One of the top analysts in the market many individuals follow (and I do as well) is Dan Ives of Wedbush. His work on many of the top tech names in recent decades has been excellent. And while he's often known as a perma-bull for top-tier mega-cap tech stocks, his views have largely been correct.
That's been the right bet for a very long time, and he's been on the correct side of that trade. So, when Mr. Ives talks, plenty of investors listen.
In a recent note, Ives cited his bullish cases on his top 10 picks for investors looking to play a risk-on rally into 2026. Unsurprisingly, Microsoft (MSFT) was one of his top picks.
Let's dive into why that's the case and what his thesis says about the broader trade in tech stocks right now.
AI Bubble Talk Is Premature
According to Dan Ives, the recent narrative that's been building that most AI-related companies are trading in bubble territory is one that needs to be refuted. In his view, companies like Microsoft and other hyperscalers that deal with enterprise customers are among the best-positioned to see a re-acceleration of growth in the new year.
Most analysts, including Dan Ives, will likely admit that valuations are very high on a historical basis. That said, it's also true that we're still in the early innings of this revolution, given the fact that data centers are still getting built up and the amount of compute needed to power the next generation of AI strategic deployments is likely years away.
This feeds into a positive narrative around Microsoft's current fundamentals, shown above. Microsoft has achieved above-market margins for many years, tied to the company's core software and cloud businesses. And with an incredible amount of cloud compute required to support the next-generation cloud-based AI applications Ives and others see on the horizon, I'm assuming the expectation Ives and other analysts have is that these margins should expand over time.
If that's the case, one could make a cogent argument that Microsoft's forward price-earnings multiple of around 30 times is perhaps undervalued. I'm not going to go there yet, though I can understand such a view for investors thinking three or four years out. But a lot will need to go right in order for this valuation to normalize toward the market multiple, given Microsoft's size and importance in most indices.
What Do Other Analysts Think About MSFT Stock?
Dan Ives is one of 48 analysts covering MSFT stock, though he does not appear to be the outlier among the group.
Wall Street collectively believes that MSFT stock should be worth around $630 per share roughly one year from today. That's some impressive implied upside of around 30% from here.
I do think that Microsoft's growth trajectory and importance to the whole cloud sector and the AI discussion do warrant a premium multiple. But with questions recently floating around concerning tech valuations more broadly, it will be interesting to see if this momentum can be sustained into 2026, and if so, for how long.
Personally, I'm a “Hold” on Microsoft right now in my own portfolio, but I can also understand why other investors may be looking to add here. It all depends on one's view of how big of a potential catalyst AI and this cloud buildout will be. One thing is for sure—Dan Ives appears to be sold on this thesis.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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