Is Microsoft Undervalued by Investors? These Tech Stock Experts Think So.

Key Takeaways

• Wedbush analysts wrote Monday that Microsoft stock has room to run in 2026 after it has recently pulled back from October's record highs.
• Investors are still "underestimating" how much value Microsoft's Azure cloud computing services could add as the AI industry continues to grow, the analysts said.

Microsoft (MSFT) stock has set a number of records this year, and analysts think that trend can continue well into 2026.

Wedbush analysts led by Dan Ives, who is particularly bullish on the artificial intelligence trade, wrote Monday that Microsoft remains undervalued as the new year approaches. The analysts reiterated their "outperform" rating and $625 price target, upside of nearly 30% from the stock's Monday levels.

The analysts wrote that investors are still "underestimating" how much Microsoft's Azure cloud computing service could grow if the AI industry continues expanding as Wedbush expects. The analysts project that Azure and Microsoft's Copilot AI assistant could add $25 billion in sales to Microsoft's results through fiscal 2026.

Why This Matter to Investors

Despite a recent pullback in tech stocks, some analysts are still saying that the AI trade should be able to continue providing growth next year as the biggest tech companies keep spending tens of billions on the infrastructure behind AI.

"We believe Microsoft is set to have a massive 2026 and the stock is a compelling buy at these levels," the analysts wrote, as they expect Microsoft to play a "foundational role" in the next stages of AI development.

Wedbush analysts aren't alone, as all but one of the 13 analysts with current ratings tracked by Visible Alpha rate Microsoft a "buy," with the other calling it a "hold." The average price target among those analysts is $635, even higher than Wedbush's target, indicating the expectation that Microsoft stock will rise well above the records it set earlier this year.

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The AI trade has had a rocky last several weeks as investors and analysts have raised an increasing number of questions over whether the circular nature of funding in the AI industry is sustainable, and when tech companies could potentially see a return on the billions they have invested in the tech.

Microsoft shares were little changed in late-afternoon trading Monday. They have gained about 15% since the start of the year, but are roughly 10% below their most recent record closing high, set just before the company's last earnings report in October.

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