Microsoft Stock Takes Most Massive Single-Day Loss Since Pandemic as Its AI Efforts Flail

"On Thursday, the Redmont giant's share price collapsed by nearly 12 percent after it released its latest quarterly results, making it not only its biggest single day slide since March 2020, according to Bloomberg, but also one of the worst drops in the company's history. The Wile E. Coyote-worthy cliff-plunge, which wiped out over $400 billion in valuation, was despite Microsoft actually exceeding some key expectations, including its net income, which rose by 23 percent from the same period the year before to nearly $31 billion."

"Overall, its total capital expenditures grew by 66 percent to a record $37.5 billion in Q4, as the company continues to splurge on building AI data centers for its Azure cloud computing business. Azure reported a 38 percent bump in revenue, which is slightly slower than the year before, adding to investor uncertainty over whether the business will be able to reap back the tens of billions spent on its data centers. In December, The Information reported that Azure was struggling to sell the company's autonomous "AI agents" to its business customers, with quotas being slashed by up to 50 percent."

"But Microsoft's AI spending spree has investors second-guessing its direction, and it's striking that the lack of faith was strong enough to precipitate a historic plunge even with respectable financial growth. Some analysts had predicted the stock drop, citing the uncertainty over Microsoft's AI spending. "Since it is becoming even more evident that Microsoft is not going to garner a strong ROI from their massive AI investment, their shares need to be revalued back down to a level that is more consistent with its historic fair value," Matthew Maley, chief market strategist at Miller Tabak + Co, told Bloomberg before markets opened on Thursday."

Microsoft's share price fell nearly 12 percent in a single day, wiping out over $400 billion in market value even as net income rose 23 percent to nearly $31 billion and revenue climbed 17 percent to $81.3 billion. Total capital expenditures jumped 66 percent to a record $37.5 billion as the company invested heavily in AI data centers for Azure. Azure revenue grew 38 percent but showed slight deceleration, and reports indicated difficulty selling autonomous "AI agents" to business customers. Analysts cited uncertainty over the ROI of massive AI spending as a primary driver of investor concern and the stock decline.

Read at Futurism