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Microsoft (MSFT) Faces AI Growing Pains: Redburn Cuts PT and Downgrades to Neutral

Microsoft Corporation (NASDAQ:MSFT) is one of the AI Stocks Analysts are Tracking CloselyOn November 18, Rothschild Redburn downgraded the stock to “Neutral” and cut the price target to $500 from $560.

According to the firm, Azure has been the main growth engine for Microsoft till now, accounting for more than half of the company’s revenue growth. It has also been helping investors remain focused on cloud strength rather than the potential GenAI headwinds in the Office 365 Suite.

However, Microsoft is facing a two-fold challenge which makes the sustainability of its growth model under current AI economics rather concerning. First, generating revenue from AI now requires nearly six times more capital expenditure than traditional cloud services.

Image by Tawanda Razika from Pixabay

This makes the business more “capital intensive” and potentially may reduce long-term cash-flow.

“Firstly, value creation from Gen-AI-related revenues is far lower than under traditional cloud 1.0 economics. As detailed in this report, it now takes roughly six times more capex to generate the same level of value – making the business structurally more capital-intensive and weighing on long-term cash flow potential, with no clear end in sight.”

Second, there may be a potential “value leakage” within Microsoft’s Office 365 suite.

“Secondly, we see value leakage within Office 365, as the integration of third-party models such as OpenAI and Anthropic shifts value away from Microsoft.”

While the firm acknowledges that Microsoft is still one of the “key beneficiaries of Gen-AI,” these key structural concerns have led the firm to downgrade the stock.

Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements.

While we acknowledge the risk and potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT and that has 10,000% upside potential, check out our report about this cheapest AI stock.

READ NEXT: 10 AI Stocks in the Spotlight This Week and 10 AI Stocks Investors Are Watching

Disclosure: None.

The $250 Trillion AI Hype is Real. A few years from now, you’ll probably wish you’d bought this stock.

When Jeff Bezos said that one breakthrough technology would shape Amazon’s destiny, even Wall Street’s biggest analysts were caught off guard.

Fast forward a year and Amazon’s new CEO Andy Jassy described generative AI as a “once-in-a-lifetime” technology that is already being used across Amazon to reinvent customer experiences.

At the 8th Future Investment Initiative conference, Elon Musk predicted that by 2040 there would be at least 10 billion humanoid robots, with each priced between $20,000 and $25,000.

Do the math. According to Musk, this technology could be worth $250 trillion by 2040.

Put another way, that’s roughly equal to:

  • 175 Teslas
  • 107 Amazons
  • 140 Metas
  • 84 Googles
  • 65 Microsofts
  • And 55 Nvidias

And here’s the wild part — this $250 trillion wave isn’t tied to one company, but to an entire ecosystem of AI innovators set to reshape the global economy.

It’s a leap so massive, it could reshape how businesses, governments, and consumers operate worldwide.

Even if that $250 trillion figure sounds ambitious, major firms like PwC and McKinsey still see AI unlocking multi-trillion-dollar potential.

How could anything be worth that much?

The answer lies in a breakthrough so powerful it’s redefining how humanity works, learns, and creates.

And this breakthrough has already set off a frenzy among hedge funds and Wall Street’s top investors.

What most investors don’t realize is that one under-owned company holds the key to this $250 trillion revolution.

In fact, Verge argues this company’s supercheap AI technology should concern rivals.

Before I reveal the details, let’s talk about how some of the richest people on the planet are positioning themselves.

  • Bill Gates sees artificial intelligence as the “biggest technological advance in my lifetime,” more transformative than the internet or personal computer, capable of improving healthcare, education, and addressing climate change.
  • Larry Ellison — through Oracle, is spending billions on Nvidia chips and partnering with Cohere to embed generative AI across Oracle’s cloud and apps.
  • Warren Buffett — not known for tech hype — says this breakthrough could have a ‘hugely beneficial social impact.

When billionaires from Silicon Valley to Wall Street line up behind the same idea — you know it’s worth paying attention to.

Even as we admire what Tesla, Nvidia, Alphabet, and Microsoft have built, we believe an even greater opportunity lies elsewhere…

But the real story isn’t Nvidia — it’s a much smaller company quietly improving the critical technology that makes this entire revolution possible.

And judging by what I’m hearing from both Silicon Valley insiders and Wall Street veterans…

This prediction might not be bold at all:

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