Investors Shift Gears: Big Tech Loses Its Shine • Day Trade To Win

Investors Rotate Away from Big Tech as Microsoft Faces AI Spending Scrutiny

Analysts say investors are shifting out of so-called “laggard” Big Tech names and chasing momentum-driven AI plays. Microsoft appears to be caught in the middle of that shift — and its rising AI costs might be spooking some on Wall Street.

Despite posting solid earnings last week, Microsoft’s stock has been under steady pressure. Shares have now declined for seven consecutive sessions — their longest losing streak since September 2022 — shedding roughly 8.3% over that span.

The decline comes even after the company reported 40% growth in its cloud business, topping expectations of 38%. Still, the bar for Microsoft remains high. Investors reacted similarly after the company’s previous strong report earlier this year, suggesting good news isn’t enough to drive the stock higher.

“Even good earnings get dismissed,” wrote Mizuho’s Jordan Klein, who noted that traders are rotating out of “laggard megacaps” into “AI winners” fueled by better fundamentals or hype around future capital spending.

Klein also expressed frustration that Microsoft’s stock “keeps going down every day even as they rapidly expand data-center capacity to support AI revenues.”

That spending, however, could be the source of concern. Evercore ISI analyst Kirk Materne said Microsoft’s increased capital expenditures “seem to be acting as a headwind” for its shares.

As Big Tech ramps up AI-related investments, Wall Street appears more cautious about how quickly those billions will translate into profits. Microsoft insists it’s not overbuilding, saying its AI infrastructure is designed to serve a wide range of enterprise customers beyond the major AI players.

Materne remains upbeat:

“The company continues to invest in line with demand, and these capex investments will result in continued strong revenue growth,” he wrote.

For now, though, the market seems more focused on momentum than patience — and Microsoft’s heavy AI spending is testing investor resolve.