Microsoft Analyst Says $30B Anthropic Cloud Deal Proves MSFT Story Is Much More Than GenAI, Predicts 32% Upside For Stock

• Microsoft now has strong positioning across multiple secular growth drivers.
• The analyst viewed the stock as underappreciated, given the durability of topline demand and potential for further margin expansion.
• His price target suggests 32% upside from current levels.

Following Microsoft Corp.’s (MSFT) announcement of an expanded partnership with artificial intelligence (AI) startup Anthropic on Tuesday, an analyst reiterated his bullish stance on the software giant. The agreement comes at a time when skepticism around the technology abounds.

Microsoft stock fell 2.70% on Tuesday amid the broader tech rout, but is up about 18% year-to-date. 

Analyst Affirms Bullish Stance

Morgan Stanley analyst Keith Weiss said the deal aligns with his view that the Microsoft story is broader than generative AI and the generative AI (GenAI) story is broader than just OpenAI, according to a summary of the note on Fly.

Weiss noted that the Satya Nadella-led company now has strong positioning across multiple secular growth drivers, including genAI, the migration of enterprise workloads to the public cloud, and cybersecurity. The analyst viewed the stock as underappreciated, given the durability of topline demand and potential for further margin expansion.

Morgan Stanley has an ‘Overweight’ rating on Microsoft’s stock and a $650 price target, implying 32% upside potential from Tuesday’s close.

Microsoft’s deal with Amazon-backed Anthropic provides for Anthropic to buy $30 billion of Azure compute capacity, which involves using up to 1 gigawatt (GW) of compute power from Nvidia. Nvidia and Microsoft, in turn, have agreed to invest up to $10 billion and up to $5 billion, respectively, in Anthropic.

The investment deal with Microsoft and Nvidia has pushed Anthropic’s valuation to about $350 billion, up from $185 billion as of September, CNBC reported, citing a source. The AI startup is the maker of the Claude large-language mode.

What Retail Feels About Microsoft Stock

Retail sentiment toward Microsoft stock among retail traders on Stocktwits remained ‘bearish’ as of late Tuesday, and the message volume improved, although only to ‘normal’ levels.

A bullish watcher of the stock recommended loading it under $500.

Delving into the deal per se, a user said it is bad news for AMD and OpenAI and good news for Nvidia and Intel. “$MSFT was one of the original investors in OpenAI Bubble and is now partnering with a direct competitor, Anthropic,” they said.

The circular nature of the deal could trigger some anxiety among market participants, who are already worried about the amount of money invested in AI. Skeptics such as Michael Burry, of “The Big Short” fame, have flagged the rising capital spending (capex) by hyperscalers and see the trend as a precursor to a bubble burst and, in turn, a market crash. Fund managers have recently trimmed or exited positions in AI names, including Nvidia. 

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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