A Wall Street analyst on Monday raised his price target on Microsoft stock, saying the software giant will benefit as artificial intelligence applications drive more cloud infrastructure usage.
Melius Research analyst Ben Reitzes reiterated his buy rating on Microsoft stock and upped his price target to 595 from 520.
On the stock market today, Microsoft stock dipped a fraction to close at 503.02.
"The demand for AI-driven solutions should continue to drive increases in infrastructure capacity, with companies like Microsoft, Amazon, Google and Oracle investing heavily in AI compute," Reitzes said in a client note.
In particular, Microsoft's Azure cloud business is benefiting from the company's partnership with AI leader OpenAI, he said.
"While long-term there are concerns that OpenAI and Microsoft are destined for increased conflicts of interest, the agreement seems to be favorable for Microsoft in general," Reitzes said. "Even as OpenAI desires for Microsoft to own less than 49%, we see Redmond owning a huge piece of what could be a multi-trillion-dollar entity with OpenAI no matter what."
He added, "Simply put, Microsoft will not roll over and let (OpenAI Chief Executive) Sam Altman walk away without an absolutely huge outcome for MSFT shareholders."
OpenAI's latest valuation gives it a market value of $300 billion, he said.
Microsoft Stock Is On Two IBD Lists
Together, Microsoft and OpenAI will disrupt the software-as-a-service (SaaS) industry with agentic AI applications, Reitzes said.
"When perfected, AI agents can automate entire workflows across multiple applications, centralizing business logic in the AI tier and rendering traditional SaaS infrastructure redundant," Reitzes said. "As AI agents offer greater control, customization, and efficiency compared to traditional SaaS, they enable faster, outcome-based solutions that will align with the AI economy."
Microsoft is integrating AI agents into its core offerings. The company will "play a major role in disrupting SaaS since it is a trusted partner that enterprises can count on to help build, deploy and run agents," Reitzes said.
Microsoft stock is on two IBD lists: Long-Term Leaders and Tech Leaders.
OpenAI's torrid growth also is benefiting Oracle and its Oracle Cloud Infrastructure, Reitzes said. He maintained his buy rating on Oracle stock and raised his price target to 270 from 230.
On Monday, Oracle stock slid a fraction to close at 229.28. Like Microsoft stock, Oracle is on the IBD Tech Leaders list.
Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
