Microsoft downgraded to Hold at Melius Research on threats from AI

As previously reported, Melius Research downgraded Microsoft (MSFT) to Hold from Buy with a $430 price target. Microsoft’s 365 business faces threats from AI, meaning it needs to increase its capex markedly to keep pace with Google (GOOGL) and Amazon (AMZN), so free cash flow may take another hit, the analyst tells investors. If Microsoft doesn’t increase spending now, it reflects either an execution issue or a need to manage earnings, and “neither is good,” the analyst added. Additionally, the analyst argues that Microsoft shares look “very expensive” on the firm’s new free cash flow estimates.

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