Morgan Stanley: Under macroeconomic fluctuations, Microsoft Corporation (MSFT.US) maintains a strong advantage in the GenAI field, and the "hold" rating is maintained.

According to the latest CIO survey report released by Morgan Stanley, despite the macroeconomic environment being uncertain, Microsoft Corporation (MSFT.US) still maintains a strong leadership position in the field of Generative Artificial Intelligence (GenAI) and is expected to be a major beneficiary of enterprise IT budget shifts and AI investments. The bank maintains a "hold" rating on Microsoft Corporation with a target price of $530. Since late February, Morgan Stanley has noted an increase in macro uncertainty, affecting CIO expectations for IT budget increases and software expenditure. The first quarter of 2025 CIO survey shows a year-on-year IT budget growth expectation of 3.7%, which remains stable overall. However, feedback after February 20 showed a slowdown in year-on-year growth to 3.2%. Software projects continue to lead in CIO priorities and defensive rankings, and customer confidence in GenAI is increasing. Despite some relative changes in Microsoft Corporation's positioning, its absolute strength remains strong, highlighting its favorable position in the long-term AI/Machine Learning trend and its defensive characteristics as an integrator of the field. In the cloud computing sector, as workloads shift to the cloud, Microsoft Corporation remains a major beneficiary. Morgan Stanley points out that 46% of respondents expect Microsoft Corporation to achieve the largest market share growth in the next three years in the Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and hybrid cloud markets. Microsoft Corporation leads in both the IaaS and PaaS markets, with adoption rates stabilizing in the former and increasing in the latter, outperforming Amazon.com, Inc. (AMZN.US) and Alphabet Inc. Class C (GOOGL.US). Regarding GenAI, 35% of CIOs expect Microsoft Corporation to gain the largest incremental share in GenAI spending by 2025. However, over the next three years, Microsoft Corporation is expected to cede some market share, with Amazon.com, Inc. and Alphabet Inc. Class C likely to see gains. In terms of AI agent strategy, 32% of CIOs expect to use Microsoft Corporation's services, second only to Amazon.com, Inc. (22%), highlighting Microsoft Corporation's strength in this field. From a valuation perspective, Microsoft Corporation's current valuation is attractive. Its 2026 fiscal year GAAP P/E ratio is 22x, with a PEG ratio of 1.6x (10-year average PEG of 2.1x), reflecting some negative expectation adjustments. If market sentiment stabilizes, Microsoft Corporation's stock may see an ideal entry point. Overall, Microsoft Corporation's strong position in public cloud adoption and AI, extensive distribution channels, wide customer base, and expanding profit margins will support its earnings per share growth. In the long term, Microsoft Corporation is expected to achieve revenue growth of over 10%, good operational expense control, and strong capital returns, with a total return rate of 15%-19%. However, Microsoft Corporation also faces some risks, such as macroeconomic weakness affecting IT spending, cloud services replacing local businesses, increased investments affecting profit margins, and limitations on AI applications.