Key Takeaways
- Benchmark Research started MSFT coverage with a Buy recommendation and $450 price objective
- MSFT shares have declined approximately 23% in the last three months, erasing more than $1 trillion in valuation
- Benchmark’s analyst contends the substantial capex investment is warranted given existing cloud contracts span hardware lifecycles
- The firm values Microsoft’s OpenAI ownership at approximately $227 billion
- Microsoft revealed plans to invest $5.5 billion in AI infrastructure across Singapore and is negotiating a $7 billion Texas power facility arrangement with Chevron
The past several months have been challenging for Microsoft shareholders. Shares plummeted more than one-third across a six-month period, eliminating over $1 trillion from the company’s market capitalization. However, signs of stabilization are emerging.
On Tuesday, Benchmark Research analyst Yi Fu Lee launched coverage with a Buy recommendation and established a $450 price objective. Lee’s valuation approach applies an enterprise value-to-revenue multiple of 8.8x to Microsoft’s anticipated 2027 revenue figures.
The analyst’s central thesis is straightforward: Microsoft controls an enormous repository of enterprise and consumer information, which serves as the foundation for its artificial intelligence offerings. Lee characterizes the tech giant as the sector’s “true landlord.”
According to Lee, this data superiority underpins a long-term projection exceeding 10% yearly revenue expansion and approximately 30% free cash flow margins — significantly higher than the current fiscal year’s anticipated 21.8%.
The primary concern surrounding Microsoft currently involves its capital spending. Projections indicate the company will allocate over $100 billion this fiscal year, predominantly toward data center development. This figure has created anxiety among certain investors.
Benchmark’s Perspective on Capital Investment
Lee challenges this apprehension. His analysis shows Microsoft has already secured cloud service agreements that span the majority of the operational lifespan for the infrastructure being purchased. Essentially, the revenue needed to validate these expenditures is already contracted.
“We think it would be more concerning if Microsoft does not spend the cash today to add global capacity,” Lee wrote.
Microsoft shows no signs of pulling back. The technology leader confirmed its commitment to deploy $5.5 billion toward cloud and AI infrastructure development in Singapore through 2029. This disclosure followed a previous announcement detailing over $1 billion in investments planned for Thailand.
Regarding energy infrastructure, Bloomberg sources indicate Microsoft is negotiating with Chevron (CVX) and investment firm Engine No. 1 regarding a $7 billion power generation facility in Texas designed to power data center operations. The parties involved have not yet provided official statements.
OpenAI Investment Strengthens Investment Thesis
Lee additionally highlighted Microsoft’s financial position in OpenAI as an undervalued component of the business. His assessment places Microsoft’s current ownership in the ChatGPT creator at roughly $227 billion.
Despite OpenAI’s efforts to expand its investor base, Lee anticipates the partnership between the two organizations will remain robust over time. He characterizes their relationship as “symbiotic” — OpenAI requires dependable cloud infrastructure, while Microsoft gains from hosting a premier AI platform.
Lee also outlined an extensive market opportunity ahead. His estimates place Microsoft’s total addressable market spanning software, cybersecurity, and vertical solutions at $730.5 billion in 2025, expanding to $1.25 trillion by 2030 at an 11.4% compound annual growth rate.
MSFT reached peak levels above $450 in October 2025 before the downturn commenced. Shares have since rebounded modestly from recent lows near $360.
