The stock market is still digesting the massive sell-off in technology equities as the emergence of the low-cost Chinese artificial intelligence (AI) model DeepSeek rattled investors.
The correction emerged as investors questioned the high valuations of AI infrastructure developed by technology giants such as Nvidia (NASDAQ: NVDA), which recorded one of its most volatile trading days on January 27.
Microsoft (NASDAQ: MSFT) was also caught in this melee, but the company recorded modest losses compared to peers, pushing analysts to rethink their stance on the firm.
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At the close of the last trading session, MSFT stock was valued at $434.56, down over 2%. However, ahead of trading on January 28, the firm showed some strength, up almost 1% in pre-market trading.
The losses are minimal compared to Nvidia, which plunged 16% to trade at $118.58. Similarly, the chipmaker shows strength in pre-market trading, up almost 5%.
Analyst updates MSFT stock price
Regarding Microsoft, financial services entity UBS has reaffirmed its ‘Buy’ rating and set a price target of $525.
According to the firm’s Karl Kierstead, Microsoft managed a relatively unscathed escape from the market’s reaction to DeepSeek.The analyst noted that Microsoft’s strategic decisions under CEO Satya Nadella’s leadership have positioned the company advantageously in the evolving AI landscape.
“In our judgment, the very modest -2% impact on Microsoft shares (one of the very few large-cap tech firms that was spared) felt about right, as the DeepSeek news validates much of what Microsoft has been saying/doing of late,” Kiersteadsaid.
For instance, Microsoft’s recent strategy involves not fully funding OpenAI’s expansive GPU compute targets and instead focusing on building an inference infrastructure tailored for large enterprise customers.
According to Kierstead, this shift “signals a desire to pivot away from material training GPU commitments to a single LLM.”
The investor note suggested that Nadella’s vocal stance on LLMs becoming commoditized reflects a forward-thinking approach to managing capital expenditure (capex) and resource allocation.
Microsoft stock fundamentals
Indeed, given these fundamentals highlighted by UBS, Microsoft has a good chance of bouncing back, considering that a section of Wall Street believes the market might be overreacting to DeepSeek’s emergence in the AI realm.
Microsoft has several company-specific and industry-wide growth catalysts in the AI field that are likely to drive investor confidence. For instance, one of MSFT’s most recent positive gains was triggered by the unveiling of the Stargate Project. The initiative, featuring a colossal $500 billion venture, seeks to fortify America’s AI landscape, spearheaded by entities such as OpenAI.
To this end, the Washington-based giant stands to benefit from increasing AI spending.
At the same time, MSFT’s share price might be impacted by the company’s earnings, which are scheduled for January 29.
Microsoft’s revenue is projected to grow, with analysts estimating $68.8 billion for Q4 2024 (up 10.94% YoY) and $69.78 billion for Q1 2025. Full-year 2025 revenue is expected to reach $278.45 billion, a 13.6% increase.
Overall, Wall Street remains mostly bullish, and a revenue beat could boost the stock, potentially easing concerns of a broader sell-off tied to the DeepSeek disruption.
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