The firm experienced its poorest trading session since 2020
Microsoft’s stock has seen its biggest drop in over five years, dropping 10% this week following the firm’s report of record artificial intelligence spending and slower growth in its core cloud division.
The stock finished at $433.50 on Thursday, down from $481.63 at the close of trading two days prior, erasing roughly $357 billion from the company’s market capitalization—one of the biggest single-day losses on record outside the Covid-era market selloff.
Microsoft ranks among the most proactive U.S. tech firms in embracing AI, having invested billions in infrastructure and expanded its collaboration with OpenAI. The company is integrating generative AI tools into Windows, Office, and Azure, while also cutting thousands of positions as part of a restructuring effort.
Per Bloomberg, this selloff signals rising investor doubt about whether the massive amounts Big Tech is pouring into AI will yield significant returns. Microsoft noted a 66% surge in capital expenditure to a record $37.5 billion in its most recent quarter, while growth in its Azure cloud segment slowed compared to the prior quarter.
“As it grows increasingly clear that Microsoft won’t secure a strong return on investment from its huge AI spending, its shares should be revalued to a level more aligned with their historical fair worth,” Matthew Maley, chief market strategist at Miller Tabak + Co, told Bloomberg.
The downturn spread to other major tech players: Alphabet and Nvidia each temporarily lost over $100 billion in market value at one point. Alphabet later reduced its losses to close 0.7% higher, while Amazon.com finished the session down 0.5%.
Microsoft stated that its quarterly profit was boosted by its OpenAI investments, which has increased its dependence on that partnership—even as its personal computing and gaming divisions saw a 3% drop.
IMF Chief Economist Pierre-Olivier Gourinchas warned earlier this month that the global economy’s resilience might be put to the test if the AI boom fails to generate productivity gains.
He cautioned that the global economy’s increasing reliance on a U.S.-driven AI boom leaves it vulnerable—any gap in the technology’s expected potential could prompt a steep reduction in investment.