If you own Microsoft, this year has tested your patience in ways that probably feel unfair.
While Nvidia and some of the other tech giants kept grabbing the AI headlines, Microsoft quietly became the worst performer in the Magnificent Seven this year, dropping about 23% in the quarter ending March 31 and badly trailing the S&P 500
That slide came even as you kept hearing that Microsoft was the best positioned AI winner, which only makes the drawdown sting more.
Goldman Sachs is now stepping in to say your pain may have gone too far.
Goldman has reiterated a buy rating on Microsoft and set a $600 stock price target, implying nearly 61% upside from where the stock closed before the note went out, CNBC reported. In a message to clients, analyst Gabriela Borges argued that Microsoft’s AI story is still very much intact and that the risks everyone is obsessing over are “already more than priced in.”
If you feel like you have been punished for believing in AI too early, this is the kind of call you probably did not realize you wanted to hear.
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How Microsoft became the “worst” Magnificent Seven stock
Before we talk about the upside, it helps to be honest about the drawdown.
Over the past six months, Microsoft has lost nearly a quarter of its value, making it the weakest name in the Magnificent Seven basket at a time when investors are questioning whether the group itself has peaked.
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Microsoft shares are down about 23% year to date and have posted their worst quarterly performance since the 2008 financial crisis, even as the S&P 500 is off only about 3.5%, CNBC noted.
The stock crashed about 10% in a single day after its January earnings when massive AI capital spending spooked investors, earlier reporting from TheStreet pointed out.
Those numbers are not just lines on a chart.
If you have been buying steadily on the AI story, you have probably watched a position you felt proud of turn into the thing you hesitate to open in your brokerage app. A big part of the discomfort is the feeling that Microsoft’s own success has created impossible expectations.
Analyst Rich Luria told TheStreet last year that Microsoft had become “the worst performer” among the mega caps partly because its AI investments would take longer to show up in earnings than the market wanted. You see that impatience in how much focus there is now on Copilot adoption, Azure margins, and the size of Microsoft’s AI data center bill.
Goldman’s new call doesn’t pretend those worries are fake. It argues that the stock has already paid for them and then some.
What Goldman is actually saying now
Goldman’s thesis, as summarized by CNBC, has a few key parts that matter if you are trying to decide whether to hold, add, or walk away.
First, Borges told clients that Microsoft’s pace of multiple compression has slowed and that “data points are improving” as adoption of AI enabled premium tiers begins to move the needle over the next nine months. She described Microsoft as “the best compounder in our coverage across AI product cycles” because it earns across AI compute, platforms, and applications.
Second, Goldman believes AI disintermediation risk is already more than priced in, even though the firm acknowledges that Copilot’s capabilities currently lag some competing tools. In other words, the market has been punishing Microsoft as if its own AI bet might be a bust, while Goldman sees that as an overreaction to early product comparisons.
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Third, the firm is tying that view to a specific number. Goldman set a $600 target on the stock, which implies around 60% upside from the roughly $373 level where Microsoft was trading before the note, according to Investing.com summaries of the bank’s earlier Maia and AI research.
The AI metrics that support Goldman’s optimism
To understand why a bank can be this bullish after a 23% drawdown, I like to look at the numbers underneath the narrative. A recent breakdown of Microsoft’s AI metrics by BayelsaWatch compiled the latest figures from the company’s January earnings.
According to that analysis, Microsoft generated $81.3 billion in total revenue in its second fiscal quarter of 2026, up 17% year over year, with Microsoft Cloud revenue up 26% to $51.5 billion dollars.
The report noted that AI workloads across Azure, Microsoft 365, and Dynamics were a major driver of that growth, even as personal computing revenue fell about 3%.
On the product side, Copilot is finally giving us real adoption numbers.
Microsoft disclosed that it has 15 million paid Microsoft 365 Copilot seats, representing about 3.3% of the company’s 450 million commercial Microsoft 365 user base, with daily active usage up sharply year over year.
Independent analysis of those numbers by the tech newsletter Perspectives framed it this way: after two years on the market, Copilot has become “the fastest adoption of any new M365 suite” in the company’s history, even if the headline penetration number still looks small.
Goldman’s earlier AI note, cited by Yahoo Finance, leaned heavily on that adoption curve. The research team said Microsoft’s Copilot and AI agent strategy could drive more than $35 in earnings per share by fiscal 2030, implying over 20% annual EPS growth, and that the bank’s upside case assumes Copilot adds tens of billions of incremental revenue.
If you put all that next to a stock that now trades at a steeper discount to its five-year forward earnings multiple than it has in years, you can see why Goldman thinks this particular selloff has gone too far.
Why this matters if you are just tired
I don’t think this is only a story for professional money managers. If you own Microsoft in an index fund, a retirement account, or a simple “own the giants” portfolio, this year has likely made you question just how safe “safe” really is.
Here is how I’d translate Goldman’s call and the underlying data into something you can actually use:
- The drawdown is big, but not mysterious
Microsoft has been hit by fear that AI spending will crush near term margins and that rival AI platforms will steal its productivity users. - The underlying business is still growing
Double digit revenue growth, 26% cloud growth, and a fast ramp in AI related workloads suggest the company is not limping fundamentally. - The AI story is early, not over
Only about 3% of Microsoft 365 commercial users are on paid Copilot tiers, which means most of the potential monetization is still ahead of you, not behind you. - Valuation has reset
Multiple compression has brought the stock below its five year average forward multiple, even as the AI optionality is larger than it was when that multiple was higher.
For me, the most useful part of Goldman’s note is not the exact price target. Targets move; the reasoning behind them is what you actually live with as an investor.
What I ended up getting from reading through Goldman’s call, the earnings numbers, and the AI adoption data was a different question to ask myself.
Instead of “was I wrong to believe in Microsoft’s AI story,” I found myself asking “am I reacting to a bad quarter and scary headlines, or to a real change in the long term thesis.”
If you own Microsoft today, that might be the question that matters more than any one day’s price move.
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