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Microsoft (MSFT): KeyBanc Downgrades Microsoft Despite AI Leadership and Strong Fundamentals

We recently published a list of 10 AI Stocks Surging on News Today. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other AI stocks surging on news today.

In the latest efforts to stop China from getting ahead in the AI race, the Trump administration is considering penalties that would block China’s DeepSeek from buying U.S. technology, reports The New York Times. It has also been reported that the administration is currently debating Americans’ access to its services. DeepSeek, a Chinese start-up that shook up Wall Street a few months ago with its cheaper and more efficient AI models, has had the US taking firm steps to tighten controls and scrutinize tech investments.

A key focus of US export controls has been Nvidia, whose chips were used to build DeepSeek’s AI models. Even though the US had stringent export controls, the AI start-up managed to get hold of thousands of its GPUs, raising concerns about the effectiveness of the said controls. As a result, US officials now aim to prevent the most advanced chips from being sold to China to deter it from having a lead in the AI race.

READ NOW: 12 AI Stocks on Wall Street’s Radar and  10 AI Stocks You Shouldn’t Overlook Right Now

The U.S. House Select Committee on China said that “it has sent a formal letter to Nvidia demanding answers about sales to China and Southeast Asia to examine whether and how its chips ended up powering DeepSeek’s AI models—despite U.S. export restrictions”.

With the government tightening its export rules to China, the AI chipmaker has revealed how it would face a $5.5bn (£4.2bn) hit in costs. The company will now require licences to export its H20 AI chip to China, one of its most popular chips.

“The [government] indicated that the license requirement addresses the risk that the covered products may be used in, or diverted to, a supercomputer in China.”

The company also said that federal officials have advised them that the licence requirement “will be in effect for the indefinite future”.

According to Marc Einstein from the Counterpoint Research consultancy, the $5.5bn hit is in line with estimates.

“As we have seen in the last few days and weeks, this may largely be a negotiating tactic. I wouldn’t be surprised to see some exemptions or changes made to tariff policy in the near future.”

For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds. The hedge fund data is as of Q4 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points  (see more details here).

manaemedia / Shutterstock.com

Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 317

Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements. On April 17, KeyBanc downgraded the stock to “Sector Weight” from Overweight based on too many negative catalysts building for Microsoft.

“To be clear, this isn’t about calling a quarter or anything like that. We’re not tactically downgrading ahead of the print in a couple weeks due to any single response in our survey of checks; this is more about seeing the data building and validating some worries we’ve had for a while.”

Overall, MSFT ranks 1st on our list of AI stocks surging on news today. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

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A New Dawn is Coming to U.S. Stocks

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…

Should I put my money in Artificial Intelligence?

Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.

Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…

But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.

That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…

And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.

He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

Click to continue reading…