--- title: "Microsoft's highly anticipated AI faces a heavy blow! Investors encounter the harshest winter since 2008" type: "News" locale: "en" url: "https://longbridge.com/en/news/280794939.md" description: "Microsoft faces its worst quarterly performance since 2008, as AI investments and competitive pressures impact growth prospects. Market concerns over the return on investment in AI infrastructure have led investors to sell off software stocks. Nevertheless, Jonathan Cofsky, an investment manager at Janus Henderson, still holds Microsoft shares. The stock price fell 24% in the first quarter, making it the weakest performer among the seven tech giants in the U.S. stock market" datetime: "2026-03-27T12:53:02.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/280794939.md) - [en](https://longbridge.com/en/news/280794939.md) - [zh-HK](https://longbridge.com/zh-HK/news/280794939.md) --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/280794939.md) | [繁體中文](https://longbridge.com/zh-HK/news/280794939.md) # Microsoft's highly anticipated AI faces a heavy blow! Investors encounter the harshest winter since 2008 According to the Zhitong Finance APP, American tech giant Microsoft (MSFT.US) seems to be at the intersection of two unsettling trends shaking the tech sector, which could lead to its stock price recording the worst quarterly performance since the global financial crisis nearly twenty years ago. Firstly, this nearly $3 trillion market capitalization software giant is doubling down on AI capital expenditures. However, more and more investment institutions on Wall Street are questioning when the increasingly large investments in artificial intelligence computing infrastructure will yield more significant returns in revenue and profit growth. Secondly, the pessimistic narrative of "AI disrupting everything" has led global investors to continue selling software stocks, as they worry that AI startups like Anthropic and OpenAI are building AI agents focused on high-efficiency workflows that could completely replace SaaS software products from companies like Microsoft. Jonathan Cofsky, a portfolio manager at Janus Henderson Investors, stated, "There is indeed a concern in the market that customers may not pay Microsoft in the future but will instead turn more directly to AI large model suppliers, which could impact Microsoft's core growth business and at least put pressure on the company's pricing and profit margins." However, Jonathan Cofsky remains firmly invested in Microsoft stock. From a $100 billion gamble to a weakening moat, the company's stock price fell 24% in the first quarter, poised to record the largest quarterly decline since a significant drop of 27% in the fourth quarter of 2008. So far this year, among the "Magnificent Seven" tech giants—those that have seen the highest investment enthusiasm in recent years—Microsoft has been the weakest performer. A benchmark index tracking this group (the Magnificent Seven benchmark index) has fallen 13% during the same period. ![1774615125(1).png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260327/1774615127376680.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg) As shown in the above chart, Microsoft's stock price is set to record its weakest quarterly performance since 2008—since the beginning of the year, the company's stock price has fallen over 24%. Cofsky stated, "Microsoft has become more capital-intensive." "If the stock price is to perform better in the future, we need to be more assured that there will not be a substantial slowdown in core software business growth." With a series of recently launched AI agent products focused on high-efficiency workflows from leading AI large model companies like Anthropic and OpenAI likely to replace certain functional software services at much lower costs, global software stocks have faced heavy selling pressure. The iShares Expanded Tech Software Sector ETF (IGV.US), which tracks the U.S. software industry, has fallen about 40% from its historical high in September, plunging into a deep bear market Since February, the pessimistic tone of "AI disrupts everything" has mainly stemmed from the market's increasing concerns that AI workflows, similar to Claude Cowork and OpenClaw (formerly known as Clawdbot and Moltbot), which have gained explosive popularity and viral spread, may undermine the entire software empire based on the SaaS seat subscription revenue model. This has led to a rare sell-off that quickly spread to industries such as insurance, real estate, truck transportation, and any other sectors that appear to rely on seat revenue models or labor-intensive business models—markets believe these industries will be completely disrupted by AI. **Microsoft stands at the most dangerous crossroads since the AI super bull market** This round of sell-off has even made the stock look relatively cheaper compared to tech giants and the Nasdaq index, with a forward P/E ratio below 20 times, the lowest since June 2016. As shown in the chart below, Microsoft's valuation is at a multi-year low. ![1774615165(1).png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260327/1774615168509499.