TLDR
- Benchmark Research launches MSFT coverage with Buy rating and $450 price target
- MSFT shares declined approximately 23% across three months, erasing more than $1 trillion in market capitalization
- Benchmark analyst contends substantial capex investment makes sense given existing cloud contracts span hardware lifecycle
- Analyst estimates Microsoft’s OpenAI ownership at approximately $227 billion
- Microsoft revealed $5.5 billion Singapore AI infrastructure commitment and pursues $7 billion Texas power plant partnership with Chevron
The past several months have been challenging for Microsoft. Shares plummeted more than one-third during a six-month stretch, eliminating over $1 trillion from the company’s market capitalization. Signs of stabilization appear to be emerging.
Benchmark Research analyst Yi Fu Lee launched coverage Tuesday, assigning a Buy rating alongside a $450 price objective. The target derives from applying an 8.8x enterprise value-to-revenue multiple to the firm’s anticipated 2027 revenue figures.
Lee’s central thesis is straightforward: Microsoft controls an enormous repository of enterprise and consumer data, which powers its artificial intelligence offerings. The analyst characterizes the company as the tech sector’s “true landlord.”
This data positioning, according to Lee, underpins a long-range forecast exceeding 10% yearly revenue expansion and approximately 30% free cash flow margins — significantly higher than the 21.8% projected for the current fiscal year.
The major concern surrounding Microsoft centers on capital spending. The firm anticipates outlays surpassing $100 billion this fiscal year, primarily directed toward data center buildouts. This figure has created anxiety among certain shareholders.
Why Benchmark Isn’t Worried About the Spending
Lee challenges this apprehension. He notes Microsoft has secured cloud agreements that extend through much of the operational lifespan of purchased infrastructure. The revenue stream justifying these expenditures is essentially guaranteed.
“We think it would be more concerning if Microsoft does not spend the cash today to add global capacity,” Lee wrote.
Microsoft continues expanding at full speed. The company verified its commitment to deploy $5.5 billion toward cloud and AI infrastructure in Singapore through 2029. This disclosure followed an announcement of over $1 billion designated for Thailand.
Regarding energy infrastructure, Bloomberg reported Microsoft is negotiating with Chevron (CVX) and investment firm Engine No. 1 regarding a $7 billion power facility in Texas designed to provide electricity for data center operations. The involved parties declined immediate comment.
OpenAI Stake Adds to the Bull Case
Lee highlighted Microsoft’s position in OpenAI as an undervalued component. He calculates Microsoft’s existing stake in the ChatGPT creator at roughly $227 billion.
Despite OpenAI expanding its investor base, Lee anticipates the two entities maintaining close alignment over the long haul. He characterizes the partnership as “symbiotic” — OpenAI requires a dependable cloud infrastructure provider, while Microsoft gains from hosting a premier AI model on its platform.
Lee also outlined a substantial market opportunity. He calculates Microsoft’s total addressable market spanning software, cybersecurity, and vertical segments at $730.5 billion for 2025, expanding to $1.25 trillion by 2030 at an 11.4% compound annual growth rate.
MSFT reached a peak above $450 in October 2025 before the downturn began. Shares have rebounded modestly from recent lows near $360.
