Microsoft Corporation (MSFT) Price Target Lowered to $472 Amid Demand Concerns, AI Outlook Remains Strong

We recently compiled a list of the 12 AI Stocks on Wall Street's Radar. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other AI stocks on Wall Street's radar.

Almost 50 House Democrats have signed a message to stop the unauthorized use of AI tools in the government. Members of Congress have asked to cease applying any unauthorized artificial intelligence system that will aid in curbing government spending. President Donald Trump has set up DOGE, or the Department of Government Efficiency. Meanwhile, billionaire Elon Musk has been assigned the responsibility to cut what DOGE will say is waste, fraud, and abuse in the federal bureaucracy.

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The Democrats have acknowledged that artificial intelligence holds the potential to modernize the US government. However, it also highlighted the potential concerns related to employee monitoring and access to sensitive data by DOGE and its AI tools.

"These present serious security risks, self-dealing, and potential criminal liability if not handled correctly, and have the potential to undermine successful and appropriate AI adoption,"

-Letter, spearheaded by Representatives Donald Beyer, Mike Levin and Melanie Stansbury.

The Democrats have further demanded that the administration terminate the use of any AI systems that haven’t been formally approved through processes such as FedRAMP or that have been unable to meet existing legal requirements. The letter, addressed to the White House Office of Management and Budget, was also questioned on whether any of the technology used by the administration was powered by Musk’s company, xAI. This question, in particular, has been asked to clarify any potential conflicts of interest.

According to the Democrats, these would be "exponentially worse if Musk pursues further contracts to become a major provider of government AI services."

The White House has recently introduced new policies on federal agency AI use and the federal government.

“President Trump recognizes that AI is a technology that will define the future. This administration is focused on encouraging and promoting American AI innovation and global leadership, which starts with utilizing these emerging technologies within the Federal Government. Today’s revised memos offer much needed guidance on AI adoption and procurement that will remove unnecessary bureaucratic restrictions, allow agencies to be more efficient and cost-effective, and support a competitive American AI marketplace.”

- Lynne Parker, Principal Deputy Director of the White House OSTP.

For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds. The hedge fund data is as of Q4 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points  (see more details here).

Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 317

Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements. Morgan Stanley reiterated the stock as “Overweight” and lowered its price target to $472 per share from $530. The analysts noted how there is a “wall of worry” due to macro and micro demand impacts, leaving negative investor sentiment.

“Even post our proactive cuts to our estimates, the valuation looks attractive at 25X GAAP CY26 EPS, for a long-term GenAI winner.”

Overall MSFT ranks 2nd on our list of the AI stocks on Wall Street's radar. While we acknowledge the 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. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.