More than $400 billion was wiped from Microsoft’s stock value Thursday after a surge in spending at its data centers increased investor fears about the huge sums the Silicon Valley stalwart is spending to keep up with the race to artificial intelligence.
The sharp sell-off began after the software group’s quarterly results were released Wednesday evening, which showed the company’s capital spending reached $37.5 billion in the three months ended December, up from $22.6 billion in the same quarter of 2025. The total invested in AI technology since its 2024 fiscal year topped $200 billion.
Despite the fact that Microsoft reported a 60 percent increase net profit to $38.5 billion and an increase of 17 percent quarterly revenue came in at $81.3 billion, compared with forecasts of $80.3 billion, shares fell about 6 percent after hours Wednesday in New York.
On Thursday, after investors fully digested Microsoft’s latest results, their verdict was swift and by the close of trading in New York, the stock had lost $48.13, or 10 percent, to $433.50, its biggest daily percentage decline since March 2020. It was also the second-biggest drop in history after Nvidia shares lost $593 billion last year in response to the launch of DeepSeek’s low-cost AI model.
Last October, Microsoft’s stock market value topped $4 trillion, but it fell to $3.2 trillion as of Thursday evening.
Microsoft’s selloff affected the tech-leaning Nasdaq Composite, which by the end of regular trading hours had fallen 172.33 points, or 0.7 percent, to 23,685.12.
Analysts at Goldman Sachs said: “We believe the stock market reaction reflects another consecutive quarter of higher-than-expected capital spending without a commensurate increase in Azure (cloud computing business) growth rates.”
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The Windows maker has long enjoyed a first-mover advantage in the big-tech AI race thanks to its early bet on OpenAI, whose technology powers most of its offerings, including M365 Copilot.
Microsoft, led by Satya Nadella, owns a 27 percent stake in Chat maker GPT, whose recapitalization effort last year helped boost Microsoft’s overall profits after a change in how it accounts for its stake.
But the positive reception to Google’s latest Gemini model and the launch of autonomous agents such as Anthropic’s Claude Cowork have presented risks, both to Microsoft’s AI business and to the software offerings that have long been at the company’s core.
This year, Microsoft, Amazon, Alphabet and Google-owner Meta Platforms are expected to spend more than $500 billion in combined capital spending, up from about $366 billion in 2025, according to Bloomberg data.
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The reaction to Microsoft’s results and its investments in AI contrasts sharply with Meta Platforms’ results, also released Wednesday evening. The owner of Facebook, WhatsApp and Instagram said it expects annual capital spending to rise sharply, to between $115 billion and $135 billion, largely due to infrastructure costs, higher depreciation of its AI data center assets and higher infrastructure operating expenses.
Mark Zuckerberg, co-founder and chief executive of the world’s largest social media platform, said: sharp increase in spending would help build the AI infrastructure in the pursuit of superintelligence, a theoretical step where machines could surpass human performance.
Meta forecasts total spending for 2026 to be between $162 billion and $169 billion, up from $117.69 billion a year ago, due to rising salary costs as the company spends millions to hire top AI talent.
Shares of Meta closed up $69.58, or 10.4 percent, at $738.31.