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Microsoft Corp. (NASDAQ:MSFT) stock jumped about 6% Wednesday as investors rotated back into mega-cap AI leaders, even as fresh political concerns raised questions about the pace of future U.S. data-center construction.

The rally extended to Big Tech peers including Apple Inc. (NASDAQ:AAPL), Amazon.com Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOG)(NASDAQ:GOOGL).

The Nasdaq gained 0.87% and the S&P 500 rose 1.3%.

• Microsoft stock is at critical resistance. What’s driving MSFT to record levels?

Ives Keeps Microsoft at the Top of His AI List

Tech analyst Dan Ives said Democratic victories in both chambers of Congress could create a "big hurdle for AI buildout" and potentially slow U.S. data center development over the next several years.

Still, Ives said his preferred technology names remain unchanged and continued to identify Microsoft as his top hyperscaler AI pick heading into 2027.

Earlier, Ives had called the recent technology sell-off a "gut check" and urged investors not to "panic," while warning that AI companies have "like a six-month window" to demonstrate stronger monetization from their infrastructure spending.

Slowinski Sees More Azure Acceleration

BNP Paribas analyst Stefan Slowinski maintained an Outperform rating and raised his price target to $632 from $604 following Microsoft’s latest results.

Slowinski highlighted 48% constant-currency Azure growth in the fiscal first quarter, above management’s 44%-45% guidance, while Microsoft 365 Commercial Cloud grew 18%.

He expects Azure growth to accelerate further to 49%-50% in the fiscal second quarter and Microsoft 365 Commercial Cloud growth to reach 19%.

Slowinski raised his fiscal 2027 revenue estimate by about 0.5%, but also lifted his fiscal 2028 and 2029 cash-capex forecasts by 9% and 16%, respectively. He cautioned that continued infrastructure spending could push free cash flow negative in the second half of fiscal 2027.

Luria Highlights Microsoft’s Funding Advantage

Ahead of earnings, D.A. Davidson Managing Director Gil Luria slightly favored Microsoft over Alphabet and Amazon.

Luria expected Azure to accelerate and viewed Microsoft’s ability to generate free cash flow as an advantage in funding AI infrastructure without necessarily relying on additional debt or equity.

He also saw enterprise demand, Azure’s AI compute exposure and higher software subscriptions as important growth drivers.

Thill Points to Cloud and Software Strength

Following the results, Jefferies analyst Brent Thill highlighted accelerating Azure and Microsoft 365 growth, strong remaining performance obligations and lower-than-expected capital spending.

Thill also pointed to Microsoft’s resilient operating margins despite heavy AI investment.

He said the key issue from here is whether Microsoft can sustain infrastructure spending while preserving profitability, with enterprise AI adoption still at an early stage.

Munster Questions How Long Software Acceleration Can Last

Deepwater Asset Management’s Gene Munster noted Microsoft’s software growth accelerated to 17% in September from 14% in June.

He nevertheless questioned whether that pace is sustainable as AI changes demand for knowledge-worker software.

Munster also said capacity constraints prevented Azure from growing even faster, reinforcing Microsoft’s need for additional infrastructure investment.

Analyst Consensus

Microsoft carries a Buy consensus rating with an average consensus price forecast of $619.13.

Recent actions include Bernstein maintaining Outperform and raising its forecast to $722, RBC Capital maintaining Outperform with a $640 forecast, and Citigroup maintaining Buy while increasing its forecast to $680.

Top ETF Exposure

• Vanguard Morningstar Growth ETF (NYSE:VUG): 9.74% Weight
• iShares Global Tech ETF (NYSE:IXN): 9.91% Weight
• Xtrackers S&P 500 Scored & Screened ETF (NYSE:SNPE): 9.80% Weight

Significance: Because Microsoft carries such a heavy weight in these funds, any significant inflows or outflows for these ETFs will likely trigger automatic buying or selling of the stock.

MSFT Price Action

Microsoft shares were up 6.44% at $554.56 at the time of publication on Wednesday, according to Benzinga Pro data.

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