Citi Stays Bullish on Microsoft (MSFT), Cites AI Agent Momentum

We recently published a list of 12 AI Stocks on Analysts’ Radar. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other AI stocks on analysts’ radar.

The recently imposed US sanctions on chip use have angered China. In recent news, the country has stated that it may take legal action against any individual or organization who are found assisting or implementing U.S. measures that advise companies against using their advanced semiconductors.

According to the U.S. published guidance, companies risk violating export controls if found using Ascend AI chips from Shenzhen-based Huawei. In response, China’s commerce ministry said there could be “corresponding legal liabilities” against those involved in implementing U.S. measures and that it constitutes “discriminatory restrictive measures” against Chinese firms.

READ ALSO: 10 AI Stocks Investors Are Watching Today and 15 AI Stocks Surging on News and Analyst Ratings.

The sanctions are seemingly a new strategy adopted by the US to curb China’s progress in the AI arms race. The world is yet to watch the success of this strategy as opposed to the AI diffusion rule imposed earlier, which the world came to know had failed miserably after the arrival of DeepSeek.

Even Jensen Huang has deemed the AI diffusion rule to be a failure.

“All in all, the export control was a failure. The fundamental assumptions that led to the AI diffusion rule in the beginning, in the first place, has been proven to be fundamentally flawed.”

In fact, the sales block advanced AI chips to China, forcing companies to buy semiconductors from Chinese designers. It also pushed the country to invest aggressively in a robust supply chain that doesn’t rely on manufacturers outside the country.

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. On May 21, Citi analysts reaffirmed a “Buy” rating on the stock and a price target of $540.00. The rating update follows Microsoft’s Build conference, where Microsoft made more than 50 announcements. The announcements highlight the company’s steady push towards creating an “open agentic web.” The firm acknowledged that all of these announcements currently don’t appear to be immediate drivers of revenue growth.

The firm has also acknowledged Microsoft’s commitment toward developing an open, collaborative ecosystem, predominantly in artificial intelligence (AI). The introduction of Agentic DevSecOps has been a standout development for the company, reflecting the company’s investment in AI integration. Moreover, the firm’s analysis reveals how over 230,000 organizations have utilized Copilot Studio to develop AI agents, with the user base doubling over the past year. The company stands out as a leader in the enterprise general AI (GenAI) space, showcasing the ability to monetize advancements effectively.

“We maintain our Buy rating as we see Microsoft maintains a leadership position in Enterprise GenAI monetization and momentum existing the Mar-Q should continue to drive upside to street numbers.”

Overall, MSFT ranks 1st on our list of AI stocks on analysts’ 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 have limited downside risk. If you are looking for an AI stock that is more promising than MSFT and that has 100x upside potential, check out our report about this cheapest AI stock.

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