Microsoft is next in the $4T market cap club: Wedbush

Wedbush said Microsoft (NASDAQ:MSFT) is next in line to the $4T market cap club, after Nvidia (NVDA) breached the mark on Wednesday, citing “AI Revolution.”

The firm has maintained its Outperform rating with a $600 price target on the stock. Microsoft is also on the Wedbush Best Ideas List.

“We believe Microsoft will also hit the $4 trillion market cap club this summer and then over the next 18 months the focus will be on the $5 trillion club….as this tech bull market is still early being led by the AI Revolution,” said analysts led by Daniel Ives.

The analysts noted that they have seen deal conversions for broader enterprise scale AI deployments “accelerating” in the field as the AI Revolution takes hold and many Microsoft customers now focused on deploying enterprise use cases across a number of verticals with financials, government, and retail clear standouts.

“We strongly view this as Microsoft’s “shining moment” with AI set to change the cloudgrowth trajectory in Redmond,” said the analysts.

Based on their checks, the analysts believe the next three years, over 70% of Microsoft installed base will ultimately be on this AI functionality for the enterprise/ commercial which changes the landscape and growth trajectory for CEO Satya Nadella and Co. going forward.

While AI use cases are building markedly in fiscal 2025, its clear fiscal 2026 for Microsoft remains the true inflection year of AI growth, according to the analysts.

“We believe the stock still has yet to price in what we view as the next wave of cloud and AI growth coming to the Redmond story with a strong competitive cloud edge vs. Amazon especially and Google in cloud bake offs,” said the analysts.

Ives and his team noted said that their recent partner checks have been incrementally strong around Copilot deployments with Microsoft customers, and ultimately they estimate this could add another nearly $25B to the company’s topline trajectory by fiscal 26.

“Here is the key as the multiplier ripple impact from the Godfather of AI Jensen and Nvidia is just starting to be felt on the cloud/software layer as the 2nd derivatives of the AI Revolution play out in the field. Our thesis remains that the cloud and AI monetization is going to comprise a bigger and bigger piece of Redmond going forward and will ultimately spur growth and margins over the coming years,” said the analysts.

The analysts added that they see Microsoft as the clear front runner on the enterprise hyperscaleAI front, despite increasing competition from Amazon (AMZN) Amazon Web Services and Alphabet (GOOG) (GOOGL) Google’s Google Cloud Platform.

“The core driver of the impressive Azure value proposition and MSFT next gen enterprise stack is AI….and this dynamic is just starting to take shape in the field in our view,” the analysts noted.