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg) Microsoft's valuation multiple is only slightly above the S&P 500 index; however, during the recent decline, Microsoft briefly fell to a valuation lower than the S&P 500, marking the first time since 2015 that this has occurred. This highlights that the market has rarely pushed Microsoft down to a level "close to the market, or even briefly below the market." Although Wall Street remains optimistic that Microsoft will be a long-term winner in the AI technology field, Microsoft still must keep pace with the unprecedented AI computing power spending arms race among mega cloud computing companies like Google and Amazon, which may complicate any short-term sentiment reversal. According to market averages compiled by institutions, including leasing, Microsoft's capital expenditures are expected to reach $146 billion in the fiscal year ending June 2026, a significant increase of about 66% from $88 billion in fiscal year 2025; this figure is expected to swell to $170 billion in fiscal year 2027 and continue to rise to $191 billion in fiscal year 2028. Investors are increasingly scrutinizing such massive expenditures, especially in the absence of more apparent acceleration in growth. In the most recent quarter's performance, the much-watched Microsoft Azure cloud computing division even saw a slight slowdown in growth compared to the previous quarter. Meanwhile, Microsoft's Copilot AI application product has gained limited traction among users, prompting the company to adjust its operational model related to AI applications to improve this AI software service. **Accumulating headwinds** Ben Reitzes, a senior analyst at Melius Research, has given the stock a "hold" rating. He stated that all these combined issues reflect that Microsoft is facing accumulating headwinds. In a report sent to clients on March 23, he wrote: "Microsoft's upside potential in operating its Azure cloud platform is very limited, as it is busy fixing the growth rate of its Copilot business and its own model ecosystem—and this will not be resolved in just one quarter." Among the 67 Wall Street analysts covering Microsoft, 63 have given a "buy" rating, 3 have given a "hold" rating, and 1 has given a "sell" rating. Analysts have set an average 12-month target price of $592 for the stock, indicating more than a 60% upside potential over the next year based on the average target price expectation. According to data compiled by institutions dating back to 2009, this represents the highest implied investment return rate on record. The stock's decline relative to its 200-day moving average is also the largest since 2009. Analyst Reitzes believes that the overwhelming "buy" ratings for the stock reflect a serious complacency among his peers on Wall Street. He thinks that the company's productivity and business process divisions, as well as the More Personal Computing segment, face additional growth risks. On the other hand, analyst Tal Liani from Bank of America has become increasingly bullish on Microsoft. Earlier this week, he resumed coverage of the stock with a "buy" rating, citing Microsoft's "sustained multi-year growth potential" in cloud computing and AI. These two starkly contrasting market views touch on the tense core surrounding Microsoft stock. The long-term growth outlook is indeed promising, but there are very real execution risks between now and then. Whether these concerns are prescient or represent a significant buying opportunity depends on the observer's judgment. Jake Seltz, a senior portfolio manager at Allspring Global Investments, stated, "I believe this stock has high long-term investment value. Its AI strategy will ultimately prove to be correct, and I think it will largely be insulated from the most severe fears of AI disruption. Meanwhile, these concerns are creating long-term holding opportunities, especially if you are willing to be a little more patient." Microsoft is currently facing "two major pressures" from its AI technology, which it hopes will drive growth: on one end, defensive actions such as heavy asset investment, margin pressure, and a large-scale hiring freeze; on the other end, emerging AI startups and AI agent workflows are challenging the medium- to long-term growth prospects and bargaining power of Office, Copilot, and even Azure. Therefore, some Wall Street analysts view Microsoft's recent decline not merely as a typical valuation correction, but as the market's first systematic questioning of whether AI will amplify Microsoft or first undermine its long-standing critical software business model. Microsoft's stock price is heading towards its worst quarterly performance since Q4 2008, indicating that Wall Street is re-evaluating Microsoft from being the "first beneficiary of the AI wave" to a "super tech giant with the most concentrated AI capital, but insufficient investment return validation." ### Related Stocks - [Microsoft Corporation (MSFT.US)](https://longbridge.com/en/quote/MSFT.US.md) - [GraniteShares 2x Long MSFT Daily ETF (MSFL.US)](https://longbridge.com/en/quote/MSFL.US.md) - [State StreetSPDRS&PSftwr&SvcsETF (XSW.US)](https://longbridge.com/en/quote/XSW.US.md) - [T-Rex 2X Long Microsoft Daily Target ETF (MSFX.US)](https://longbridge.com/en/quote/MSFX.US.md) - [iShares Expanded Tech-Software Sect ETF (IGV.US)](https://longbridge.com/en/quote/IGV.US.md) - [YieldMax MSFT Option Income Strategy ETF (MSFO.US)](https://longbridge.com/en/quote/MSFO.US.md) - [Direxion Daily MSFT Bull 2X Shares (MSFU.US)](https://longbridge.com/en/quote/MSFU.US.md) - [Direxion Daily MSFT Bear 1X ETF (MSFD.US)](https://longbridge.com/en/quote/MSFD.US.md) - [Kurv Yield Premium Str Microsoft ETF (MSFY.US)](https://longbridge.com/en/quote/MSFY.US.md) ## Related News & Research - [LIVE MARKETS-AI fears put Microsoft on track for worst quarter since 2008](https://longbridge.com/en/news/281048123.md) - [Microsoft takes on AI rivals with three new foundational models](https://longbridge.com/en/news/281556605.md) - [Microsoft Rolls Out New AI Models to Take On Rivals](https://longbridge.com/en/news/281563234.md) - [Microsoft, Chevron, Engine No. 1 in Talks for Proposed Power Generation Deal](https://longbridge.com/en/news/281503134.md) - [Microsoft unveils AI upgrades, rolls out Copilot Cowork to early-access customers](https://longbridge.com/en/news/281024827.md)