Microsoft Corp. shares are heading for their worst month since the dot-com era as investors continue to fret about how the software giant will fare in a world marked by artificial intelligence. The stock is down 17 per cent in June, putting it on course for its worst monthly showing since December 2000. The selloff has erased more than US$570 billion in market value and pushed the stock to its lowest closing price since 2023 on Thursday before rebounding on Friday.
Investor concerns over AI spending and disruption
“Microsoft is getting hit on two sides with worries about both AI spending and AI disruption,” said Jack Ablin, chief investment strategist at Cresset Wealth Advisors, which owns the stock. “While it looks like a pretty good deal with the valuation so low, I’m getting the sense that investors are shooting first and asking questions later.”
Microsoft’s slump stems from a number of trends that have made investors increasingly cautious. While the company is spending aggressively to build out AI infrastructure and release its own AI products, there continues to be broad apprehension about whether the technology will erode demand for traditional software.
Valuation at a decade low
The selloff has left Microsoft valued at the cheapest in a decade. At 19 times profits estimated over the next 12 months, the stock is trading at a rare discount to the S&P 500 at 20 times and well below its average of 27 over the last 10 years.
“Whether Microsoft Word or Excel will be rendered obsolete by AI remains to be seen,” Ablin said. “But the spending is certainly a concern, especially since so many are going to the bond market to borrow, suggesting their cash piles won’t be enough to sustain the buildout.”
Azure growth disappoints, capex forecast raises eyebrows
Concerns that Microsoft’s heavy spending on AI infrastructure isn’t generating sufficient returns were reignited in late April when its fiscal third-quarter earnings revealed underwhelming growth in its Azure cloud-computing business. Microsoft also forecast US$190 billion in capital expenditures through the end of December, more than Wall Street was expecting.
The aggressive investments are a key risk for Microsoft because they threaten profitability, according to Stifel analyst Brad Reback. Given “compressing Azure gross margins from accelerating capex, we believe estimates appear meaningfully too high,” he wrote in a June 25 note cutting the price target on Microsoft shares to US$400 from US$415.
Michael Burry buys Microsoft call options
Microsoft’s weakness has enticed Michael Burry, the investor whose bet against the U.S. housing market before the 2008 financial crisis was featured in The Big Short. Burry bought Microsoft call options with strike prices in the low US$700s that expire in 2028, he wrote in a Substack post late on Thursday. That helped send Microsoft shares up 5.7 per cent to US$372.97 on Friday, their best day since May 2025.
