TLDR
- Bank of America reinstated coverage with a Buy rating and $500 price target, calling Microsoft “a primary beneficiary of AI monetization.”
- Benchmark analyst Yi Fu Lee says the selloff is an “attractive buying opportunity,” with a $450 price target implying ~19% upside.
- Morgan Stanley named MSFT its Top Pick in large-cap software, citing strong Azure AI margins and durable mid-teens revenue growth.
- Melius Research cut its price target to $400, warning the Copilot reorganization signals deeper operational strain and tensions with OpenAI.
- Short interest in Microsoft has jumped 20% this year, with short sellers behaving as if the stock is a “momentum-driven, distressed name.”
Microsoft has spent most of 2026 in the penalty box. The stock is down 22% year-to-date, short sellers are piling in, and internal restructuring has raised fresh questions about its AI strategy. But a growing chorus of analysts say the selloff has gone too far.
Benchmark analyst Yi Fu Lee is the latest to make that case. Writing this week, Lee called current price levels an “attractive buying opportunity,” arguing it is “very shortsighted for investors to walk away from Microsoft” given the company’s long-term position in the AI cycle. His $450 price target implies around 19% upside from here.
Lee’s central argument is that Microsoft is not just spending on AI — it’s already contracted for most of that spending. The company has locked in agreements covering the useful life of its GPU and CPU purchases, which limits the capex risk that has spooked many investors. Customer demand is already outpacing supply, he said, before any new infrastructure expansion begins.
He also pointed to Microsoft’s ecosystem — 365, Teams, Dynamics, Fabric, and LinkedIn — as a unique data asset that positions the company as what he calls a “true landlord” of AI-ready data. That’s not a small edge in a world where training and running AI models depends heavily on proprietary data.
Wall Street Is Split
Bank of America made a similar case in late March, reinstating coverage with a Buy rating and a $500 price target. Analyst Tal Liani called Microsoft “a primary beneficiary of AI monetization,” citing Azure’s role in enterprise AI workloads and the breadth of its software stack. BofA expects Azure to grow 24% to 28% as AI workloads scale, and sees operating margins holding above 46% even as annual capex climbs from $44 billion in 2024 toward $143 billion by 2028.
Morgan Stanley, which named MSFT its Top Pick in large-cap software back in December, has held that view into 2026. Analyst Keith Weiss argued in January that Microsoft is the “#1 share gainer of IT wallet” as cloud migration accelerates, with 92% of CIOs expecting to use Microsoft’s generative AI products in the next year.
Not everyone is convinced. Melius Research analyst Ben Reitzes cut his price target to $400 in late March, pointing to a Copilot reorganization that he said “doesn’t seem like it was into strength.” The move shifts Mustafa Suleyman toward frontier model development, with Jacob Andreou now running a unified Copilot team reporting to Satya Nadella. Reitzes described the product history as “a confusing, fragmented experience.”
OpenAI Tensions Loom Large
Melius also flagged a growing rift between Microsoft and its closest AI partner. The note cited reports that Microsoft is “considering suing OpenAI,” despite the fact that OpenAI accounts for 45% of the Azure backlog. Reitzes argued the IP arrangement hasn’t delivered a competitive Copilot, forcing Microsoft to spend more on R&D and consume more Azure capacity internally.
Short sellers appear to agree with the bears. According to S3 Partners data, short interest in Microsoft has risen 20% this year. Researcher Leon Gross noted that Microsoft typically sees shorts cover on the way down, but this time “it is trading like a momentum-driven, distressed name, with shorts increasing into weakness.”
The Street’s overall consensus remains bullish. MSFT carries 33 Buy ratings and 3 Hold ratings, with an average 12-month price target of $582.17.
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