It’s been a wild year for artificial intelligence (AI) stocks. The technology continues to advance and demonstrate just how impactful it could be. Yet investors are a bit concerned about the significant capital expenditures these companies have committed to building out AI infrastructure. AI companies, even large ones in the “Magnificent Seven,” took on debt to fund the buildouts, and investors are unclear whether the returns will justify the expense.
That said, most Wall Street analysts believe much of the sell-off is overblown and do see opportunities. Here are two AI stocks that Wall Street analysts think could surge 47% and 54%, based on consensus estimates.
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It’s hard to imagine that a company like Microsoft(NASDAQ: MSFT), with everything it has going for it, could see such a big sell-off in recent months. Not only does the company operate a strong, diverse tech conglomerate without AI, but Microsoft is expected to be one of the largest beneficiaries of what some are calling the fourth industrial revolution.
However, the stock has stalled as Microsoft has already spent over $72 billion in capital expenditures (capex) through the first half of its fiscal year 2026, which ends in June. Capex has come in higher than expected, and most of it has been spent on AI infrastructure, such as graphics processing units (GPUs) and data centers.
Furthermore, investors seem somewhat disappointed in Microsoft Copilot, the company’s AI chatbot and assistant that is a big part of its AI strategy. The company revealed on its most recent earnings call that Copilot has 15 million paid members. That’s a small percentage of its total Microsoft 365 subscribers and a far cry from what the big AI chatbots like ChatGPT or Claude have, although Microsoft may not see Copilot as a direct competitor.
Despite the struggles, Wall Street analysts see the stock as a strong buy. Of the 33 Wall Street analysts who have issued research reports on the company in the past three months, 30 have a buy rating, while three have a hold rating, according to TipRanks. The average price target implies roughly 47% upside from current levels.
Jefferies analyst Brent Thill recently reiterated a buy rating on the stock with a $675 price target, implying 66% upside. Thill sees Microsoft’s end-to-end platform, encompassing its 450 million Microsoft 365 subscribers and Azure cloud, as a key advantage. The analyst also has the stock trading at about 21 times his projected fiscal year 2027 earnings per share, which isn’t an expensive valuation historically.
Ultimately, while Microsoft’s Copilot growth has been somewhat disappointing so far, it could also be a source of future upside if it begins to ramp up. I also believe the company’s well-diversified businesses somewhat insulate it from being a pure bet on AI.
The cloud provider Oracle(NYSE: ORCL) has seen its stock swing wildly over the past six months. After a blockbuster earnings report in September in which the company reported over $450 billion in remaining performance obligations, which is contracted revenue that is expected to be collected in future periods, the company’s stock exploded higher.
Oracle had burst onto the scene as an AI data center player in a major way. However, the rally was short-lived when it became clear that a major part of the RPOs came from OpenAI, which seemed to be striking AI data center deals with anyone and everyone. Oracle also needed to take on significant debt to fund the build-out of these data centers, and investors had concerns about margins in this business.
In Oracle’s most recent earnings report, the company beat Wall Street’s consensus estimates and raised its fiscal year 2027 revenue guidance by $1 billion. Oracle also reported strong cloud revenue and a strong backlog, somewhat assuaging investor concerns.
Of the 32 analysts who have issued a research report over the past three months, 28 have buy ratings, and four say “hold.” The average price target implies 54% upside, according to TipRanks.
Deutsche Bank analyst Brad Zelnick recently reiterated a buy rating on the stock, while lowering his price target from $375 to $300 per share. However, that still implies significant upside, with the stock trading around $166 per share as of this writing. Zelnick is encouraged by the company’s unsecured bond offering in February, which received an investment-grade rating, as well as by OpenAI’s recent $110 billion private financing round.
I think it’s hard to say what will happen with AI right now. Will it keep accelerating as it has, or is some kind of pause inevitable? Obviously, if OpenAI can fulfill its contract with Oracle, the stock should zip higher. With Oracle’s stock down 46% in the past six months and the stock now trading at about 22 times forward earnings, the risk-reward proposition has improved significantly.
I think investors can at least take a smaller position, as the upside could be immense.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group, Microsoft, and Oracle. The Motley Fool has a disclosure policy.
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