As Nvidia (NASDAQ:NVDA) makes history by achieving a $4 trillion market capitalization, the spotlight shifts to Microsoft (NASDAQ:MSFT), which is poised to reach this same unprecedented milestone soon. This rapid ascent for both tech giants underscores the transformative power of the AI Revolution and Microsoft’s central role in shaping its future in the cloud.
Wedbush analyst Daniel Ives reiterated an Outperform rating on Microsoft with a $600 price forecast on Thursday, noting the company’s inclusion on Wedbush’s “Best Ideas List.”
Ives emphasized the historical significance of Nvidia, led by “Godfather of AI” Jensen Huang, becoming the first member of the $4 trillion market cap club. He stated, “This is a historical moment for Nvidia, the tech space flexing its muscles, and it speaks to the AI Revolution hitting its next stage of growth, led by the one chip fueling AI…Nvidia.”
AI Revolution’s “Poster Children”
Ives positioned both Nvidia and Microsoft as “poster children for the AI Revolution,” calling them “foundational pieces” in what he considers the biggest tech trend of his 25-year career covering tech stocks. He projects Microsoft will join the $4 trillion club this summer, with an eye on the $5 trillion club within the next 18 months, signaling that this tech bull market, driven by AI, is still in its early stages.
Accelerating AI Enterprise Adoption
The analyst’s recent field checks reveal an “accelerating” pace of deal conversions for broader enterprise-scale AI deployments as the AI Revolution gains traction. Many Microsoft customers are now prioritizing enterprise use cases across various verticals, with financials, government, and retail emerging as clear standouts.
Also Read: Microsoft’s AI And Cloud Scale Drives Market-Beating Returns
AI to Transform Microsoft Cloud Growth
Ives strongly views this period as Microsoft’s “shining moment,” with AI poised to fundamentally alter the cloud growth trajectory for the Redmond-based giant. His analysis suggests that over the next three years, over 70% of Microsoft’s installed base will ultimately adopt AI functionality for enterprise or commercial purposes. This widespread adoption, he believes, will significantly change the landscape and growth trajectory for CEO Satya Nadella’s leadership.
Fiscal 2026: AI Inflection Year
While AI use cases are building notably in fiscal 2025, Ives asserts that fiscal 2026 will be the true inflection year for Microsoft’s AI growth, as CIOs prepare for deployments “behind the velvet ropes in Redmond.” Microsoft is strategically “doubling down” on its AI monetization strategy within the cloud, evidenced by its capital expenditure guidance of $80 billion for fiscal 2025, with continued growth into fiscal 2026. This investment aims to expand data center buildouts to keep pace with scaling laws and capitalize on the strong demand trajectory.
Microsoft Leads Enterprise AI
Despite increasing competition from Amazon.com (NASDAQ:AMZN) Amazon Web Services and Alphabet (NASDAQ:GOOGL) Google Cloud Platform, Ives identifies Microsoft as the “clear frontrunner on the enterprise hyper-scale AI front.” He highlights AI as the core driver of Azure’s impressive value proposition and Microsoft’s advanced enterprise stack, noting that this dynamic is “just starting to take shape in the field.”
Untapped Growth, Copilot Impact
The analyst believes the stock has yet to fully price in the upcoming “next wave of cloud and AI growth” for Microsoft, emphasizing its strong competitive cloud edge against both Amazon and Google in cloud evaluations. Recent partner checks have shown “incrementally strong” momentum around Copilot deployments with Microsoft customers, which could add an estimated ~$25 billion to Redmond’s top-line revenue by fiscal 2026.
AI’s Multiplier Effect
Crucially, Ives concluded that “the multiplier ripple impact from the Godfather of AI, Jensen, and Nvidia is just starting to be felt on the cloud or software layer as the second derivatives of the AI Revolution play out in the field.” His core thesis remains that cloud and AI monetization will constitute a larger portion of Microsoft’s business going forward, ultimately spurring growth and margins in the coming years. Ives projects Microsoft’s fourth-quarter revenue at $73.77 billion and EPS at $3.34.
Price Action: MSFT stock is trading lower by 0.64% to $500.30 at last check Thursday.
Read Next:
Photo via Shutterstock
