Mizuho thinks Microsoft stock is like "free money." Is it worth buying them?

Mizuho believes that the tech giant Microsoft's shares, which have fallen in price by 6%, look like "free money" as their price will soon recover. The investment bank calls OpenAI's possible departure from Microsoft's Azure cloud infrastructure "far-fetched fears" and considers this cooperation sustainable.

Mizuho analyst Jordan Klein believes Wall Street is exaggerating the risks of Microsoft's cloud division losing a major customer, OpenAI. In a note cited by MarketWatch, the analyst asks a rhetorical question: can Microsoft stock be considered "free money" now, after falling more than 6% from its late July intraday high despite strong reporting?

Shares of Microsoft ended trading on October 3 with an increase of 0.2% to $516.8. The maximum value of securities on July 31 reached $555.45. According to Klein, quotations may recover in October.

Klein is surprised that Microsoft's stock remains under pressure because of what he calls "far-fetched concerns" about the future sustainability of its partnership with OpenAI. According to Klein, investors are avoiding Microsoft stock for fear that OpenAI is "spending money like a drunken sailor to build up its own capacity in data centers and eventually walk away from Azure, taking 100% of the profits for itself." At the same time, the analyst emphasizes that this is a mid-term issue, as OpenAI's possible move to Oracle is "more of a 2027 story," MarketWatch quoted him as saying.

Investors also fear that OpenAI will introduce technologies that will compete with traditional vendors like Microsoft itself, as well as social networks like Meta Platforms, the publication writes. That risk is being discussed ahead of OpenAI's upcoming developer presentation. "If access to Sora 2 expands and video content generation grows, workloads on Azure will benefit directly in the coming weeks and months," Klein writes, recalling that it is Microsoft, not Oracle, that now remains the primary provider of computing power to developer ChatGPT.

"Stocks like Microsoft are certainly lagging [behind other AI tech companies] - and that's annoying. But there are bound to be those 'compressed springs' among the laggards in a portfolio. You can't endlessly buy and chase those that are already up a lot," Klein wrote.

According to him, the recent weakness in Microsoft shares has only lowered expectations for the next quarterly report, which could play into the company's hands. Microsoft's next report is expected in late October.

D.A. Davidson downgraded Microsoft from buy to neutral on Sept. 23, leaving its target price target at $475. The analyst firm fears that the tech giant's leadership in artificial intelligence is diminishing and that it has become too dependent on Nvidia's chip supply, while Google and Amazon are developing their own AI chips for their data centers.

According to MarketWatch, of the 61 analysts tracking the tech giant's securities, 59 recommend buying them and two recommend keeping them in the portfolio. There is no advice to sell. The Wall Street consensus price target is $625.4, 21% above the current value.

This article was AI-translated and verified by a human editor