TLDR: A recent Morgan Stanley survey of Chief Information Officers (CIOs) reveals that Microsoft is overwhelmingly expected to capture the largest share of generative AI spending in the coming years. This strong outlook, coupled with its leadership in cloud migration and alignment with key IT priorities, has led Morgan Stanley to name Microsoft its top pick in large-cap software, reiterating an ‘Overweight’ rating and a $625 price target.
Microsoft Corporation (NASDAQ:MSFT) has been identified as the leading beneficiary of enterprise spending on generative artificial intelligence (AI), according to a comprehensive quarterly survey conducted by Morgan Stanley among hundreds of U.S. and European Chief Information Officers (CIOs) between August 5 and September 9. The investment bank has reiterated its ‘Overweight’ rating on Microsoft stock, designating it as their ‘Top Pick’ in large-cap software, with a price target of $625.
The survey highlights Microsoft’s dominant position in the evolving AI landscape. A significant 37% of CIOs anticipate Microsoft securing the largest or second-largest share of additional generative AI spending over the next three years. This figure places Microsoft considerably ahead of its closest competitor, Amazon.com, which garnered 12% of CIO expectations. For 2025 specifically, 33% of CIOs expect Microsoft to gain the largest incremental share of GenAI spend, more than double the next highest vendor.
Morgan Stanley analyst Keith Weiss underscored this sentiment, stating, “Bottom line, Microsoft again remains the clearest beneficiary of GenAI spend.” The company’s consistent leadership in the bank’s CIO surveys reinforces its strong market position.
Beyond generative AI, Microsoft is also poised to capitalize on the ongoing migration of computing workloads from on-premise servers to the cloud. Forty-nine percent of the 100 respondents surveyed on this trend expect Microsoft to gain the largest additional share of IT budgets resulting from this shift over the next three years. Amazon followed with 12%, and Salesforce with 6%.
CIOs continue to prioritize AI, security, digital transformation, and cloud computing projects. Microsoft’s extensive portfolio and deep integrations across its software ecosystem position it favorably to address these critical areas. “We see Microsoft as well positioned for both growth and defense given the current CIO priorities,” Weiss added.
The survey also noted that Azure, Microsoft’s cloud platform, is expected to be the fastest-growing hyperscaler in 2025. Microsoft also remains the top IT wallet share gainer, with a net +42% expecting share gains, an increase from +41% in the prior survey. Despite its strong performance and market leadership, Morgan Stanley believes Microsoft’s “valuation is still at a discount to peers.”
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The adoption of AI projects continues to be a major focus for CIOs, with 58% reporting that they either have AI projects in production or expect to by the end of the year, a slight decrease from 60% in the previous quarter. Microsoft’s scale, ecosystem, and increasing AI infrastructure investments are seen as key factors translating into higher lifetime value and stronger economics for the company in the long run.
