Microsoft or Micron: Goldman Sachs Picks the Better AI Stock to Buy on the Dip

High-flying stocks can stay on a strong run for a while, but that momentum doesn’t last forever. Both Microsoft (NASDAQ:MSFT) and Micron (NASDAQ:MU) illustrate this pattern well.

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Microsoft now sits 31% below the peak it reached back in October, while Micron’s turn came much more recently. The memory giant pushed to a new high just last week ahead of earnings, only to give back about 15% in the days that followed.

For investors looking beyond the near-term swings, the broader AI story around both names remains intact, and that keeps the door open for a rebound. The key question is which offers the more attractive opportunity on the pullback right now.

That’s where Goldman Sachs comes in, with a clear view on which of these two AI players looks like the more compelling buy. Taking a closer look at the firm’s thinking helps put the comparison into context, and a check of the TipRanks database reveals whether the rest of the Street shares that view or takes a different angle.

Microsoft

The AI landscape is shifting at a fast pace, and the companies involved in the race for AI supremacy are often switching positions; one moment, a certain name is leading the pack, and the next, it is trying to catch up to the competition. Microsoft is a good example of this dynamic.

The tech giant was considered the early leader in AI, given its heavy investment in ChatGPT maker OpenAI. Importantly, Microsoft didn’t just invest in the company, it also embedded OpenAI’s models (like those behind ChatGPT) into its own ecosystem. For example, they are used within Azure’s cloud platform and built into productivity tools such as Microsoft 365 Copilot. This allows businesses and users to access OpenAI-powered features directly through Microsoft products rather than using them separately.

However, other players have also been working on their own AI offerings, and those have turned out to be highly capable, too. Additionally, adoption of Microsoft 365 Copilot has fallen short of high expectations, while Alphabet’s Google Gemini and Anthropic’s Claude models have also been attracting plenty of attention.

Meanwhile, the stock took a big hit even after Microsoft reported strong December quarter results, the downturn partly driven by two factors: first, higher capex without upward revisions for Azure, which reignited concerns about ROI and Azure’s competitiveness compared with peers. And second, continuing questions about whether the knowledge worker applications business, like Office 365, could be disrupted by new AI entrants such as Claude Cowork.

That said, Microsoft is not one of the world’s most successful companies for nothing, and it would be foolish to write it off. That seems to inform Goldman analyst Gabriela Borges’ take; she thinks the strategy will bear fruit eventually.

“We believe Microsoft prioritizing compute capex for first party applications (Copilot) and internal R&D (e.g. Microsoft AI) over short-term Azure revenue will ultimately drive more strategic AI positioning across multiple layers of the technology stack and better returns over the medium term,” Borges said. “We believe Copilot is already contributing to M365 Commercial Cloud growth, stabilizing revenue growth on a business at very large scale (~$89 bn in FY26E). Excluding some one time items called out in F4Q25/F1Q26, M365 Commercial Cloud has seen stable revenue growth over the past 3 quarters vs. a trend of steady deceleration prior… We believe Copilot adoption is also evidenced in higher ARPU growth over the past 3 quarters (10-11% vs. 5-7% in the year prior).”

To this end, Borges assigns a Buy rating on the shares, with a $600 price target that implies ~60% upside from current levels. (To watch Borges’ track record, click here)

The broader Wall Street view lines up closely with that stance. The stock carries a Strong Buy consensus rating, based on 33 Buys and 3 Holds, while the $586.41 average price target suggests the Street sees about 57% upside over the next 12 months. (See MSFT stock forecast)

Micron

From an early AI winner, we turn to a more recent one – Micron. Over the past year, the memory giant has emerged as one of the market’s biggest success stories, driven by its critical role in the AI ecosystem. Despite a recent pullback, MU stock is still up an impressive 306% over the past 12 months.

The company’s offerings include DRAM, which provides short-term memory for data a processor uses immediately, and NAND, a flash memory used for long-term storage in devices and servers. Lately, the focus has shifted to HBM (high-bandwidth memory), an advanced form of DRAM designed for the extremely fast data transfer that AI accelerators and data-center GPUs require.

The memory industry is known to be highly cyclical, but a shift appears to be taking place right now. With the huge expansion of AI infrastructure, demand for high-bandwidth memory and cutting-edge storage has soared. For example, as one of only three providers of HBM, Micron has noted that all its HBM production for 2026 had already been sold.

The insatiable demand has also resulted in a lack of supply, and that has caused a huge spike in prices. Micron has been benefiting from these trends, as was very easy to see in its latest quarterly statement for its fiscal second quarter (February quarter).

It was a record-breaking affair. Revenue came in at $23.86 billion, up 196.4% year-over-year, beating forecasts by $4.56 billion. At the other end of the scale, adj. EPS of $12.20 surpassed expectations by $3.54.

The third quarter outlook was even more impressive. Micron anticipates adj. EPS between $18.75 and $19.55, with revenue expected in the $32.75 billion to $34.25 billion range. Those figures were way above analyst expectations, which had predicted adj. EPS of $11.29 on $23.66 billion in revenue.

Interestingly, however, since the report, the shares have been on the back foot, perhaps a classic case of “sell the news” with the market evidently thinking the stock had soared enough for now. That reaction makes sense to Goldman analyst James Schneider, who, despite the strong report, keeps a skeptical stance.

“The DRAM and NAND markets remain very healthy – which should drive continued tailwinds for Micron’s business. In addition, the company’s product execution continues to improve – with Micron’s HBM market share now in line with the company’s overall share position,” the 5-star analyst said. “However, we see potential risk of slowing HBM price momentum in 2027 given the prospects of meaningful supply additions in 2027, which keeps us Neutral for now. We could consider being more constructive on the stock if we see continued supply growth discipline continuing across the industry through 2027.”

Schneider’s Neutral rating is backed by a $400 price target, a figure suggesting shares will stay range-bound for the foreseeable future. (To watch Schneider’s track record, click here)

That said, only one other analyst joins Schneider on the sidelines, and they are outnumbered by 25 Buys, all adding up to a Strong Buy consensus rating. Meanwhile, at $537.57, the average target offers a 12-month upside of 36% from current levels. (See Micron stock forecast)

Bottom line, when taking in the Goldman Sachs analysts’ views, it’s clear the banking giant currently favors Microsoft over Micron.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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