Microsoft shares decline as investors express concerns over the company’s AI investment strategy.

Microsoft’s recent stock slump highlights the ongoing turbulence in the technology sector, driven by concerns over the profitability of significant investments in artificial intelligence. As the company grapples with a slowdown in cloud computing growth, worries mount about the potential impact of rising competition and the viability of its partnership with OpenAI. This moment of reflection serves as a critical juncture not only for Microsoft but for the entire AI landscape, prompting investors to reassess their strategies in an evolving marketplace.

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Microsoft has faced a notable decline in its stock value, falling 12 percent amid a broader software industry sell-off that has raised questions about the profitability of major investments in artificial intelligence (AI). The Redmond, Washington-based technology company is poised to conclude the trading day with its most significant losses since March 2020, resulting in approximately 0 billion being wiped off its market valuation.

The recent downturn follows Microsoft’s earnings report on Wednesday, which revealed a deceleration in growth for its cloud computing service, Azure. The company reported a remarkable 66 percent increase in capital expenditures during the second quarter compared to the same period a year earlier, reaching a record .5 billion. Despite this, a forecast for stable Azure growth of 37 to 38 percent from January to March has led to concerns, particularly after a slowdown in the last quarter of 2025, partially attributed to limitations in AI chip capacity.

Dan Ives, an analyst at Wedbush Securities, noted that investors anticipated a decrease in capital expenditure and quicker monetization of cloud and AI services. For Microsoft, the journey toward solidifying its position in AI is projected to be a multi-year process, with 2026 being seen as a pivotal year for both the company and the AI sector.

Adding to the cloud computing giant’s challenges is the pressure stemming from OpenAI, which constitutes 45 percent of Microsoft’s cloud backlog. The potential risk to some 0 billion of investment has raised alarms among stakeholders as OpenAI, despite being a leading player in the AI landscape, grapples with diminishing momentum in the competitive race.

Additionally, Microsoft is reportedly prepared to invest approximately billion into OpenAI, a significant move that brings with it considerable debt, which the AI pioneer owes, estimated at nearly 0 billion. Concerns surrounding OpenAI’s sustainability have been echoed by industry experts, including Sebastian Mallaby of the Council on Foreign Relations, who predicts difficulties in maintaining financial solvency within the next 18 months.

Industry observers also note the emergence of fierce competition, as OpenAI faced an internal “code red” last December following the successful launch of Google’s Gemini 3, as well as advancements by Anthropic’s Claude Code, which is rapidly gaining traction in the marketplace. Investors have been vigilant as Microsoft navigates this tumultuous landscape, especially as its deep ties with OpenAI present both an opportunity and a concentration risk.

As tech leaders like Nvidia and Amazon continue to pour resources into AI, their stocks reflected the prevailing uncertainty, with both companies experiencing downturns in midday trading. Amazon’s stock was down by 1.3 percent and Nvidia saw a decrease of 0.1 percent.

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