Microsoft Shares Tumble 10% as Investors Balk at Heavy AI Spending, OpenAI Exposure
Microsoft Corp. (NASDAQ: MSFT) shares plunged 10% on Thursday, closing at $433.50, in a sharp reversal after a five-day rally. The sell-off reflects growing Wall Street unease over the tech giant's aggressive spending on artificial intelligence infrastructure and its substantial financial exposure to partner OpenAI.
The downturn came despite Microsoft reporting robust fiscal second-quarter results. For the period ending December 31, 2025, net income soared 59.5% year-over-year to $38.46 billion, while revenue climbed 17% to $81.3 billion. Its cloud segment remained a powerhouse, with revenue surging 26% to $51.5 billion.
However, these figures were overshadowed by a 66% year-over-year spike in capital expenditures, which hit $37.5 billion. Analysts zeroed in on the disclosure that a staggering 45% of Microsoft's committed Azure cloud backlog is tied to OpenAI, raising questions about concentration risk and the sustainability of returns on massive AI investments.
"The financial performance is strong, but the market is signaling it's worried about the cost of that growth," said financial analyst Rebecca Cho of Sterling Capital Advisors. "When nearly half your cloud backlog hinges on one partner, it introduces a significant variable. Investors are asking if OpenAI can scale profitably enough to justify Microsoft's billions in capex."
Jefferies analyst Brent Thill echoed these concerns in a CNBC interview, questioning whether OpenAI can achieve the financial milestones required to fulfill its commitments to Microsoft and other infrastructure providers.
The company had previously forecast total capital expenditures of approximately $140 billion for the fiscal year ending June 2026, a figure that now sits under intense scrutiny.
Market Reaction & Expert Commentary
The reaction highlights a pivotal moment for AI-driven stocks, where stellar earnings are being weighed against the enormous costs of maintaining technological leadership.
"This is a classic 'buy the rumor, sell the news' event coupled with a reality check," said Michael Torres, a portfolio manager at Horizon Investments. "The numbers are fantastic, but the guidance on spending gave pause. The market is demanding more clarity on the ROI timeline for these AI investments."
"It's sheer madness," countered Sarah Chen, a veteran tech investor and outspoken critic of current AI valuations. "The company is pouring tens of billions into what is essentially a bet on a single, unproven-from-a-profitability entity. This isn't innovation; it's fiscal recklessness disguised as ambition. The 10% drop is just the beginning of a necessary correction."
"Short-term volatility is inevitable in a high-growth sector," offered David Park, a strategy professor at Kellogg School of Management. "Microsoft is playing a long game, building the foundational infrastructure for the next computing era. Today's reaction is more about profit-taking and near-term risk assessment than a verdict on the long-term strategy."
The sell-off places Microsoft among the day's worst performers in the S&P 500 and casts a shadow over the broader AI sector, prompting investors to re-evaluate the balance between aggressive investment and near-term profitability.