Microsoft is having its worst month in nearly 25 years.
The software giant has lost more than $570 billion in market value in June, with its shares falling 17%—their biggest monthly decline since December 2000 during the dot-com era, reported Bloomberg.
The selloff comes despite remaining one of the biggest names in (AI), raising an obvious question: Why are investors suddenly dumping one of the world’s most valuable companies?
The answer lies in growing concerns over whether Microsoft’s massive AI spending will generate enough profits to justify the cost.
Microsoft has emerged as one of the biggest spenders in the AI race.
The company has poured billions of dollars into data centres, AI chips and cloud infrastructure while rapidly rolling out AI-powered products across Windows, Microsoft 365, Azure and Copilot.
But investors are beginning to question whether those investments are translating into earnings quickly enough.
According to Bloomberg, concerns intensified after Microsoft’s latest quarterly results showed weaker-than-expected growth in its Azure cloud business. The company also projected capital expenditure of about $190 billion through the end of December—far higher than Wall Street had expected.
Ironically, the technology Microsoft is betting on has also become one of investors’ biggest concerns.
Some analysts worry AI could eventually reduce demand for traditional software products such as Microsoft Office, while forcing the company to continue spending heavily to stay ahead of rivals.
“Microsoft is getting hit on two sides with worries about both AI spending and AI disruption,” Jack Ablin, Chief Investment Strategist at Cresset Wealth Advisors, told Bloomberg.
He said investors appear to be “shooting first and asking questions later” as uncertainty around AI continues to weigh on sentiment.
The sharp correction has significantly lowered Microsoft’s valuation.
According to Bloomberg, the stock now trades at about 19 times expected earnings, below the S&P 500’s valuation of around 20 times and well under Microsoft’s own 10-year average of 27 times earnings.
That has prompted some investors to view the decline as a buying opportunity.
Michael Burry—the investor made famous by The Big Short for predicting the 2008 housing market crash—has bought Microsoft call options that expire in 2028, according to Bloomberg. The disclosure helped lift Microsoft’s shares nearly 6% on Friday.
Despite the recent selloff, many analysts remain optimistic about Microsoft’s long-term prospects.
Bloomberg reported that the company is expected to post its fastest annual revenue growth since 2022, with analysts forecasting sales growth of 17% in the current fiscal year. Revenue growth is expected to accelerate further over the next few years.
Keith Fitz-Gerald, principal at the Fitz-Gerald Group, told Bloomberg that while questions remain over how AI could reshape the software industry, Microsoft’s current valuation looks attractive.
“There is no question the current price represents something close to an epic buying opportunity,” he told Bloomberg, although he added that uncertainty around AI means he is keeping his position small for now.
Microsoft’s selloff does not necessarily mean investors have lost faith in artificial intelligence.
Instead, it suggests they are becoming more selective.
For the past two years, markets rewarded companies simply for investing heavily in AI. Now, investors want proof that those billions of dollars are translating into stronger profits.
Microsoft remains one of the biggest beneficiaries of the AI revolution. But after losing more than $570 billion in market value in a single month, the message from Wall Street is becoming clearer: spending alone is no longer enough—investors want results.