Goldman Sachs Boosts Microsoft to Top Pick, Raises Price Target to $640

Global investment bank Goldman Sachs has updated its US Conviction List, removing semiconductor company Broadcom and adding Microsoft as a new entrant. The move reflects a shift in market focus from building AI infrastructure to monetizing it.

The price target for Microsoft was raised from $610 to $640, implying upside of over 30% given the current stock price of $487.65. Analyst Gabriela Borges noted that the AI revolution has entered a new phase where models are being applied to enterprise workloads, leading to increased earnings.

Microsoft's recent quarterly earnings report showed revenue growth of 18%, beating expectations, and its cloud platform Azure surpassed $100 billion in annual revenue with a 43% growth rate. Borges projected that Microsoft's earnings per share (EPS) growth could accelerate from 12% in fiscal 2027 to over 20% by fiscal 2029.

Goldman Sachs also added several other companies to its Conviction List, including Applied Materials, Delta Air Lines, O'Reilly Automotive, Viking Holdings, and UPS. The bank highlighted distinct demand drivers for each industry, such as Applied Materials' ability to expand market share in semiconductor manufacturing equipment, Delta Air Lines' pricing power, and UPS's recovery phase.