- Tech Giants Downgraded: Analyst firm Redburn Atlantic has downgraded both Microsoft and Amazon stocks from a “Buy” to a “Neutral” rating.
- AI Hype Priced In: The core reason for the downgrade is the belief that the market has already factored in a “best-case scenario” for AI monetization into the stocks’ current valuations.
- Valuation Concerns: The firm suggests that while the AI opportunity is real, the recent surge in stock prices leaves limited room for further upside in the near term.
- Microsoft Price Target: Redburn Atlantic set a new price target of $450 for Microsoft shares following the rating change.
Big Tech Rally Hits a Valuation Wall
In a note of caution amid the market’s artificial intelligence frenzy, Redburn Atlantic has downgraded two of the biggest names in tech, Microsoft (MSFT) and Amazon (AMZN). Analyst Alex Haissl shifted both stocks from a “Buy” to a “Neutral” rating, signaling that the excitement around AI may have outpaced the immediate financial returns.
The move suggests that while the long-term potential of AI is undeniable, the current stock prices for these giants have already baked in much of that future success.
Microsoft: Has the AI Best-Case Already Happened?
For Microsoft, the downgrade stems from the view that its AI leadership is now fully appreciated by investors. The company’s strategic partnership with OpenAI and the successful rollout of its Copilot AI assistants have sent the stock soaring.
However, Redburn Atlantic argues that this enthusiasm means the market has “priced in a best-case scenario for monetization over the next few years.” With the stock trading at a premium, the firm believes there is less room for significant growth from its current levels, setting a price target of $450.
Amazon’s AI Potential Faces Scrutiny
Amazon’s downgrade follows a similar logic. While its cloud computing division, Amazon Web Services (AWS), is a critical player in the AI infrastructure space, the analyst believes investor optimism has pushed its valuation to a peak. The market is seen as overly enthusiastic about the immediate growth prospects tied to AI, prompting the more conservative “Neutral” stance.
This ratings change serves as a broader commentary on the “Magnificent Seven” stocks, which have dominated market gains over the past year. It highlights a growing debate among analysts: after such a powerful rally, are the valuations of top tech companies becoming too stretched, even with the promise of AI?