‘Conquer the Fear,’ Says Top Investor About Microsoft Stock

Microsoft (NASDAQ:MSFT) investors will be hoping that the company’s upcoming fiscal fourth quarter (June quarter) report won’t elicit the same reaction from investors as its hyperscaler peer Alphabet did.

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The search giant delivered an exceptional Q2 readout but that didn’t matter due to one fact: the company hiked its full-year capital expenditure forecast to between $195 billion and $205 billion, up from the $180 billion to $190 billion forecast provided last quarter, reviving worries that financial discipline is being sacrificed in the battle for AI supremacy.

As such, GOOGL shares are taking a hefty beating in Thursday’s session, down by 7% as of writing. The contagion has spread across other hyperscalers too, with MSFT stock also down on the news.

So, can we expect more downside when Microsoft reports next Wednesday (July 29)?

That remains to be seen. Nevertheless, looking ahead to the print, top investor Dhierin Bechai takes a positive stance. Despite growing concerns over Microsoft’s elevated capital expenditures, declining free cash flow and pressure on margins, Bechai remains bullish on the stock’s long-term prospects.

The central issue is not necessarily the size of Microsoft’s AI spending, but whether the company is providing investors with enough evidence that those investments are generating attractive returns. Capital expenditures are expected to remain elevated, with a significant portion directed toward GPUs and CPUs that depreciate quickly and may require regular replacement. This creates a legitimate risk that high CapEx becomes a permanent feature of the business.

However, Bechai, who ranks among the top 1% of investors on TipRanks, believes Microsoft has a substantial opportunity to demonstrate that its AI infrastructure investments are creating durable revenue and profit growth. A clearer measure of revenue or earnings generated per dollar of CapEx could help investors look beyond the headline spending figures. Further transparency around infrastructure costs, margins and the potential impact of agentic AI on traditional software subscriptions could also help rebuild investor confidence.

After all, Microsoft remains one of the world’s most dominant tech companies, with unmatched exposure to cloud infrastructure, enterprise software, distribution and valuable business data. Bechai believes AI adoption and commercialization remain in their early stages, meaning the company’s growth opportunity could still be considerable.

Importantly, Microsoft’s valuation has already compressed significantly relative to its historical levels. At approximately 14.1x EV/EBITDA, the stock trades around 28% below its historical median of 19.5x. That suggests some of the concern surrounding Microsoft’s elevated spending and broader AI disruption fears may already be reflected in the stock.

In short, Bechai admits that Microsoft’s CapEx strategy presents real risks, but nevertheless believes the market could be underestimating the company’s long-term AI opportunity.

Although the 5-star investor would welcome greater clarity on how the company is allocating its capital expenditures, Bechai still believes Microsoft remains a Strong Buy. (To watch Bechai’s track record, click here)

That is also the conclusion reached by the analyst consensus, a rating based on 35 Buys and 1 Hold and Sell, each. Going by the $558.86 average price target, shares will appreciate by 48% over the next year. (See MSFT stock forecast)