Investing

Meet the Supercharged Growth Stock Headed to $4 Trillion Over the Coming 12 to 18 Months, According to 1 Wall Street Analyst (Hint: Not Nvidia)

Chris MacDonald

Published: December 13, 2024 10:47 am

There’s no doubt that Nvidia (NASDAQ:NVDA) is, and likely will continue to be, the most talked about stock for some time. The leading high-performance semiconductor maker, whose chips are used for a wide range of applications (but most notably for AI applications and compute), has seen its valuation skyrocket to lead this company to become the largest in the world by market capitalization.

The thing is, Nvidia continues to battle it out with other top mega-cap tech stocks, with a couple other potential players vying for a $4 trillion market capitalization. Currently, Microsoft (NASDAQ:MSFT) is easily among the front-runners for such a valuation, and it’s certainly going to be a race to see which company hits this mark first.

While other investors will consider Apple (NASDAQ:AAPL) as the top candidate to hit this valuation first (given that the company is currently the closest to doing so), I think Microsoft could potentially beat Apple to the punch. Here’s why at least one analyst agrees, and what could propel the software and AI giant to new highs in 2025 and beyond.

Key Points About This Article:

• Microsoft (MSFT) is among the leading tech giants that appears best-positioned to crack the $4 trillion market capitalization threshold in 2025.
• Here’s why one analyst thinks this is likely, and why $4 trillion could really just be the next psychological threshold for the company on a path to much higher levels.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Analysts Believe in Microsoft’s Ability to Soar

A number of Wall Street analysts have jumped on the bullish bandwagon when it comes to Microsoft, though there’s a wide range of estimates with regard to where this stock could be headed from here. Taking a look at the 28 analyst ratings for MSFT stock (currently trading around $449 per share), the divergence between the high and low price target ($550 and $425, respectively) is quite wide.

However, the $550 price target Dan Ives has put on Microsoft stock, which is the highest on the Street, would peg Microsoft at a valuation of more than $4 trillion. Like other analysts who are very bullish on Microsoft’s long-term growth potential, stronger-than-expected performance in 2025 driven by the company’s AI endeavors appears to be the key catalysts those ultra bullish on this stock are pricing in.

Other analysts such as Citibank’s Tyler Radke have praised Microsoft’s cost-cutting efforts and AI efficiency improvements, and suggest that the company’s Copilot integration could lead to a surge in productivity which may allow Microsoft to demand greater margins from the market. Indeed, if Microsoft customers can become as much as 50% more efficient with these tools, perhaps much greater pricing power is ahead for the software giant. We’ll see.

But given the generally ubiquitous bullish nature of most analyst calls on Microsoft, this is a stock that could certainly have what it takes to break through this key threshold next year. All eyes will be on Dan Ives’ price target, and whether that’s achievable over the next 12-18 months.

The Numbers Don’t Lie

It’s not just hype and euphoria that’s driving these price targets, though. Microsoft is certainly among the mega-cap tech companies that have the fundamentals to support a higher market capitalization over time, particularly if valuation multiples remain robust. 

The company is currently benefiting from a number of secular growth catalysts with are worth pointing out. Rising IT budgets (expected to grow around 4% overall in 2025, with the vast majority of corporations planning spending increases) and a particularly high increase in cloud and AI spending should bode well for Microsoft. The company’s investments in OpenAI and its Copilot technology should drive increased sales over the coming year. And while estimates vary on where these numbers could come in at, the fact that AI services have contributed 12 points to the company’s overall Azure growth is meaningful. I’d anticipate these numbers to climb in the coming quarters.

Microsoft’s shift from selling stand-alone software to a subscription-based model has ensured very stable cash flows over time. I think the introduction of an even more powerful suite of tools, driven by various AI integrations, should bode well for the company and its investors over time. 

Bottom Line: Microsoft Looks Like a Buy

Dan Ives continues to be among the most bullish analysts in the market, and his price target on Microsoft is certainly an eyebrow raiser. Yes, this stock is one that’s been on a tear of late, and it’s entirely possible Microsoft could breach the $550 level by the end of next year. However, that’s certainly a big ask for this stock, as it would imply a move of more than 20% from where shares currently trade. 

Over time, I expect Microsoft to certainly hit this target, and whether it’s 2025 or 2026 (or perhaps later, no one has a crystal ball), I do think Microsoft remains a top stock I’d continue to hold in my portfolio over the long-term. AI catalysts aside, this is a cash flow machine with plenty of growth drivers in other high-growth businesses like the cloud. In terms of diversification, market positioning, and pricing power there are few better companies out there in the market right now.