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This Week's Exclusive Story Microsoft's Next AI Leg: Can MSFT Still Outperform From Here?Author: Chris Markoch. Posted: 3/24/2026. 
Key Points - Microsoft stock is trading near a 52-week low with a P/E ratio around 23, making it one of the cheapest Magnificent 7 stocks by valuation.
- Investor concerns include rising AI infrastructure spending, uncertainty around the OpenAI partnership, and slow early adoption of Copilot Pro.
- Despite near-term headwinds, Microsoft’s strong free cash flow, bullish analyst sentiment, and oversold technical signals suggest upside.
- Special Report: Have $500? Invest in Elon's AI Masterplan
It may be time for investors to start shopping for discounted stocks. It might surprise some to find that Microsoft Corporation (NASDAQ: MSFT) now looks like it's on the metaphorical clearance rack compared with its Magnificent 7 peers. MSFT is trading within roughly 10% of its 52-week low after the tariff-related turmoil in early 2025. And it's not just the price—valuation has shifted too. At the time of writing, MSFT trades at about 23X trailing earnings, a valuation level not seen since 2022. SpaceX is already one of the most valuable private companies on Earth, and some analysts believe its valuation could reach over $1.5 trillion. But since SpaceX isn't publicly traded, most investors assume they have no way to invest—that assumption may be wrong. According to veteran investor Matt McCall, there's a little-known public investment vehicle that provides exposure to SpaceX and dozens of other private companies, and today shares trade for less than $30. Click here to see the full story That creates a compelling question for investors: Is Microsoft a blue-chip whose best days are behind it, or is this a generational buying opportunity? The Sell-Off Hasn't Been Entirely Unjustified It's been a difficult five months for technology investors. Multiple competing narratives have made the sector vulnerable, and one prominent worry is that artificial intelligence (AI) could erode software profit margins. There are also broader concerns about the capital expenditures (CapEx) needed to build out AI infrastructure. Analysts estimate Microsoft will spend between $100 billion and $120 billion to support its AI buildout in 2026, a sharp increase from prior years. Microsoft also faces company-specific questions. Its partnership with OpenAI appears less secure than it did 18 months ago. To put this in perspective, OpenAI signed a multi-year deal with Microsoft in October 2025 valued at $250 billion—roughly 40% of Microsoft's $625 billion backlog. Analysts note that OpenAI does not have Microsoft's balance sheet, which raises reasonable doubts about how much of that $250 billion will ultimately be recognized on Microsoft's books. Microsoft's AI Monetization Faces Early Challenges Investors are also watching Microsoft's in-house AI monetization, particularly Copilot Pro. Copilot Pro is the paid add-on to Microsoft 365 Personal and Family subscriptions, priced at about $20 per user per month. The premium tier offers deeper integration of Copilot into core Office apps like Word, Excel and Outlook, priority access to more advanced models (such as GPT‑4‑class models) during peak times, higher usage limits than the free tier, and expanded features for image creation, "deep research" and other advanced workflows for heavy Microsoft 365 users. The rollout of Copilot Pro has been tepid so far. On its Q2 2026 conference call, Microsoft reported 15 million paid Copilot subscribers—only about 3% of its roughly 450 million commercial customers. Why This Time Isn't Different Those risks matter only if growth falters. Analysts' concern isn't that Microsoft isn't growing, but whether it can sustain the level of growth needed to justify heavy CapEx and absorb potential AI-related headwinds—especially within its Azure cloud division. Can Microsoft afford to pursue that growth? Yes. The company generated more than $97 billion in free cash flow over the trailing 12 months, so it is not at risk of having to raise external capital to fund its ambitions. Given that financial flexibility, Microsoft presents a growth story that may not be fully appreciated or priced into the stock. The company's PEG ratio is roughly 1.4, a level investors often interpret as attractive. Analyst sentiment remains broadly bullish. MarketBeat's analyst forecasts show 45 analysts with a consensus "Moderate Buy" rating and an average price target of $591.87—implying more than 55% upside from current levels. Key Support and Oversold Signals The MSFT weekly chart still shows a multi‑year uptrend intact, with price recently pulling back to test long‑term trendline support near the rising 200‑week moving average in the high‑370s. The consolidation follows a sharp decline from all‑time highs, suggesting investors are recalibrating lofty AI expectations rather than abandoning the broader bullish trend. Volume has increased on recent down weeks, signaling distribution but not the kind of capitulation that usually ends a major cycle. The 14‑week RSI has slipped into oversold territory near 30, a zone that has historically preceded tradable rebounds during prior MSFT pullbacks. As long as the stock remains above the 200‑week moving average and the long‑term trendline, the primary uptrend remains technically viable, with risk skewed toward a medium‑term basing phase rather than a full trend reversal. |
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