With AI Efforts Gaining Traction, Morgan Stanley Says Microsoft Has Room to Grow

Microsoft’s push to capture more of the artificial intelligence (AI) wave may be progressing gradually, but Wall Street still sees substantial growth potential ahead. Morgan Stanley says the tech giant is well-positioned to benefit from AI-driven demand and its expanding enterprise solutions portfolio.

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The firm reaffirmed its overweight rating on Microsoft and boosted its price target to $625 from $582, suggesting an 18.9% upside from current levels. Along with the higher target, Morgan Stanley named Microsoft one of its top picks.

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“Strong momentum on revenue and a clearer understanding of Microsoft’s wide range of growth drivers should help push shares toward our revised $625 target,” analyst Keith Weiss wrote in a client note Friday.

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At the core of Morgan Stanley’s bullish case is Microsoft’s Azure cloud computing platform, which continues to gain traction amid robust enterprise IT spending. In one survey cited by the bank, 49% of CIOs identified Azure as the top expected winner in IT budget share over the next three years.

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The note highlighted that Azure grew 39% year over year in constant currency, underscoring its accelerating adoption.

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Weiss pointed out that Azure is also strategically aligned with AI, making it a unique beneficiary of industry tailwinds.

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Microsoft has carved out a distinct advantage by embedding OpenAI’s model family into its ecosystem, allowing businesses to tap into cutting-edge AI applications. Weiss noted that a wide range of enterprise software providers and internet companies are already integrating their platforms with ChatGPT, extending Microsoft’s reach.

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“With AI workloads expected to account for a growing share of cloud spending, Azure stands to gain as more workloads migrate into the cloud,” Weiss added.

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The analyst also emphasized Microsoft’s differentiated position compared to rivals. Unlike Amazon, which competes directly with customers in sectors such as retail, logistics, and healthcare, Microsoft avoids those conflicts.

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“Microsoft effectively acts as the Switzerland of the cloud market,” Weiss wrote. “Because it doesn’t compete in so many verticals, enterprises often prefer it as a more independent partner.”

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Morgan Stanley’s bullish outlook echoes a broader consensus across Wall Street. Out of 64 firms covering Microsoft, 60 currently rate the stock a buy or strong buy, according to LSEG data. That overwhelming support underscores the confidence analysts have in the company’s long-term growth trajectory.

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Despite the upbeat outlook, Microsoft shares slipped 0.61% in premarket trading Friday. Still, the stock has delivered a strong run this year, advancing roughly 20% year to date.

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While Microsoft’s progress in fully monetizing AI opportunities may take time, Morgan Stanley sees the company as a clear winner in the years ahead. With Azure continuing to dominate IT budget allocations, integration of OpenAI models opening new commercial avenues, and a unique position as a neutral cloud provider, Microsoft is viewed as one of the best-placed players to capitalize on AI’s next chapter.

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