Analyst: Microsoft's AI Compute Backlog Exceeds Google's by 50%, Valuation Unjustly Penalized by Market
Alina Collins
D.A. Davidson analyst Gil Luria says Microsoft's AI compute backlog exceeds Google's by 50%, yet the stock just posted its worst single month in roughly twenty years — a valuation penalty he calls fundamentally misguided.
Microsoft is selling more AI infrastructure than Google — so why is its stock doing worse?
Gil Luria, head of tech research at D.A. Davidson, says Microsoft's AI compute backlog is 50% larger than Google's. This means → Microsoft is actually moving significantly more AI infrastructure, but the market is not pricing that in.
Microsoft recently posted its worst single-month stock performance in about twenty years, while Alphabet and Amazon shares rose over the same period.
Luria's read is blunt: "The pendulum has swung too far. The market crowned Google the winner and Microsoft the loser, but both are winners."
How did the P/E gap flip?
A year ago, Google traded at roughly 18× earnings; Microsoft sat at 30× — the market was willing to pay far more for Microsoft. Today the positions have reversed.
In plain terms = a year ago the market thought Microsoft deserved its premium. Now it doesn't — even though Microsoft's AI business is actually stronger than it was then.
Luria calls this an over-correction: the valuation gap has moved beyond what fundamentals can justify.
The "double penalty" — why does the market's logic contradict itself?
Luria argues the market is imposing a self-contradictory double penalty on Microsoft: punishing it for spending too aggressively on AI capex, while simultaneously discounting it as a legacy software company that AI will disrupt.
In plain terms = the market is saying "you're spending too much on AI" and "AI will make you obsolete" at the same time — both cannot be true.
He stresses that Microsoft's enterprise-software stickiness remains intact: "We all know we'll still be using Outlook, Teams, Word, and PowerPoint in five years — and AI agents will use them too."
All three are spending on AI — why is only Microsoft being punished?
Google's and Amazon's AI capex is treated leniently by the market; Microsoft's comparable spending is penalized. This reflects the market applying different narrative frames to the three companies, rather than a consistent financial standard.
Luria notes that Microsoft's AI commercialization metrics are actually further ahead — the backlog figure is the most direct proof.
He did not give a specific price target, but his core call is clear: whether the valuation gap narrows depends on Microsoft's AI revenue delivery in coming quarters.
Content is for reference only, not financial advice.