MSFT and META: Buy the Weakness or Bail Out? Jefferies Weighs In

It hasn’t been an easy run for the Magnificent 7 this year, with every name in the group pulling back as the AI-fueled momentum that once powered the rally begins to fade. What was previously met with enthusiasm is now being questioned, as investors grow uneasy about bubble-like conditions and the sheer scale of capital pouring into AI infrastructure.

Moreover, the broader backdrop isn’t offering much support. Rising tensions in the Middle East have pushed oil prices higher, reintroducing inflation concerns and stirring worries about another squeeze on consumer spending.

Against this backdrop, both Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) have both seen their shares slide into double-digit declines over the past few months, leaving investors at a crossroads. The question now is whether the current weakness presents a buying opportunity ahead of a potential rebound, or if it makes more sense to step aside before conditions deteriorate further.

Jefferies analyst Brent Thill has been weighing this question as well, sizing up the outlook for these two market giants in the current environment. So, does he take a favorable stance or a dim view? Let’s take a closer look at the pair and see where the analyst lands.

Microsoft

The AI landscape is moving at such a fast pace, that it’s easy to forget how well-positioned Microsoft seemed when the GenAI craze first kicked off toward the end of 2022. At the time, it stood out among the major tech players as arguably the biggest beneficiary. That was driven by its close ties and significant financial backing of OpenAI, the creator of ChatGPT.

That partnership gave Microsoft early access to cutting-edge models, which it quickly integrated across its product ecosystem, from Azure to Office, embedding AI capabilities into offerings used by millions of customers. At the same time, its deep investment in OpenAI positioned it not just as a partner, but as a key beneficiary of the rapid rise in demand for GenAI services, particularly through cloud infrastructure.

However, as the space has matured, competition has intensified, with both peers (Google, Amazon) and newer players (Anthropic, for instance) vying for supremacy in what has been described as an AI arms race.

Meanwhile, all the spending associated with realizing AI-related ambitions has resulted in a sharp increase in CapEx. As Microsoft has significantly increased investment in data centers, GPUs, and broader AI infrastructure, data center spending climbed 66% year-over-year in the December quarter, pushing total capital expenditure to $37.5 billion. At the same time, growth in its cloud business came in below market expectations.

With worries about an AI-driven “software apocalypse” further weighing on already depressed sentiment, MSFT shares have fallen by 23% year-to-date. However, Jefferies analyst Brent Thill thinks the factors that are dragging it down aren’t the headwinds they seem to be, with the company remaining the AI name to back.

“AI-driven disruption fears are overstated; MSFT will be the AI winner,” says Thill. “We believe MSFT is structurally positioned to capture share in the agentic AI era, regardless of which foundational model leads. Importantly, MSFT is model-agnostic, and its strategy does not depend on owning the best model but on controlling the platform where models are deployed, governed, and monetized. With direct platform control of core productivity interfaces with over 450M paid M365 users, MSFT provides a full-stack AI solution with governance that CIOs trust. As value shifts to the app layer, where agents operate across applications, MSFT is positioned to monetize faster as agent-driven API usage expands the opportunity well beyond traditional human interactions.”

Accordingly, Thill rates the stock a Buy while his $675 price target points toward 12-month returns of a hefty 82%. (To watch Thill’s track record, click here)

Most analysts agree with the Jefferies stance. Based on a mix of 34 Buys vs. 3 Holds, the stock claims a Strong Buy consensus rating. Going by the $582.17 average price target, a year from now, shares will be changing hands for a 57% premium. (See MSFT stock forecast)

Meta Platforms

Meta, like Microsoft, is a name everyone is familiar with, and like its peer, it is considered a hyperscaler, although one of a different kind. It earns that label because it runs huge, highly efficient data centers that drive the world’s biggest social networks, along with increasingly heavy AI workloads.

The key difference is that, unlike companies such as Amazon Web Services, Microsoft Azure, and Google Cloud, Meta doesn’t actually sell cloud computing services to outside customers.

Instead, all that infrastructure is used internally to run and improve its own platforms – Facebook, Instagram, WhatsApp, and Threads. A big chunk of its AI spending goes into making those apps smarter, more engaging, and ultimately more effective at driving advertising revenue.

And, as with its peers, that spending has become enormous. Its projected $115–$135 billion in capital expenditures for 2026 marks a steep rise compared with the $72.2 billion spent in 2025. The concern is that investment in AI may be ramping up more quickly than revenue is growing, which could weigh on free cash flow. But, unlike Microsoft stock, which cratered following its latest quarterly results due to concerns over the elevated spend, Meta avoided that fate, subsequently rising, its strong readout managing to overcome the spending fears.

The uptick didn’t last too long, however, with the stock eventually pulled down as AI-related fears and the Middle East war impacted sentiment. And more recently, the stock took a heavy beating as the company’s long-standing legal issues came to the fore.

Specifically, a Santa Fe jury found that Meta misled users about the safety of its social apps in relation to children being targeted by online predators. The following day, a Los Angeles jury ruled against Meta and YouTube in a personal injury case, with both companies held liable for deliberately designing addictive products that caused harm to young users.

All the headwinds have added up to share losses of 14% so far this year, but according to Jefferies’ Brent Thill, going by past performance, this could represent an excellent opportunity for investors.

“META was caught in legal woes, but we believe the regulatory overhang will prove to be a good buying opportunity,” Thill said. “We have generally viewed regulatory and court-related overhangs on META as attractive long-term buying opportunities. In this case, we believe the impact while less than feared, is likely more pronounced for META than GOOGL given META’s greater exposure to social channels. META already bars FB & IG users under the age of 13 on its platform globally, and we note that these fears are ultimately not new, having been around for years. And we don’t believe this is the ‘Big Tobacco’ moment for social media platforms as they provide numerous social benefits.”

Conveying his confidence, Thill rates the shares a Buy, backed by a $1,000 price target. This suggests the shares will gain ~76% over the one-year timeframe.

38 other analysts join Thill in the bull camp, while an additional 6 Holds can’t detract from a Strong Buy consensus rating. At $862.05, the average price target points toward 12-month returns of 51%. (See Meta stock forecast)

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