Microsoft stock experiences its longest decline since 2022. What's going on?

Microsoft shares have declined for seven consecutive trading sessions and also fell in price at the premarket on Nov. 7. As a result, the company's value has fallen more than 8% since last Thursday, despite strong reporting. Investors were alerted by a sharp rise in capital expenditures. At the same time, Wall Street remains optimistic: Microsoft's securities are recommended for purchase by 100% of analysts, and the drawdown is considered temporary.

Shares of technology giant and one of the leaders of the artificial intelligence race, Microsoft, have been falling in price for seven consecutive trading sessions - the longest series of declines since September 2022. The securities have lost more than 8% over that period, MarketWatch reported . At the premarket on November 7, quotes fell another 0.3%.

Investors are selling off Microsoft shares even as it reported Oct. 29 that its cloud business grew 40 percent in the third quarter, beating Wall Street's consensus forecast. At the same time, the company reported a sharper-than-expected increase in capital spending. According to analysts cited by MarketWatch, the increased spending on infrastructure for AI could hold back the company's quotes, even as it promises continued strong revenue growth.

Microsoft's expenses in the third quarter amounted to $34.9 billion against $24 billion in the previous period. Such a rapid increase reflects the high demand for the company's services, which it is not yet able to fully satisfy, explained in an interview with Bloomberg investor relations director Jonathan Neilson.

Microsoft's current spending is "becoming more of a headwind for the stock than a growth driver," according to Kirk Matherne of Evercore ISI. He says the increased spending has reinforced investor concerns about the high cost of AI infrastructure. However, Mathern himself remains positive: according to him, Microsoft is "investing in line with real demand growth, and this investment will drive further sustainable revenue growth."

Mizuho analyst Jordan Klein complained, "It's sad to see Microsoft's stock continue to decline despite rapid expansion of data center capacity and rising AI bookings." Investors, Klein observed, are now redirecting capital from "mega-capitalization laggards" to other "beneficiaries of the AI boom" - those that are showing growth either due to improving fundamentals or in anticipation of an influx of funds amid increased capital spending by the giants. