Microsoft Stock (MSFT) Rebound Gains Steam: One Investor Says ‘It’s Time to Pounce’

Microsoft (NASDAQ:MSFT) shares are up 3.64% today, extending a rebound that has now pushed them about 8% above their March 27 low, as investors rotate back into beaten-down large-cap tech names.

This recovery comes after a period in which Microsoft’s longer-term growth story has come under closer scrutiny, particularly as the company ramps up its ambitions in AI, with shares still down about 21% year to date.

At the center of that debate is the sheer scale of its investment effort, with billions in capex – $37.5 billion last quarter alone – underscoring the magnitude of the wager it’s making on this gambit. There are a number of signs that the company is succeeding, such as Azure and other cloud services’ 39% year-over-year revenue growth and Microsoft Cloud’s $625 billion in remaining performance obligations.

And yet, capex is growing at a faster rate than revenues, and the vast majority of this spend is on short-lived assets such as GPUs and CPUs (which will need to be replaced). Meanwhile, paid Copilot seats number only 15 million, a fraction of the roughly 450 million Microsoft 365 commercial subscribers.

Making matters worse, these concerns are running up against a volatile ecosystem, one that’s been rocked by both geopolitical stability and visions of an AI bubble.

For investor Louis Gerard, though, the conclusion is clear. He sees the current setup as a rare chance to accumulate shares in what he calls an “AI empire” at prices that don’t fully reflect the long-term opportunity.

Gerard embraces Microsoft’s “strategic pivot” toward the AI gravy train, arguing that agentic AI will “unlock” higher enterprise value. The investor points out that automated workflows will further integrate Microsoft’s products into the value chain, as they can run long-term and multi-step functions.

Gerard also addresses the $37.5 billion elephant in the room. However, he isn’t bothered by the nature of this spending, praising Microsoft’s “efficient allocation” to support its $625 billion backlog with “diversified partners.”

Moreover, the investor also posits that the company’s pursuit of its own custom silicon via its Maia 100 AI accelerator chips could protect future margins by reducing reliance on external partners.

And that gives Gerard plenty of confidence in Microsoft’s ability to navigate the coming technological changes to its benefit.

“By building all layers of the AI revolution, such as infrastructure, governance and the application layer, Microsoft is essentially becoming the only vertically integrated mega-cap in the generative AI value chain,” concludes Gerard, who isn’t budging from his Strong Buy rating on MSFT shares. (To watch Gerard’s track record, click here)

That’s the spirit on Wall Street as well, where 35 Buys and 3 Holds combine to give MSFT a Strong Buy consensus rating. Its 12-month average price target of $580.84 points to an upside approaching 52%. (See MSFT stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.