snap back in shares,” he said. MSFT mountain 2023-01-17 MSFT in past 2 years Microsoft has already benefited from the AI boom. Over the past two years, the stock is up more than 76% — beating out the S & P 500’s advance of nearly 49%. Analysts in general love the stock, too. Of the 59 who cover the tech giant, 55 rate it as a buy or strong buy, according to LSEG. The remaining four have a hold rating. The average price target also implies upside of more than 18%. To be sure, Cantor highlighted certain risks around Microsoft, including macro pressures and high capital expenditures for longer than expected — which could hurt free cash flow margins.
