Microsoft Slides 10%, $357 Billion Wiped After AI Spend Surges, Azure Slows

This article first appeared on GuruFocus.

Microsoft Corp. (NASDAQ:MSFT) shares came under heavy pressure after its latest earnings release, with Microsoft closing down 10% on Thursday and wiping roughly $357 billion from its market value in a single session. The move marked the second-largest one-day valuation decline on record, trailing only last year’s selloff in Nvidia following the launch of DeepSeek’s lower-cost AI model. Investors reacted to results that underscored record investment in artificial intelligence at a time when growth at Microsoft’s core Azure cloud business slowed from the prior quarter, raising questions about near-term returns on that spending.

The weakness spilled across the broader technology complex during the session. Alphabet (NASDAQ:GOOG) and Nvidia (NASDAQ:NVDA) each lost more than $100 billion in market value at one point before Alphabet recovered to finish up 0.7%, while Amazon ended the day down 0.5%. The reaction reflects growing skepticism among investors that the hundreds of billions of dollars being deployed by Big Tech into AI infrastructure will necessarily translate into proportionate earnings growth in the near term.

Microsoft’s earnings showed capital expenditures rose 66% year over year to a record $37.5 billion, reinforcing concerns around return on investment as Azure growth moderated. Matthew Maley, chief market strategist at Miller Tabak + Co., said the results could prompt investors to reassess Microsoft’s valuation relative to historical levels. The selloff ranks among the company’s worst days since its 1986 IPO, with only a handful of larger declines during events such as Black Monday in 1987, the dot-com bust, and the height of the Covid-19-driven market selloff in 2020.