--- title: "Microsoft's stock is charging back. Here's the case for it to rally another 30%." type: "News" locale: "en" url: "https://longbridge.com/en/news/295440784.md" description: "Bernstein analyst Mark Moerdler raises Microsoft's price target to $660, predicting a 30% rally. He argues Microsoft's AI spending is measured, citing lower-than-expected capex and extended data center lifespans. The stock trades at a discount to prior valuations, with future hardware commitments capped to mitigate bubble risks. AI currently drives 17% of cloud revenue, while traditional operations remain strong growth drivers." datetime: "2026-08-10T19:18:00.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/295440784.md) - [en](https://longbridge.com/en/news/295440784.md) - [zh-HK](https://longbridge.com/zh-HK/news/295440784.md) --- # Microsoft's stock is charging back. Here's the case for it to rally another 30%. By Christine Ji Think Microsoft is overspending on AI? A Bernstein analyst says the company is actually taking a 'measured' approach. Shares of Microsoft trade more cheaply than they did a year ago. Microsoft is staging an artificial-intelligence comeback that could power the stock to new highs, some on Wall Street believe. Shares of Microsoft (MSFT) are up 30% since the company reported impressive fiscal fourth-quarter results at the end of July, putting the stock into positive territory for the year. It's just the beginning of a much larger rally, according to Bernstein analyst Mark Moerdler. "Even with the relatively large recent move the stock is still trading at a meaningful discount to its prior valuation multiple range," he wrote in a Monday note. Shares of Microsoft now trade at 25x forward earnings, a significant discount from the 33x multiple they commanded a year ago. Moerdler raised his price target to $660 from $647 previously, implying a 27x forward multiple and room for the stock to run more than 30% higher from current levels. For the most recent quarter, Microsoft spent $41 billion on capital expenditures and finance leases, a lower amount than expected. The company also extended the useful life of its data centers to 25 years from 15, decreasing long-term AI costs. Still, investors remain concerned that Microsoft is overbuilding its AI capacity, which Moerdler believes is a "misunderstanding" of Microsoft's business trajectory. Microsoft's future lease obligations increased 255% in the latest fiscal year to $329.1 billion, but Moerdler points out that these leases are being rolled out over a seven-year period from 2027 to 2033, with lease terms between one and 20 years. This results in a "reasonable mid-teens growth of long-term lease expenses" in line with historic norms, he wrote. Additionally, many of these contracts contain conditional requirements or cancellation clauses in case build-outs stall. Microsoft has also given itself flexibility with its AI hardware purchasing strategy. For fiscal 2027, Microsoft committed $169 billion in purchase agreements for chips, power contracts, cooling systems and other AI infrastructure needs. However, commitments for fiscal 2028 and beyond are just $25 billion. "This would mean that if AI was the bubble that some argue, then Microsoft may be stuck with data centers but not AI-specific hardware, which is the far larger cost of AI," Moerdler wrote. In that scenario, Microsoft could utilize its data-center capacity for its cloud business and internal use, as Moerdler believes Microsoft has built its data centers to be compatible with both AI and non-AI workloads. Bernstein estimates that AI accounted for roughly 17% of Microsoft's Commercial Cloud revenue in fiscal 2026, meaning that traditional cloud operations are still a prominent growth driver. "Microsoft is not building too fast, but rather taking a surprisingly measured approach given the demand signals they are receiving and their ability to easily pivot facilities to meet demand," Moerdler added. \-Christine Ji This content was created by MarketWatch, which is operated by Dow Jones & Co. 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