Microsoft’s stock has been plummeting 18% this year, but analysts at Morgan Stanley believe it’s a “most under-owned” megacap waiting for a rebound. The bank’s call comes as the company reports significant strength in its business, including revenue growth of 26% in Microsoft Cloud and Intelligent Cloud segments.
However, investors are concerned about underlying issues such as Microsoft’s spending on infrastructure, which has raised questions about whether AI investments are cannibalizing legacy businesses. The stock has also been selling off due to fears that cash cows like Azure could come under pricing pressure.
But Morgan Stanley’s analysts argue that the fundamentals support a contrarian view. The company’s recent earnings beat estimates, and its CEO, Satya Nadella, stated that Microsoft is “only at the beginning phases of AI diffusion.” Analysts are overwhelmingly bullish on the stock, with 57 buy or strong buy ratings versus just one hold.
The bank also points to a fresh catalyst: a $50 billion investment by end of decade to bridge the AI divide in the Global South. This could directly counter the bearish argument that Microsoft’s growth is limited to saturated Western markets.
Morgan Stanley believes that institutional positioning drives stock prices and that underweight managers are scrambling to buy on any positive catalyst. The bank notes that Microsoft isn’t a speculative AI play, but rather a $2.95 trillion company with 39% profit margins and 34.4% return on equity.
Overall, the contrarian setup suggests that Microsoft’s bad news is already priced in, and investors may need to weigh this thesis against ongoing uncertainty around AI returns and revenue growth.
Source: https://247wallst.com/investing/2026/02/18/morgan-stanley-pounds-the-table-microsoft-is-the-most-under-owned-stock