Microsoft Corp. (NASDAQ:MSFT) is accelerating its AI infrastructure push with a massive new data center lease in Texas, underscoring both the surging demand for cloud computing power and Wall Street's growing conviction that the company is positioned to dominate the next phase of artificial intelligence growth.

Data Center Expansion To Meet AI Demand

Microsoft has agreed to lease a roughly 700-megawatt data center in Abilene, Texas, previously slated for Oracle Corp. (NYSE:ORCL) and OpenAI.

The site, adjacent to Oracle and OpenAI's Stargate campus, was secured from developer Crusoe after earlier negotiations with Oracle and OpenAI collapsed over financing issues and shifting requirements, Bloomberg reported on Monday.

The deal reflects Microsoft's accelerating push to expand AI and cloud infrastructure. The company committed about $50 billion in new data center leases last quarter, reversing a slowdown in projects seen a year earlier.

The Abilene campus will now host both Microsoft and Oracle, highlighting intensifying competition in AI infrastructure. Meta Platforms Inc. (NASDAQ:META) also explored the site but did not proceed.

Analyst Sees Strong Growth Across AI Stack

On Tuesday, Bank of America Securities analyst Tal Liani said Microsoft remains a long-term artificial intelligence leader, reinstating coverage with a Buy rating and a $500 price forecast, implying about 31% upside. Microsoft is at the center of the AI supercycle, Liani said in the report.

Liani expects Microsoft to deliver sustained, multi-year growth as it monetizes AI across both its cloud infrastructure and software ecosystem. He pointed to Azure as the backbone for enterprise AI workloads, while products including Microsoft 365, Dynamics, GitHub, and Windows continue to integrate AI features that drive usage and spending.

He forecasts total revenue growth of 15% to 17% over the next three years. This will be led by a 24 to 28% growth in Intelligent Cloud as AI workloads scale.

Liani based his valuation on a 24x 2027 earnings multiple, above the roughly 19x peer average, citing Microsoft's scale and positioning in AI.

He also highlighted key risks, including the pace at which Microsoft converts its AI backlog into revenue, the evolving economics of its partnership with OpenAI, and uncertainty over the durability of the current AI cycle.

He expects margins to face near-term pressure from higher AI-related spending. Gross margins could decline by about 340 basis points through fiscal 2028, while operating margins remain above 46%, supported by the company's software mix.

Free cash flow margins may fall into the low-20% range from about 30% in fiscal 2024 as capital expenditures rise from $44 billion to about $143 billion by fiscal 2028, which he views as a temporary investment phase tied to AI growth.

MSFT Price Action: Microsoft shares were down 2.72% at $372.58 at the time of publication on Tuesday, according to Benzinga Pro data.

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