Microsoft, one of the most valuable companies on earth, is having a month it would rather forget. Its shares are on track for their worst showing since the 2008 financial crisis, with more than $530 billion wiped off the company's value in June alone. At one point the stock was down more than 20% for the month, sliding to its lowest close since 2023 before a late bounce.
Hit from two sides
The selloff comes down to a rare double bind. On one side, Microsoft is spending enormous sums on artificial intelligence, guiding to around $190 billion in capital spending (the money that goes into data centres and chips) through to December, more than Wall Street expected. On the other, investors fear AI could eventually erode the very products that mint Microsoft's cash. As one analyst put it, whether "Microsoft Word or Excel will be rendered obsolete by AI remains to be seen".
"Microsoft is getting hit on two sides with worries about both AI spending and AI disruption," said Jack Ablin of Cresset Wealth Advisors. The doubts are showing up in broker notes too: Stifel's Brad Reback cut his price target to $400 from $415, warning that heavy AI spending is squeezing margins at the Azure cloud business. The selling has dragged Microsoft's valuation to about 19 times forward earnings, below the S&P 500's 20 and well under its own 10-year average of 27, its cheapest in a decade.
Bargain hunters circle
That cheapness is already tempting buyers. "Big Short" investor Michael Burry placed a bet on a rebound, buying call options with strikes in the low $700s that run to 2028, and the stock jumped 5.7% to $372.97 in a single session, its best day in more than a year. With the price this low, the debate has shifted from how far Microsoft can fall to whether the selloff has gone too far.
Whether this is a buying opportunity or the first real crack in the AI boom is the question now hanging over the world's biggest software maker, and the answer will ripple far beyond Redmond.
