Microsoft Stock Could Soar 44% On AI Boom, Analyst Says — But There's A Catch

Microsoft Corp. (NASDAQ:MSFT) continues to solidify its position as a frontrunner in monetizing artificial intelligence (AI), driving substantial gains for investors, explains Nigam Arora as he raises his price target on the Windows maker.

What Happened: According to a recent note from the Arora Report, Microsoft, currently trading at $494.24, has seen an astounding 1403% gain since the company’s original long position on the stock at $32.88.

Microsoft’s strategic initiatives, including the integration of Copilot into Office, Dynamics, and Teams, are significantly deepening subscription revenues, explains Arora. The rollout of Copilot Plus PCs is further set to boost on-device AI capabilities, expanding the company’s reach.

Azure, Microsoft’s cloud computing arm, remains a compelling growth driver, exhibiting double-digit growth that is currently outstripping competitors and maintaining healthy margins. The recent breakout in MSFT’s stock technicals further reinforces this positive momentum.

Despite certain risks, the commentary points to a strong conviction in Microsoft’s continued upward trajectory.

The Arora Report has raised its target zone for MSFT to an ambitious $713 – $726, suggesting an expected gain of approximately 44% from current levels.

For new investors, the report advises a cautious approach, recommending limiting initial positions and planning to scale up if the stock experiences a dip.

Existing holders are encouraged to maintain their positions, capitalizing on Microsoft’s leading role in the AI revolution.

See Also: Microsoft Is ‘Playing Chess, And Others Are Playing Checkers:’ Dan Ives Says MSFT Could Be A $5 Trillion Company In 18 Months

Why It Matters: However, the Arora Report’s comprehensive 360-degree analysis also highlights crucial risks.

The intensifying competition in the cloud computing space from Amazon.com Inc.‘s (NASDAQ:AMZN) AWS and Alphabet Inc.‘s (NASDAQ:GOOG) (NASDAQ:GOOGL) subsidiary Google’s Cloud platform presents a notable challenge.

Furthermore, potential supply constraints on advanced chips, vital for AI infrastructure, could impede growth. The increasing scrutiny and tightened regulation of cloud platforms and AI technologies also pose regulatory hurdles that Microsoft must navigate.

Price Action: MSFT shares ended 0.30% lower at $495.94 apiece on Friday. It has risen by 18.48% on a year-to-date basis and 8.58% over the past year.

Benzinga Edge Stock Rankings shows that MSFT had a stronger price trend over the short, medium, and long term. Its momentum ranking was solid; however, its value ranking was poor at the 13.24th percentile. The details of other metrics are available here.

The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, ended higher on Friday. The SPY was up 0.50% at $614.91, while the QQQ advanced 0.34% to $548.09, according to Benzinga Pro data.

After hitting a fresh record on Friday, the futures of the S&P 500, Nasdaq 100, and Dow Jones indices were trading higher on Monday.

Read Next:

• Microsoft Stock Poised For 23% Rally As AI Monetization Gains Steam, Dan Ives Says

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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