Aseity Research downgraded Microsoft stock from 'Strong Buy' to 'Hold'. The firm cites the current share price, near $500, as having factored in benefits from Microsoft's OpenAI relationship. This downgrade follows a roughly 26% stock gain since the firm's 'Strong Buy' rating in June.
The firm's core concern highlights a mismatch between company spending and growth sources. Azure's cloud growth increasingly stems from customers beyond OpenAI. However, two-thirds of Microsoft's capital expenditure remains focused on GPUs and CPUs. This heavy spending contributed to a free cash flow decline for two consecutive years. The decline raises questions about the stock's current valuation.