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Microsoft Loses $357 Billion in a Single Session

Microsoft shares plunged nearly 10% in Thursday trading, marking the company’s steepest one-day decline since March 2020 and wiping approximately $357 billion off its market capitalization. By the close, Microsoft’s valuation had fallen to about $3.22 trillion, a dramatic reversal for one of the world’s most valuable companies.

The selloff rippled across the broader software sector. The iShares Expanded Tech-Software ETF dropped roughly 5%, while the Nasdaq Composite ended the day down 0.7%. The tech landscape was mixed, however. Meta shares surged around 10% after delivering stronger-than-expected earnings and upbeat revenue guidance, highlighting how selective investors have become.

Microsoft’s stumble stood out not just for its size, but for what it revealed about the growing pains behind the company’s aggressive push into cloud computing and artificial intelligence.

Azure Growth Miss Sparks Investor Anxiety

At the center of the market reaction was Azure.

Microsoft reported 39% growth for Azure and other cloud services, narrowly missing the Street’s consensus estimate of 39.4%. While the difference may look small on paper, Azure’s trajectory is closely watched as a key barometer of Microsoft’s long-term growth, especially as rivals like Amazon Web Services and Google Cloud continue to invest heavily.

The company also guided to about $12.6 billion in fiscal third-quarter revenue for its More Personal Computing segment, which includes Windows. That came in well below analysts’ expectations of roughly $13.7 billion. Adding to concerns, the implied operating margin for the upcoming quarter also disappointed.

Together, these figures fueled fears that Microsoft’s growth engine may be facing short-term friction just as capital spending reaches historic levels.

Data Center Bottlenecks Take Center Stage

Microsoft executives acknowledged that infrastructure constraints played a meaningful role in the softer cloud performance.

Chief Financial Officer Amy Hood explained that Azure growth would likely have exceeded 40% if more newly available GPUs had been allocated to external cloud customers rather than reserved for Microsoft’s internal AI initiatives.

In her words, had the GPUs that came online during the first half of the fiscal year been directed entirely to Azure, reported growth would have crossed the 40% mark.

That admission intensified scrutiny of Microsoft’s data center strategy.

Ben Reitzes, an analyst at Melius Research who maintains a buy rating on the stock, said Microsoft needs to accelerate construction of new facilities.

He argued that Azure’s challenges are less about demand and more about execution, emphasizing that Microsoft must “stand up buildings faster” to keep pace with exploding requirements for AI and cloud computing.

Microsoft is already spending tens of billions of dollars annually on capital expenditures, much of it tied to data centers, servers, and AI accelerators. The company has been racing to expand capacity across North America and internationally, competing directly with Amazon and Google for power, land, chips, and specialized talent.

AI Investments Under the Microscope

Another flashpoint for investors is how Microsoft is allocating its AI computing power.

Some analysts questioned the decision to prioritize internal products such as Microsoft 365 Copilot, the company’s AI-powered productivity assistant, over Azure customers. While Copilot is positioned as a major growth driver, usage trends have so far lagged behind the explosive adoption seen by OpenAI’s ChatGPT.

UBS analysts expressed concern that Microsoft has tied up scarce and expensive AI infrastructure in products that have yet to demonstrate a strong usage ramp. They also pointed to the increasingly crowded and capital-intensive AI model market, suggesting Microsoft still needs to prove that these massive investments will generate adequate returns.

With AI data centers costing billions of dollars per campus and advanced GPUs often priced in the tens of thousands of dollars per unit, the stakes are high. Microsoft’s partnership with OpenAI alone has already involved multibillion-dollar commitments, and the company continues to expand its custom silicon and cloud AI offerings.

Wall Street Divided on Microsoft’s Long-Term Strategy

Despite the sharp selloff, not all analysts turned negative.

Bernstein analysts defended Microsoft’s approach, arguing that management is deliberately prioritizing long-term competitive positioning over short-term stock performance. They noted that capacity constraints are likely temporary and that the company is making conscious decisions to build a durable AI and cloud platform, even if that pressures margins and growth optics in the near term.

From this perspective, Microsoft’s strategy reflects a calculated bet: sacrifice a few quarters of smoother results to secure leadership in what could become a multi-trillion-dollar AI-driven market over the next decade.

Hood also signaled that capital expenditures may dip slightly in the current quarter, offering some reassurance to investors worried about runaway spending. Still, most analysts expect Microsoft’s overall AI and cloud investment to remain elevated throughout the year as competition intensifies.

What Comes Next for Microsoft Stock

Even after the $357 billion wipeout, Microsoft remains one of the largest companies in the world by market capitalization. But the episode underscores how sensitive mega-cap tech stocks have become to even modest deviations from expectations, particularly when they are spending aggressively on emerging technologies.

For investors, the focus now shifts to three key factors: how quickly Microsoft can expand data center capacity, whether Azure growth re-accelerates as infrastructure catches up with demand, and if AI products like Copilot can demonstrate meaningful adoption and revenue impact.

The earnings-driven plunge may prove to be a temporary setback. But it also serves as a reminder that in the AI arms race, execution matters just as much as ambition.

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