If Microsoft Is Ready to Rebound, Consider Trading This ETF

Caught up in the artificial intelligence software carnage, shares of Microsoft (MSFT) are down almost 23% year-to-date while residing nearly 33% below the 52-week. Analysts consider a decline of 20% from a previous high a bear market.

Those data points would be enough for many traders to take a pass on the Direxion Daily MSFT Bull 2X Shares (MSFU), which is designed to deliver 200% of the stock’s daily performance. However, now may be the time for tactical short-term traders to put MSFU on their watch lists.

MSFU is worth monitoring; there are emerging signs that Microsoft may have brighter prospects than other software stocks. For example, on Tuesday Bank of America reinstated coverage of the stock with a “buy” rating and a $500 target. It noted that Microsoft is a likely AI monetization winner due to its lineup of cloud computing and software services. That price target implies upside of about 33% from the March 23 close.

Maybe More Momentum for MSFU

Alongside other software stocks, the market has punished Microsoft — but it may be missing the real story. In a recent report, William Blair analysts downgraded a batch of software stocks while maintaining an “outperform” rating on Microsoft.

“It still sees Microsoft as well-positioned in the current market, noting that the Magnificent Seven company is one of the most ‘notable’ AI beneficiaries in the software sector. The William Blair analysts highlighted Microsoft Azure and the growing adoption rates of the company’s generative AI Copilots as reasons to be optimistic,” reported Kit Norton for Barron’s.

Despite its recent punishment, there is something to Microsoft’s status as an AI leader and beneficiary. Investors and traders considering the stock should remain aware of this. Expected AI adopters’ will direct their spending in part to Microsoft products and services.

“New data from a Morgan Stanley AlphaWise survey suggests that corporate IT leaders remain confident. Chief Information Officers in the U.S. and Europe expect software budgets to grow 3.8% this year, slightly above the 3.7% pace in 2025, with most spending directed to Microsoft products,” noted Morgan Stanley.

For more news, information, and strategy, visit the Leveraged & Inverse Content Hub.