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Many of the largest tech stocks saw big gains in 2024. In fact, all but one of the companies known as the Magnificent 7 outperformed the S&P 500 last year, driven by strong business results and investor enthusiasm for artificial intelligence.
Microsoft shareholders earned a total return of 12.9 percent in 2024, while the S&P 500 generated a total return of 25 percent. But some analysts think Microsoft shares are a good bet for 2025 and beyond.
(When evaluating specific investment decisions, it is often wise to speak with a financial advisor to make sure your portfolio is in alignment with your goals and time horizon. However, analyst notes can also provide a peek into the fundamentals and overall strategy of specific industries and stocks.)
Here’s what a few analysts have to say about Microsoft’s prospects this year.
Magnificent 7: 2024 stock performance
| Company | 2024 Total return |
| Nvidia (NVDA) | 171.2 percent |
| Meta Platforms (META) | 66.0 percent |
| Tesla (TSLA) | 62.5 percent |
| Amazon (AMZN) | 44.4 percent |
| Alphabet (GOOGL) | 35.9 percent |
| Apple (AAPL) | 30.6 percent |
| Microsoft (MSFT) | 12.9 percent |
Shares of the so-called Magnificent 7 saw major gains in 2024, with Nvidia leading the way thanks to its return of 171 percent. Nvidia’s business has exploded in recent years, driven by the growth in AI spending. Its revenue is expected to top $129 billion in its fiscal year ending in January 2025, up from about $27 billion just two years ago.
Meta Platforms, Alphabet and Amazon all benefited from the continued growth in digital advertising and all three companies increased spending on AI initiatives.
Tesla shares jumped more than 60 percent in 2024, surging at the end of the year following President Donald Trump’s election victory. Elon Musk was a major donor to the Trump campaign, and his companies may benefit from policies he has influence over thanks to his proximity to the administration.
Apple shares increased about 30 percent during 2024 despite the tech titan reporting annual revenue during its fiscal 2024 that was essentially flat with two years ago. The iPhone maker announced the largest stock buyback in U.S. history in May, authorizing $110 billion for share repurchases.
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Microsoft set to shine in 2025, analysts say
Microsoft delivered a total shareholder return of 12.9 percent in 2024, the worst among the Magnificent 7 stocks. To be sure, 12.9 percent is still a solid return, above the long-term average of the S&P 500 of about 10 percent but below Microsoft’s five- and 10-year annualized returns of more than 20 percent.
Microsoft is involved in a number of different businesses, including cloud (Azure), Office 365, Windows, Xbox, LinkedIn, Copilot and more. The company also owns a roughly 49 percent stake in ChatGPT-owner OpenAI.
Some analysts think the world’s largest software company is ready to get back to its outperforming ways in 2025.
“[Microsoft] is riding a wave of investment with its complete AI stack, from AI infrastructure to AI development services like Azure AI and AI applications like Microsoft Copilot,” CFRA analyst Angelo Zino wrote in a recent note to clients. “Many of these applications are now being deployed and are or will be moving into production in the coming quarters.” Zino rates the shares as a “strong buy” with a 12-month price target of $490. On Jan. 27, Microsoft stock opened at about $424.
Morningstar recently named Microsoft to its list of “The Best Companies to Own,” highlighting its public cloud leadership, AI strength, and “monopoly like” positions in certain products such as Office. Morningstar assigns the shares a fair value of $490.
Brad Sills, a research analyst at BofA Global Securities, also likes Microsoft shares, naming them as a top pick, with a price target of $510. He thinks the company is likely to raise its fiscal 2025 margin outlook when it reports earnings on Jan. 29, noting that “it should become more clear that the return on Azure capex is shaping up nicely.”
Bottom line
Although Microsoft was not the best-performing Magnificent 7 stock in 2024, some analysts suggest it has room to run in 2025.
If you’re considering which stocks to add to your portfolio in 2025, you may want to consult with a financial advisor, who can help you craft a portfolio tailored to your individual needs and risk tolerance.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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