Dan Ives Sees Microsoft Stock Headed to $5T Market Cap

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Wedbush Securities’ Dan Ives is one of the bigger bulls on Wall Street, and while he has high expectations for the many Magnificent Seven members, I do find his Microsoft (NASDAQ:MSFT) call to be one of the most intriguing. Undoubtedly, things are about to get a whole lot less lonely for Nvidia (NASDAQ:NVDA) in the $4 trillion market cap club, especially with Microsoft just one good day away from entering the exclusive group for the very first time.

As analysts and investors set their sights on the milestone ahead, Ives is thinking a bit further out, with the belief that the enterprise software juggernaut will hit a $5 trillion valuation at some point over the next 18 months. Pending an explosive rally on the back of a surprising quarterly beat, the move, which entails a gain of over 20%, will probably happen at some point in 2026. With shares inching higher after spending the past few months consolidating the explosive spring-time surge that took shares 48% higher from the post-Liberation Day trough to the mid-August peak, investors may be looking for Microsoft’s big breakout moment.

With an impressive footing in AI and a new bull on Wall Street over at Guggenheim Securities, who upgraded MSFT stock to Buy from Hold, it’s hard not to want to play Microsoft on a breakout, especially if you want AI upside at a price that’s not all too outlandish. In any case, I think Ives’ $5 trillion prediction will come to fruition, perhaps far sooner than he thinks, as the firm’s Azure cloud growth looks to add to its recent strengths while the firm looks to reposition Xbox for long-term growth. It’s still early days for Microsoft in this AI revolution, says Ives

The AI cloud could power a continued rally

Ives is a big fan of the trajectory of Microsoft’s AI-driven cloud business. As the firm stays in what Ives previously described as the “fast lane” relative to its public cloud peers, Microsoft may very well be equipped to outrun the rest of the Magnificent Seven as the AI boom enters its next innings. Undoubtedly, Azure is firing on all cylinders, and its impressive AI integration is a huge reason why. Of course, the firm needs to keep investing if it’s to stay ahead of its cloud competitors, many of which are also making massive strides in AI. 

Looking into the new year, it will be interesting to see how quickly AI workloads accelerate as the cloud giant looks to take cloud migrations to the next level. Of course, many AI firms are spending a great deal on AI infrastructure, but Microsoft, I believe, looks well-poised to score an above-average return on such investments, especially when it comes to the cloud. With a deeply integrated suite poised to advance at an impressive pace, it’s certainly hard to bet against Microsoft as its stock looks to hit new highs again. 

Beyond the Azure growth engine, Ives is also a big fan of the consumer business, which consists of Windows, Xbox, and LinkedIn, each of which Ives believes is better with AI. Though Azure is the big needle-mover for Microsoft, I wouldn’t discount the growth potential on the consumer side, as it might be the biggest source of surprise over the longer term.

Don’t forget about the consumer businesses

Undoubtedly, Copilot in Windows has been quite useful for consumers, but I think the tech is just scratching the surface of what it’s capable of. In due time, I’d look for greater personalization within the Windows ecosystem to act as a wide moat that helps give PCs a big jolt. Perhaps the biggest transformative wave that investors don’t see coming lies within the Xbox gaming division.

Xbox is poised to really open things up with its next-generation console, which will reportedly allow gamers to play PC titles. With cutting-edge new hardware that will make good use of AI-driven enhancements, and the future of gaming, I think, could get a lot brighter. Add the potential for AI NPCs and greater automation at Microsoft’s studios into the equation, and it seems like it’s not just fun and games over at Xbox, as the firm looks to level up its margins.

In the meantime, I’m sure many gamers are disgruntled over the recent Game Pass price increases, which certainly do look quite substantial. That said, I’m willing to bet that the service has incredible pricing power, perhaps enough to justify high double-digit percentage increases.

Of course, only time will tell, but either way, the hikes come at a time when Game Pass is packed with must-play titles such as The Outer Worlds 2 and Ninja Gaiden 4. With a new Xbox Ally handheld and improvements to its cloud-gaming service, it looks like there’s ample growth to be had as the firm opens up its ecosystem, with the aim to use innovation as its main moat source, rather than simply leaning on exclusive titles.

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