Microsoft Corporation (MSFT) shares climbed 1.04% to close at $409.43 on Thursday, as market participants continued to favor large-cap technology stocks amid record highs for the S&P 500 and Nasdaq indices. The move reflects renewed investor enthusiasm for artificial intelligence plays, with Microsoft viewed as a direct beneficiary of enterprise AI spending.
The company's recent quarterly results provided a strong foundation for the stock's advance. For the March quarter, Microsoft reported revenue of $82.9 billion, an 18% increase year-over-year, while net income surged 23% to $31.8 billion. Azure and other cloud services revenue grew 40%, underscoring the robust demand for cloud computing and AI infrastructure. CEO Satya Nadella highlighted that Microsoft's AI business has reached an annual revenue run rate of $37 billion, representing a 123% jump from the prior year.
Thursday's rally was not merely a spillover from Nvidia's gains, which rose after receiving approval to sell H200 chips to Chinese customers. Instead, investors are bidding up Microsoft as a pure-play on enterprise AI budgets, encompassing Azure cloud, Microsoft 365 Copilot, GitHub Copilot, and a suite of software already deeply integrated into large corporations. The broader market tape was strong, with both the S&P 500 and Nasdaq setting new record closes. Cisco also surged after issuing an upbeat full-year revenue outlook. “The AI trade is really on fire right now,” said Garrett Melson, portfolio strategist at Natixis Investment Managers, noting that investors appear more concerned about missing further gains than protecting against losses.
Microsoft's relationship with OpenAI has come under renewed scrutiny following a Reuters report indicating the company is exploring AI startup acquisitions to reduce its dependence on the ChatGPT maker. Among the targets are code-generation startup Cursor, which Microsoft reportedly considered acquiring, and Inception, a Stanford-founded AI startup currently in negotiations with the tech giant. While less reliance on OpenAI reduces single-partner risk, Microsoft now faces the challenge of acquiring talent and technology in a competitive market where startup valuations remain high.
The capital expenditure story continues to be a key focus for investors. Microsoft now expects its capital spending to reach $190 billion this year, well above the Visible Alpha consensus of over $150 billion. CFO Amy Hood attributed approximately $25 billion of that increase to higher component costs, including chips. These outlays on chips, servers, and data centers are necessary to maintain Azure's growth trajectory but raise questions about margin sustainability.
Uncertainty also surrounds the revised OpenAI deal. According to The Information, the new agreement places a $38 billion ceiling on revenue sharing between Microsoft and OpenAI, and allows OpenAI to do business with other major tech companies such as Amazon and Google. Reuters was unable to independently confirm these details. The renegotiated terms could alter the competitive dynamics in the AI landscape.
Macroeconomic conditions offer little relief for growth stocks. On Polymarket, traders assign a 98% probability that the Federal Reserve will hold interest rates steady at its June 17 meeting. On Kalshi's Federal Reserve market page, the top outcome for 2026 rate cuts is “exactly 0 cuts,” with 54% probability. Higher-for-longer rates continue to pressure high-valuation technology shares, as expensive money erodes the present value of future profits.
Looking ahead, Microsoft's stock performance hinges on Azure maintaining near 40% growth, AI revenue materializing in financial results, and costs not outpacing revenue. Thursday's uptick suggests investors are cautiously optimistic, acknowledging the risks but betting on the company's ability to execute in the AI era.
