25-06-2025
Microsoft's $100B AI Bet: Why Wells Fargo Says This Rally's Just Getting Started
Wells Fargo just raised its price target on Microsoft (NASDAQ:MSFT) to $585about 19% above where the stock closed Tuesday. While the stock is hovering near all-time highs, analyst Michael Turrin argues that the AI story here is still in its early innings. Microsoft has already scaled its AI segment to $13 billion in annual recurring revenueits fastest ramp everand Turrin thinks this trajectory could take total AI revenue to $100 billion by fiscal 2029. The bank maintains an overweight rating, citing Microsoft's edge across enterprise IT spend and its ability to keep expanding margins even in a tighter market.
Warning! GuruFocus has detected 6 Warning Sign with MSFT.
What's fueling that optimism? Copilot. Microsoft's AI assistant could be a key revenue unlock in the quarters ahead. Turrin expects Copilot to hit critical mass by next year, potentially generating $12 billion in recurring revenue on its own. His model assumes that just 10% of Microsoft 365 Commercial Cloud's 430 million addressable users adopt Copilotat a 20% average discountto deliver a $10 billion run rate. It's not a moonshot either. With generative AI embedded deeper into daily workflows, this adoption curve could steepen faster than most are modeling.
Microsoft is already up 16% in 2025, and most analysts aren't backing down. LSEG data shows 55 out of 62 analysts rate it a buy or strong buy. While some may balk at the valuation, Wells Fargo thinks the AI flywheel is only getting started. Microsoft's scale, distribution, and enterprise lock-in give it a launchpad that's hard to replicateand if Copilot hits its stride, investors may look back at today's price as just another pit stop.
This article first appeared on GuruFocus.
