Microsoft Corp (NASDAQ:MSFT) is nearing a $4 trillion market valuation, with analysts at Wedbush projecting the tech giant will hit the historic milestone this summer.
Nvidia Corp (NASDAQ:NVDA, ETR:NVD) earlier this week became the first ever company to achieve a $4 trillion market cap.
Microsoft, which has a current market cap of about $3.74 trillion, is fast approaching the milestone, driven by accelerating AI adoption.
“We believe Microsoft will also hit the $4 trillion market cap club this summer and then over the next 18 months the focus will be on the $5 trillion club...as this tech bull market is still early being led by the AI Revolution,” Wedbush analysts wrote.
“The poster childs for the AI Revolution are led by Nvidia and Microsoft as both are foundational pieces of building on the biggest tech trend we have seen in our 25 years covering tech stocks on the Street.”
Rapidly increasing enterprise-scale AI deployments are a major growth driver for Microsoft, particularly in sectors like financials, government, and retail, the analysts highlighted.
“We have seen deal conversions for broader enterprise scale AI deployments ‘accelerating’ in the field as the AI Revolution takes hold and many Microsoft customers now focused on deploying enterprise use cases across a number of verticals with financials, government, and retail clear standouts,” they wrote.
Wedbush sees AI transforming Microsoft’s installed base and long-term outlook.
“Based on our recent work in the field we believe the next 3 years over 70% of its Microsoft installed base will ultimately be on this AI functionality for the enterprise/commercial which changes the landscape and growth trajectory for [CEO Satya] Nadella & Co going forward.”
Microsoft is making massive investments to meet this demand. “Microsoft is doubling down on the AI monetization strategy within cloud with capex guidance of $80 billion for fiscal year 2025 and continuing to grow into fiscal year 2026 as Microsoft looks to continue its data center buildouts to keep pace with scaling laws and capitalize on strong demand trajectory,” the analysts wrote.
The analysts view Microsoft as “the clear front runner on the enterprise hyper scale AI front,” despite increasing competition from Amazon and Google.
The firm sees AI as the core driver of the impressive Azure value proposition and Microsoft's next generation enterprise stack,” adding that “this dynamic is just starting to take shape in the field in our view.”
Wedbush analysts conclude that the market is still underestimating Microsoft’s potential.
“We believe the stock still has yet to price in what we view as the next wave of cloud and AI growth coming to the Redmond story with a strong competitive cloud edge versus Amazon especially and Google in cloud bake offs,” they wrote.
“Our thesis remains that the cloud and AI monetization is going to comprise a bigger and bigger piece of Redmond going forward and will ultimately spur growth and margins over the coming years.”
The analysts have a ‘Buy’ rating and $600 price target on Micorosft, which traded hands at $500 on Thursday afternoon.