Microsoft (MSFT) Stock Steadies After $1 Trillion Wipeout — Benchmark Says Buy

TLDR

• Benchmark Research initiated coverage of MSFT with a Buy rating and $450 price target
• MSFT has fallen ~23% over the past three months, dropping over $1 trillion in market cap
• Benchmark analyst argues heavy capex spending is justified as cloud contracts cover hardware lifespan
• Microsoft’s stake in OpenAI is estimated to be worth $227 billion
• Microsoft announced $5.5 billion in Singapore AI infrastructure investment and is in talks for a $7 billion Texas power plant deal with Chevron

Microsoft has had a rough few months. The stock dropped more than a third over six months, wiping out over $1 trillion in market value. But things may be starting to stabilize.

Microsoft Corporation, MSFT

Benchmark Research analyst Yi Fu Lee kicked off coverage on Tuesday with a Buy rating and a $450 price target. That target is based on an enterprise value-to-revenue ratio of 8.8x applied to Microsoft’s projected 2027 revenue.

Lee’s core argument is simple: Microsoft sits on a massive pile of enterprise and consumer data, and that data is what makes its AI products tick. He calls the company the “true landlord” of the tech sector.

That data advantage, Lee says, supports a long-term outlook of more than 10% annual revenue growth and around a 30% free cash flow margin — well above the current 21.8% expected for this fiscal year.

The big question hanging over Microsoft right now is its capital expenditure. The company is expected to spend more than $100 billion this fiscal year, mostly on data centers. That’s a number that has spooked some investors.

Why Benchmark Isn’t Worried About the Spending

Lee pushes back on that concern. He says Microsoft already has cloud contracts in place that cover most of the useful life of the hardware it’s buying. In other words, the revenue to justify the spend is largely locked in.

Microsoft is not slowing down either. The company confirmed it’s on track to invest $5.5 billion in cloud and AI infrastructure in Singapore by 2029. That announcement came a day after it said it would put more than $1 billion into Thailand.

On the energy side, Bloomberg reported Microsoft is in talks with Chevron (CVX) and investment firm Engine No. 1 on a $7 billion power plant in Texas to supply electricity to a data center. None of the companies immediately commented.

OpenAI Stake Adds to the Bull Case

Lee also pointed to Microsoft’s investment in OpenAI as an underappreciated asset. He values Microsoft’s current stake in the ChatGPT developer at around $227 billion.

While OpenAI has been diversifying its backers, Lee sees the two companies staying closely tied together long term. He describes the relationship as “symbiotic” — OpenAI needs a reliable cloud provider, and Microsoft benefits from having a leading AI model on its platform.

Lee also laid out a broader market opportunity. He estimates Microsoft’s total addressable market across software, cybersecurity, and verticals sits at $730.5 billion in 2025, growing to $1.25 trillion by 2030 at an 11.4% compound annual rate.

MSFT hit a high of over $450 in October 2025 before the selloff. It has since recovered slightly from recent lows of around $360.

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