AI gambling and business substitution threats both pressuring, Microsoft faces its worst quarterly stock performance since 2008.

```

Microsoft is deeply trapped in a dual dilemma in the era of artificial intelligence—it not only has to withstand the heavy pressure of massive capital expenditures, but also faces the threat of AI startups disrupting its core business. The combination of these two forces is pushing the software giant toward its bleakest quarterly performance since the 2008 global financial crisis.

So far this year, Microsoft’s stock price has fallen about 23%, set to post its biggest single-quarter decline since dropping 27% in the fourth quarter of 2008. Among the "Magnificent Seven" tech giants, Microsoft has become the weakest performer by a wide margin, with the index tracking this group falling about 13% in the same period.

The core of market concerns is: on the one hand, Microsoft continues to increase investment in AI infrastructure, but Wall Street’s patience with its investment returns is waning; on the other hand, intelligent agents developed by AI startups like Anthropic and OpenAI could directly replace Microsoft’s products, impacting its core pricing power and profit margins.

Capital Expenditure Surges, Return on Investment Doubtful

Microsoft's capital expenditure is expanding at an astonishing pace. According to the average analyst forecast compiled by Bloomberg, including leases, Microsoft’s capital expenditure for the fiscal year ending June 2026 is expected to reach $146 billion, up about 66% from $88 billion in fiscal 2025. This figure is expected to further increase to $170 billion in fiscal 2027 and $191 billion in fiscal 2028.

Yet, such a scale of investment has not resulted in a corresponding revenue acceleration. In its most recent quarterly results, the closely watched Azure cloud computing division's growth rate slowed slightly from the previous quarter. Meanwhile, user adoption of Copilot AI products remains limited, and the company has begun to adjust its AI business structure to improve service performance.

Jonathan Cofsky, a portfolio manager at Janus Henderson Investors, said: “Microsoft’s capital intensity has increased significantly. If the stock is to perform better in the future, we need to be more confident that the growth rate of the software business will not materially slow down.”

Copilot AI Assistant’s Problems Unresolved

Ben Reitzes, an analyst at Melius Research, maintains a hold rating on Microsoft stock. In a client report on March 23, he wrote: “Microsoft’s Azure upside is limited, as the company is busy fixing Copilot and its own models—and this issue won’t be resolved in a single quarter.”

Reitzes believes the large number of buy ratings from Wall Street peers on Microsoft stock reflect a degree of complacency, and points out that Microsoft's productivity and business process, as well as personal computing segments, also face additional risks.

Of the 67 Bloomberg analysts tracking Microsoft, 63 have a buy rating, 3 hold, and 1 sell. The average 12-month target price is $592, implying more than 60% upside from the current price—according to Bloomberg data tracing back to 2009, this is the highest implied return rate on record. Additionally, Microsoft’s stock price currently sits below its 200-day moving average by the widest margin since 2009.

Valuation Drops to Near Decade Low, Divergence Intensifies

Continuous declines have significantly pulled back Microsoft’s valuation. Currently, its price-to-earnings ratio based on expected earnings for the next 12 months has fallen below 20 times, the lowest since June 2016, only slightly higher than the overall S&P 500 Index valuation, and at times breaking below this benchmark index for the first time since 2015.

Market divergence around Microsoft stock is intensifying. Bank of America analyst Tal Liani resumed coverage this week, giving a buy rating, reasoning that Microsoft has “durable multi-year growth drivers” in cloud computing and AI.

Jake Seltz, a portfolio manager at Allspring Global Investments, said: “I believe this stock has high long-term value, and its AI strategy will ultimately be validated. Moreover, it is largely unaffected by the most severe worries about AI disruption. At the same time, these concerns are creating opportunities, especially for investors who are willing to be patient.”

Risk Warning and DisclaimerThe market carries risks; investment requires caution. This article does not constitute personal investment advice, nor does it take into account individual users' specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investment based on this content is at your own risk. ```