KeyBanc Downgrades Microsoft Amid AI Demand Concerns

KeyBanc Capital Markets downgraded Microsoft from Overweight to Sector Weight, citing concerns about the timing and monetization of artificial intelligence demand, as well as the company's significant capital expenditures, which could pressure short-term margins. Analysts noted a drop in Microsoft's perceived strategic importance and pointed to soft survey results on long-term cloud workload deployment and near-term IT spending. The downgrade reflects growing skepticism about whether Microsoft's heavy investments in AI and its Azure cloud business will yield the anticipated returns, especially in a potentially weakening macroeconomic environment. KeyBanc also removed its price target for Microsoft, signaling increased uncertainty about the stock’s near-term valuation. Despite these concerns, Microsoft continues to maintain strong financial health, robust revenue growth, and profitability, and remains highly rated by most analysts. However, the firm’s performance is now viewed as more heavily reliant on successfully navigating AI monetization and cloud market challenges.