Wall Street is closely monitoring the potential impact of artificial intelligence on the software industry, with Microsoft's stock experiencing its second rating downgrade in less than a week. On Monday, Melius Research adjusted Microsoft's rating from 'Buy' to 'Hold,' primarily citing concerns over its capital expenditures and the market outlook for its Copilot product. Previously, Stifel had also downgraded Microsoft, pointing out potential issues with the growth rate of its Azure cloud computing business. Analysts at Melius believe that products launched by Anthropic could pose a challenge to Microsoft's 365 suite, suggesting that Copilot might need to be offered for free and would consume significant Azure resources. This rating downgrade comes at a time when investors are feeling uneasy about the prospects of the software industry, with a basket of software stocks tracked by Goldman Sachs having fallen more than 14% since late January. Despite Microsoft's stock price rising at one point on Monday, it remains down more than 24% from its high in October last year. The stock's weakness primarily stems from previous poor performance, with analysts expressing concerns about slowing Azure growth and hefty investments in artificial intelligence. Reitzes pointed out that Microsoft is facing a dilemma and expressed concerns about the return on AI investments. As a result, Melius lowered Microsoft's target price to $430. However, among analysts tracked by Bloomberg, approximately 96% still maintain a 'Buy' rating, with the average target price indicating that Microsoft's stock still has nearly 50% upside potential. The market involves risks, and investments should be made with caution.