Microsoft Hits First Record Since July As AI Halo Takes Hold

Microsoft Corp. shares closed at a record on Thursday, taking out an all-time high that's stood for nearly a year as investors increasingly see the software giant as a major winner with artificial intelligence.

Shares rose 0.8% to $467.68, eclipsing a peak hit in July. The record is the latest example of a pronounced rebound in the stock, which has climbed more than 30% off an April low. The rally has added more than $800 billion to Microsoft's market capitalisation, and at about $3.48 trillion, it is the biggest company in the world, just ahead of Nvidia Corp., another central winner of the AI era, which has a valuation of $3.42 trillion.

Microsoft is up 11% this year, outperforming the Nasdaq 100 Index.

Microsoft's most recent results helped to validate the bull thesis that Microsoft will be a dominant player with AI, and that it's among those monetizing the technology in a significant way, easing concerns about the return it's seeing from billions it has pumped into investing in the technology. 

The company's report showed strong growth trends and robust demand for both cloud computing and AI services, cementing the view that Microsoft is an oasis of stability amid a turbulent backdrop, largely insulated from tariffs and an uncertain macroeconomic outlook. And in a sign of how the company is cost-conscious amid AI-related expenses, it has been cutting jobs at an aggressive pace. 

“Microsoft is well positioned across its product lines, with a real ability to monetise AI, and I think when we look back in three or four years, it will be one of the companies that prospered and benefited from AI the most,” said Jim Awad, senior managing director at Clearstead Advisors.

While the company had been the Magnificent Seven stock that went the longest since an all-time high, it never fell out of favor. According to data from Bank of America, Microsoft is the most-owned stock by long-only funds, 91% of whom have exposure. In addition, more than 90% of the analysts tracked by Bloomberg recommend buying the stock, while there are no sell ratings.

Such a rosy consensus may sometimes be seen as a contrarian red flag, but Wall Street analysts don't seem to think Microsoft's rally will end anytime soon: The average analyst price target points to nearly double-digit upside potential over the coming 12 months.

“Microsoft should continue growing at an impressive rate and the stock in no way looks excessively priced,” Awad said. “It can be uncomfortable when everyone is on the same side of a consensus, but in this case, I think the consensus is right.”