Microsoft Slips as OpenAI Bet Starts to Worry Investors Microsoft shares fell 2-3% to around $374 on Tuesday, despite Bank of America reinstating a Buy rating with a $500 price target. The decline followed strong Q2 FY2026 revenue of $81.27 billion, which beat estimates by 1.2%, and a 39% year-over-year growth in Azure revenue. However, concerns about Microsoft’s growing reliance on OpenAI and rising capital expenditures have sparked investor unease. The company’s capital spending nearly doubled to $29.9 billion in Q2, while OpenAI investment losses reached $3.1 billion in Q1. These figures have raised questions about the sustainability of Microsoft’s AI strategy and the risks tied to its partnership with OpenAI. OpenAI has warned that disruptions to its relationship with Microsoft could harm its business, but investors are now scrutinizing how this dependency affects Microsoft’s financial health. Microsoft holds a 27% stake in OpenAI, valued at $135 billion, and has contracted to purchase $250 billion in Azure services. While this partnership has fueled Microsoft’s AI growth narrative, it has also created a significant financial exposure. Analysts note that the company’s Q2 GAAP net income included $7.6 billion in gains from OpenAI investments, which may not recur consistently. Stripping out these one-time benefits reveals a more complex financial picture. The broader tech sector also contributed to the stock’s decline, with the NASDAQ 100 down 0.6% and software stocks under pressure. Microsoft’s position as a central player in the AI narrative has made it a focal point for investor scrutiny. Despite Azure’s strong growth, the market is questioning whether the company can convert its massive capital spending into sustainable earnings.#microsoft #nasdaq_100 #openai #satya_nadella #azure
Microsoft Faces Worst Quarterly Stock Decline Since 2008 Amid AI Challenges Microsoft’s stock has plummeted by approximately 23% this year, marking its largest single-quarter decline since 2008. The downturn is driven by a combination of soaring AI infrastructure investments that have yet to deliver strong returns and growing threats from AI startups like Anthropic and OpenAI, which are challenging Microsoft’s core business. The company’s capital spending has surged, but user adoption of its AI assistant, Copilot, remains limited, exacerbating concerns about its financial performance. The stock’s decline has raised alarms among investors, particularly as Microsoft’s capital expenditures are projected to rise sharply. According to Bloomberg, the company’s capital spending for the fiscal year ending June 2026 is expected to reach $146 billion, a 66% increase from $88 billion in 2025. This figure is set to climb further to $170 billion in 2027 and $191 billion in 2028. However, these massive investments have not translated into accelerated revenue growth. The Azure cloud computing division, a key revenue driver, saw its growth rate slow in the latest quarter, while Copilot’s limited user adoption has forced Microsoft to restructure its AI business to improve performance. Market analysts are divided on Microsoft’s prospects. While some, like Janus Henderson’s Jonathan Cofsky, warn that the company’s capital intensity has reached unsustainable levels, others remain cautiously optimistic. Melius Research’s Ben Reitzes notes that Microsoft’s Azure division faces constraints due to its focus on refining Copilot and its proprietary models, a challenge that will take time to resolve.#microsoft #anthropic #openai #copilot #azure
Micron (MU) or Microsoft (MSFT): Which Beaten-Down AI Stock Is the Better Buy Right Now? Tech stocks have faced heavy selling pressure recently, with AI-focused companies like Micron (MU) and Microsoft (MSFT) experiencing significant declines. Both stocks have fallen over the past month, but their growth potential and valuation metrics differ. Microsoft’s shares have dropped 24% from their recent high of $481.60, while Micron is down over 20% from its peak of $461.70. Analysts at TipRanks’ Stocks Comparison tool suggest both may offer buying opportunities, though Microsoft shows a higher upside potential of around 60%, compared to Micron’s estimated 50% gain. Microsoft develops software, cloud services, and AI solutions, including Windows, Office, Azure, and tools like Copilot. Micron, on the other hand, is a leader in memory technologies such as DRAM, flash memory, and high-bandwidth memory (HBM), which are critical for computers, smartphones, SSDs, and AI servers. The recent selloff has pushed Microsoft to valuation levels not seen in years, with its forward P/E ratio at 21.57, below the sector average of 29.0. Analysts argue the discount is excessive given Microsoft’s strong fundamentals and growth prospects. In Q2 FY26, the company reported 17% year-over-year revenue growth, and Wall Street expects 16% growth for the next quarter and full year. Micron trades at a forward P/E of 6.17, significantly lower than the sector average of 28.01, suggesting substantial upside if growth continues. For Q2 FY26, Micron generated $23.9 billion in revenue and $12.20 EPS, exceeding consensus estimates. The company expects $33.5 billion in sales and $19.15 EPS for the May quarter, which would represent 42% and 70% above estimates, respectively.#copilot #azure #micron_mu #microsoft_msft #ai_stock
Microsoft: This Might Be the Best Core Stock Bargain in the Market Today Microsoft’s stock has faced pressure this year alongside other software companies as investors weigh the potential impact of artificial intelligence on traditional business models. However, analysts argue that AI may not threaten Microsoft’s competitive advantages. Instead, the company’s diverse product offerings, combined with switching costs, network effects, and cost efficiencies, position it to thrive in an evolving market. Morningstar recently reaffirmed its Economic Moat Rating for Microsoft while lowering ratings for other software stocks, highlighting its appeal as a long-term investment. The stock currently trades 33% below Morningstar’s fair value estimate of $600, making it a compelling core stock for investors willing to endure short-term market skepticism. Microsoft stands out among public cloud providers for its ability to deliver a broad range of platform-as-a-service and infrastructure-as-a-service solutions at scale. Its partnership with OpenAI has solidified its leadership in AI development, further enhancing its market position. Additionally, the company has successfully upsold users to higher-tier Office 365 subscriptions, particularly by integrating advanced telephony features. These factors have contributed to a more focused business model, driving revenue growth, expanding margins, and deepening customer relationships. Azure, Microsoft’s cloud computing division, is now the company’s central growth engine, despite being valued at around $75 billion. Analysts project Azure will grow at over 30% annually, driven by increasing adoption of hybrid cloud environments, where Microsoft has a strong foothold.#microsoft #openai #morningstar #azure #office_365
