Microsoft's (MSFT) share price fell 2.4% to close at $459.53 on Wednesday, marking its lowest level since May 2025 and a drop of more than 16% from its all-time high around $550. The stock has declined 8% over the past three months, reflecting a broader market shift away from AI-driven optimism towards a more realistic assessment of investment returns and immediate gains.
Key factors behind the decline include weaker-than-expected sales of AI products like Microsoft 365 Copilot, rising competition from Google Gemini and Amazon AWS, and significant capital expenditures projected to exceed $80 billion annually. Profit-taking is underway as investors question whether current infrastructure spending will deliver timely returns.
Despite the downturn, a new KeyBanc Capital Markets survey offers a bullish counter-narrative. The poll of IT resellers indicates customer IT budgets are expected to grow 5.3% in 2026, up from 4.6% in 2025. Furthermore, 30% of respondents anticipate faster growth in public cloud spending—a 17-point jump from the previous quarter—which analyst Eric Heath described as "a tailwind for Azure that goes beyond GPUs." The survey also noted increasing traction for Microsoft's suite of Copilot AI products.
In response, KeyBanc maintains an Overweight rating on Microsoft with a $630 price target, while Goldman Sachs recently raised its target to $655, citing Microsoft's investments in Anthropic and its own AI models as positive diversification beyond OpenAI.
Separately, Microsoft announced a major 12-year agreement with Indigo Carbon to purchase 2.85 million soil carbon removal credits, valued between $171 million and $228 million, as part of its goal to become carbon negative by 2030.
Technically, the stock is trading within a long-term upward channel, with its price currently near the channel's median. The market may seek balance ahead of Microsoft's quarterly earnings release on January 28, which is expected to dictate the stock's next significant move.
