Microsoft Corp. shares dropped 2.3% in late-morning trading on Wednesday, erasing earlier gains to trade near $403.74. The stock hit an intraday low of $402.91 after opening the session at $416.20.
Tech Sector Downgrade Weighs on Sentiment
The decline followed a sector-wide rating cut by UBS, which shifted its stance on U.S. information technology to Neutral. The bank highlighted concerns over soaring capital expenditures, particularly for artificial intelligence data centers, which are beginning to pressure cash flows. UBS also noted that the surge in AI infrastructure investment may be nearing a peak.
Investor scrutiny is intensifying around both spending levels and demand. JPMorgan strategists suggested the market is pricing in overly pessimistic AI disruption scenarios, while Morgan Stanley analysts described the current valuation split as driven more by sentiment than fundamentals.
Broader Market Context
The sell-off occurred despite a strong U.S. labor report showing 130,000 jobs added in January and unemployment falling to 4.3%. Major indices like the S&P 500 and Nasdaq initially gained roughly 0.5%. Attention now turns to Friday's inflation report for clues on the Federal Reserve's interest rate path.
Microsoft finds itself in a challenging position: it remains a cash-generating giant, but its substantial AI investments are growing larger without yet delivering clear proportional revenue from its cloud and AI businesses. The stock has faced pressure since late January when the company reported record AI spending and flagged a cloud slowdown.
According to analysts, the current market volatility is causing investors to act out of fear rather than differentiating between company fundamentals, clouding valuation discussions across the software sector.
