Microsoft Is Second Most Oversold Stock In Nasdaq 100 After Brutal Q1 — Yet This Analyst Still Sees 40% Upside

• Microsoft is on track for its worst quarterly performance since the 2008 financial crisis.
• MSFT's relative strength index is below 30 and the second lowest in Nasdaq; its 12-month forward P/E ratio is the lowest in a decade.
• Stocktwits sentiment for MSFT climbed last week and was ‘extremely bullish’ on Sunday.

Microsoft Corp.’s stock is on track for a sixth straight monthly decline and its worst quarterly performance since the 2008 financial crisis, capping a brutal stretch for the tech sector.

Yet, as valuation for the once-high-flying AI bellwether turns increasingly attractive, retail investor interest remains strong. 

On Stocktwits, sentiment for MSFT has climbed over the past week and was ‘extremely bullish’ as of late Sunday. Chatter around the ticker increased by 75% in this period.

“$MSFT I could honestly see this running even if the broader market takes a hit. Its just that overdone to the downside rn,” a trader wrote. 

Some investors are already taking advantage of the tech stocks rout. “$NVDA $MSFT $META $GOOGL On a shopping spree today for my favorite tech stocks on the cheap. 5 years from now looking back this will be a prized moment - buy the fear VIX 30+ when everyone runs out the door,” said a trader.

Last week, Bank of America reinstated coverage on Microsoft, with a ‘Buy’ rating and a $500 price target (about 40% above the current level), citing its pole position in the AI cloud and enterprise software markets. 

"We believe that Microsoft is well positioned to generate sustained mid-double-digit growth in the coming 3 years, led by continued adoption of [the] Azure cloud infrastructure platform, cloud-based Office 365 productivity suite and a growing number of AI solutions and services,” BofA said in its investor note.

Currently, an overwhelming 54 out of 57 analysts rate the stock ‘Buy’ or higher, and the remaining three rate it ‘Hold,’ with an average price target of $589.90, per Koyfin. That implies an over 60% upside to the last close.

Q1 Marred With Sharp Tech Selloff

The entire tech sector has fared poorly in the first three months of 2026, as investors rotated their money into defensive sectors such as energy and consumer staples amid concerns over stretched tech valuations and the question of whether heavy AI spending will deliver expected returns.

The pressure intensified after a broader market selloff tied to the ongoing U.S.-Iran conflict, which has now stretched close to a month. Among Big Tech, Nvidia has fared the best, with a 4.2% drop in the current quarter.

Microsoft’s weakness is also tied to what appears to be a fraying relationship with key partner OpenAI. Recent reports point to disagreements over cloud exclusivity, including potential legal action tied to OpenAI’s growing use of non-Azure infrastructure. 

The Roundhill Magnificent Seven ETF (MAGS) is down 16% as the first quarter draws to a close, its worst run since the fund was started in 2023.

MSFT Valuation Turns Attractive?

To be sure, certain stock measures for Microsoft are beginning to look attractive, which is driving further interest.

Microsoft’s 12-month forward price-to-earnings ratio – a key valuation measure that compares expected stock price to earnings – has fallen to its lowest level in nearly a decade. 

Moreover, the stock’s relative strength index (RSI) reading was 22.26, the lowest among the Magnificent Seven stocks and the second lowest in the Nasdaq 100 index, according to Koyfin. An RSI below 30 typically signals that a stock is oversold and may be due for a rebound.

Still, pockets of skepticism remained. “$MSFT this is either a generational opportunity…or the end of Microsoft,” a Stocktwits user posted on the MSFT stream, while another wrote, “Until they announce capex spending cuts or the whole market stops repricing for an energy crisis, this is going down.”

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

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