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Microsoft loses $357 billion in second-largest single-day market drop
Microsoft's market capitalization plunged by $357 billion on Thursday, securing the second-largest one-day loss in stock market history. Investors punished the tech giant over slowing cloud growth and rising doubts about the returns from its massive artificial intelligence investments.
The stock closed down nearly 10 percent, marking the company's steepest drop since March 2020 and its worst post-earnings decline in almost 13 years. This left Microsoft's valuation at $3.22 trillion, a figure that still exceeds the total market value of over 90 percent of S&P 500 companies.
The sell-off followed Wednesday's quarterly report, which disclosed record investment spending of $37.5 billion for the period, up 66 percent from the previous year. Meanwhile, growth in Microsoft's key Azure cloud business eased slightly from 40 percent to 39 percent. Revenue of $81.3 billion and earnings per share of $4.14 both beat Wall Street expectations, but surging costs combined with decelerating cloud momentum alarmed shareholders.
Chief Financial Officer Amy Hood addressed the strain during an analyst call, explaining that diverting all incoming GPUs to Azure instead of internal AI development would have pushed performance above 40 percent. The company prioritized its own products, like Copilot, and research efforts, a move some analysts view as promising for long-term value despite testing investor patience. Microsoft also projected Azure growth to hold steady at 37 to 38 percent through March, hampered by ongoing constraints in AI chip production and demand outstripping supply.
The downturn rippled across the tech sector, dragging the Nasdaq Composite down 0.7 percent. Shares in ServiceNow tumbled 12 percent, while the iShares Expanded Tech-Software Sector ETF fell about 5 percent, entering bear market territory.
This $357 billion wipeout trails only Nvidia's $593 billion single-day loss on January 27, 2025, triggered by a low-cost AI model from Chinese startup DeepSeek. Bloomberg notes that since Microsoft's 1986 IPO, few trading sessions, including Black Monday in 1987 and the COVID-19 crash, have seen sharper declines. In contrast, Meta Platforms shares surged 10 percent Thursday after strong results and plans for up to $135 billion in data center spending.
Market strategists, as cited by Bloomberg, argue that with evidence mounting that Microsoft may not achieve strong returns on its hefty AI outlays, the stock warrants a reassessment.