Microsoft Stock Falls After AI Spending Concerns

Microsoft faces an existential threat because of shareholders who are in the midst of a significant retraction since the October 2025 peak. Following the increase to the all-time high of $540 in 2018, the shares have dropped to a price of $408.93 as of March 6, 2026. 

The company’s sell-off has gone to more than 17% after the fiscal Q 2 earnings and that has brought arguments: is it a buying opportunity or a warning?  

The AI Spending Dilemma  

The major feature of the recent depreciation is the fear of investors about ambitious capital expenditure (CapEx) of Microsoft on AIA infrastructure. Although the cloud revenues of Azure are stable and well, their growth has slowed slightly by shifting to high 30s percentages, rather than 40s. 

The investors who are rather scared of an AI bubble are concerned about the sustainability of such wasteful expenditure in case the increases in revenue do not go parallel.  

The OpenAI Factor  

Another, more subtle issue is the strong connection between the two that Microsoft has with OpenAI. A significant portion of Microsoft outstanding performance obligations of approximately 45% of performance obligations contracts and worth about $625 billion contracts is an instance of this single partnership. 

Such an aggregation is a cause of concern about the inherent worth of such commitments, especially since it is reported that OpenAI itself is not expected to be profitable until 2029. 

However, to reduce this risk, Microsoft is aggressively broadening its AI reach by signing agreements with Anthropic and a $50 billion deal to introduce AI to countries in the Southern Hemisphere as part of the Global South initiative.

The Path to $500  

The likelihood of the headwinds shifting back to $500 makes its viability exist, even though there are headwinds. Microsoft is currently valued at a forward P/E of about 23.30 earnings, something that has not been witnessed in years. 

Regarding the price target, more than 92% hold a Buy rating and the median price target is $600, which implies high upside potential. 

Future Outlook  

The move ahead is contingent on performance. Once Microsoft manages to prove that its huge CapEx will lead to corresponding increases in revenues, the stock will go back to its former heights. 

On the other hand, however, as AI expansion continues to slow down or in case OpenAI faces more profitability headaches, higher volatility can become an obstacle to the road to $500. 

The current market environment is valuing a situation that involves AI investments having a pay off, but an error margin is slimmer than ever.