Microsoft's Split Signals: Wall Street Boosts Targets While Inflation Clouds the AI Buildout

TD Cowen and Jefferies raised Microsoft price targets on cloud and AI demand, while inflation worries pressured the stock ahead of October 28 results.

Two competing forces are pulling at Microsoft's stock, and the market is struggling to decide which one matters more. On one side, analysts are racing to raise their price targets on the strength of the company's cloud and AI infrastructure momentum. On the other, macroeconomic anxiety over stubborn US inflation is casting doubt on the economics of the very data-center expansion that underpins those bullish calls.

TD Cowen lifted its target on the software giant from $540 to $625 on Thursday, keeping a Buy rating on the shares. The firm pointed to historically strong third-party data on the Azure cloud platform, a full quarterly contribution from Fairwater, and anticipated growth at OpenAI as the pillars of its upgraded view. Jefferies moved in the same direction, raising its target from $575 to $650, according to Reuters. The shared thread running through both revisions is unrelenting demand for the computing capacity Microsoft supplies to enterprise customers and AI workloads.

The stock, however, told a different story in the near term. Microsoft shares slipped 1.1% to EUR 472.80 on European exchanges Thursday, leaving them about 4% below their 52-week high. The prior session had already brought losses, with the stock closing at EUR 478.00 as hotter-than-expected US inflation data revived rate worries. The 52-week peak of EUR 492.40, touched Tuesday, remains within striking distance — the shares are trading just 2.9% below that level.

Rate Fears Put the Capex Bill Under the Microscope

What connects the inflation print to Microsoft specifically is the scale of its capital commitments. Investors are growing uneasy about the financing costs tied to the company's sweeping data-center buildout, and the longer rates stay elevated, the more scrutiny those outlays attract. Reuters reported that the latest inflation signals deepened skepticism over the enormous upfront spending on artificial intelligence. Cautious sentiment dominated short-term trading as a result.

That spending is far from abstract. Microsoft has said its in-house Azure Maia chip family will scale to multi-gigawatt installations starting in 2027. The Maia 200 processor is already handling production workloads, including applications such as Copilot, while the next-generation Maia 300 is slated to enter regular operation in 2027. The company intends to make the Maia system its primary inference engine for its own products and services, a push designed to cut reliance on outside chip suppliers and sharpen efficiency on complex algorithms.

Whether those billions translate into measurable returns is the question likely to define the stock's medium-term trajectory. The longer borrowing stays expensive, the harder the market will press on the profitability of these mega-projects.

Cyber Takedown and a Regulatory Wrinkle

Operationally, Microsoft has been busy on the security front. Working alongside Health-ISAC, authorities, and industry partners, the company moved against criminal online marketplaces. Acting on a court order to seize and redirect relevant domains, it dismantled three components of illicit trading infrastructure — YAM Store, CoGUI, and Iron Man — deactivated more than 20,000 linked accounts, and blocked over 100,000 domains used for fraudulent purposes.

President Brad Smith used the moment to call for tighter industry guardrails, arguing that AI systems have advanced faster than the safeguards around them and that new laws and safety rules for artificial intelligence are needed.

Regulatory friction has surfaced elsewhere, too. According to media reports, the US government temporarily suspended the PERM labor certification program for Microsoft on October 8 amid fraud allegations concerning the permanent-residency application process for skilled workers; general visa categories are unaffected. On the insider front, CFO Amy Hood sold 7,305 common shares on Tuesday for proceeds of $3,984,303.

All Eyes on October 28

For investors, the next hard data point arrives when Microsoft reports results for the first quarter of fiscal 2027 on October 28, 2026. Until then, the stock looks set to trade on the tension between analyst enthusiasm for its AI and cloud franchise and a rate environment that keeps asking when the spending will start paying off.