Microsoft's blazing stock comeback isn't even close to being over, analyst says

By Hannah Pedone

Microsoft looks like a winning play in an environment where investors are looking for safer bets on the AI trend, according to Melius Research

Microsoft CEO Satya Nadella and his team will be considered the "adults in charge" in the AI era, Melius Research analyst Ben Reitzes said as he raised his price target on shares of Microsoft to $665 from $465 on Monday.

Analysts have praised Microsoft for being the "adult in the room" by keeping its artificial-intelligence spending in check. Now other aspects of the company's maturity are winning praise on Wall Street.

On Monday, Ben Reitzes at Melius Research wrote that Microsoft (MSFT) CEO Satya Nadella and his team will be considered the "adults in charge" as the AI narrative shifts. Investors are looking for safer ways to play the AI trend following warnings from Anthropic CEO Dario Amodei and others about the technology's dangerous potential. Microsoft's legacy software portfolio - and its cybersecurity offerings - could thrive in this environment.

Reitzes upgraded shares of Microsoft to buy from hold in his latest note to clients. He raised his price target to $665 from $465, which implies room for the stock to run up another 30%. It's already up 49% off its June lows.

See also: The murky AI milestone that has some of the industry's leading voices increasingly on edge

Reitzes initially expected that as a legacy software company, Microsoft would face challenges as big AI companies came out with new models. Instead, "Dario Amodei and friends said the world could end," he wrote.

Amodei and the chiefs of other frontier model makers have recently issued warnings about the dangers of fast-advancing AI models and have even called for a slowing of the pace of model releases. Those developments "reinforce the stability in legacy software," Reitzes wrote.

"In plain English, that freak out means (at least to us) that Microsoft and cyber companies are even more needed," he added.

He said that software "leaders" like Microsoft could see a boost from AI fears, unlike other Big Tech companies.

For instance, Amazon (AMZN) and Alphabet (GOOGL) (GOOG) could be vulnerable to threats posed by Meta Platforms' Muse AI assistant. Microsoft is likely more "Muse-safe" compared with companies that depend on advertising revenue, Reitzes argued.

Also working in Microsoft's favor is its existing customer base, which gives it an advantage as it sells its AI tools to customers. He wrote that Microsoft's Autopilot AI agent is the one "most enterprises will actually deploy."

"Agents are only as useful as what they can see," he wrote, referring to the fact that companies' data often resides in Microsoft platforms like SharePoint, OneDrive and Teams.

Shares of Microsoft advanced 1.5% on Monday.

-Hannah Pedone

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10-05-26 1727ET