Existential Threat: Microsoft Stock (NASDAQ:MSFT) Slips as Analysts Sound Alarm on Steam Machine
Microsoft's stock (NASDAQ:MSFT) slipped as analysts expressed concerns over Valve's Steam Machine, which poses a threat to Microsoft's console plans. Analysts warn it could shift Microsoft's focus from hardware to services like Game Pass. Despite this, Wall Street maintains a Strong Buy consensus on MSFT stock, with a 31.16% upside potential. Microsoft's AI initiatives also face skepticism, with critics preferring improvements in Windows 11's user interface and security.
Tech giant Microsoft (MSFT) is a lot more than just gaming. We all know that much; Microsoft's big worry back in the console war era was that it would be considered merely a productivity company. But there are some mounting concerns about the upcoming Steam Machine, the new attempt at console gaming from Valve that basically does what Microsoft was planning to do, only much earlier. Microsoft investors were starting to feel the pain as well, and shares slid fractionally in Thursday afternoon's trading.
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Microsoft so far has been welcoming of the Steam Machine, despite the fact that it looks a lot like its own planned Xbox release, but at least a year ahead of schedule. In fact, some analysts—like Joost van Dreunen of the New York University Stern School of Business—says this is a disaster for Microsoft waiting to happen.
He noted, "Steam Machine basically turns Microsoft's worst nightmare into a shipping product. It pushes Microsoft further down the path it's already walking, where Game Pass and cloud access matter more than plastic boxes." Just to round it out, van Dreunen also noted that there was one major strategic risk here, that the Steam Machine would become the preferred PC-console hybrid, and leave Microsoft a publisher and supplier rather than a console maker.
"Mindblowing"
If you are so far unimpressed by what artificial intelligence (AI) can do, you are not alone. However, you are also part of the reason that Microsoft's AI CEO Mustafa Suleyman is having his mind blown on a regular basis. Suleyman finds it "mindblowing" that people are "…unimpressed that we can have a fluent conversation with a super smart AI that can generate any image / video…" In fact, Suleyman calls these people "cynics."
The response, however, was more measured. Some of those "cynics" responded that it was not AI that left them flat, but rather Microsoft's eagerness to shoehorn AI into any product it could find for the sake of shareholder interest. Those cynics would apparently prefer to see Microsoft address simpler issues, like making Windows 11 more like Windows 7 in terms of a simpler user interface and improved security.
Is Microsoft a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 33 Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 17.76% rally in its share price over the past year, the average MSFT price target of $631.98 per share implies 31.16% upside potential.
