Melius upgrades MSFT as Microsoft seen as 'adults in charge' amid AI security fears
The Melius analyst said businesses prefer Microsoft instead of relying directly on AI labs for security
Microsoft stock is up 9% year to date / Photo: JHVEPhoto / Shutterstock
Research and investment firm Melius has upgraded Microsoft to "buy," recommending buying any weakness in the stock. The upgrade is attributable to rising enterprise demand for security solutions amid fears about AI: in this environment, Microsoft will be viewed as a trusted “adult in charge” capable of providing protection, Melius reckons.
Details
Melius has upgraded Microsoft to “buy” from “hold” at a target price of $665 per share, Barron's reported. The valuation is 29% above the last close.
Microsoft is becoming increasingly important amid the debate over the threat posed by AI, which Dario Amodei, CEO of Anthropic, the world’s most valuable AI start-up, has warned about. This is driving interest among enterprise resellers in Microsoft’s security products, Melius analyst Ben Reitzes says, adding that this “freak out” merely confirms that Microsoft and cybersecurity companies are needed more than ever.
“Satya Nadella and his team are increasingly going to be considered the ‘adults in charge’ – a key cog in the security, governance and the ‘AI CYA’ (CYA is short for 'cover your ass' – Oninvest) play that is likely in the early innings,” CNBC quoted Melius as saying.
Growing demand for AI could allow Microsoft to charge premium prices for its tools while expanding capacity to serve more cloud customers, driving growth through both higher prices and increased volume, Reitzes writes.
“Microsoft is increasingly focused on owning the enterprise ‘wrapper’ around AI rather than winning the frontier model race outright,” Reitzes added. “The strategy seems even smarter now given its ‘partners’ are predicting the end of the world, and Microsoft in essence can provide boards with a form of ‘AI insurance,’” the quote carried by Investor’s Business Daily.
Melius raised its Microsoft earnings estimates for fiscal 2027 by 2% and for fiscal 2028 by 4%. It also introduced a fiscal 2029 estimate of $30.77 per share, around 7% above the consensus, Investing.com noted.
Stock performance
Microsoft shares were up 1.7% on Monday as of this writing. They could thus end the day at their highest level since October 29, 2025, Barron's noted, citing Dow Jones Market Data. The stock has gained around 9% year to date. By comparison, the broad-market S&P 500 is up 13%.
In late September, Piper Sandler forecast growth in Microsoft 365 subscriptions following the integration of OpenAI’s Dots AI agent. Piper Sandler has an “overweight” rating on Microsoft stock.
Microsoft shares enjoy nearly unanimous backing on Wall Street: 98% of the 59 analysts tracked by FactSet have the equivalent of a “buy” recommendation. Only one analyst is neutral with a “hold” rating, MarketWatch data shows.
