Microsoft NASDAQ:MSFT stock dipped 1.5% on Monday after Wolfe Research reduced its price target on the software company, citing concerns tied to rising artificial intelligence spending and higher infrastructure costs.
Wolfe Research analyst Alex Zukin lowered his target price on Microsoft to $525 from $570 while maintaining an Outperform rating, reflecting continued confidence in the company's long-term outlook despite near-term cost concerns.
Microsoft is expected to spend nearly $190 billion in calendar 2026 on capital projects linked to AI development. The analyst also suggested that increasing memory chip prices could lift Microsoft's 2027 capital spending estimate to around $270 billion from roughly $230 billion previously.
Microsoft also disclosed workforce reductions and restructuring efforts involving its Xbox gaming division as the company redirects resources toward AI-related investments. Despite cost concerns, Wolfe Research said Microsoft's cloud and AI strategy could continue supporting growth, with Azure revenue projected to expand by more than 40% over the next two fiscal years.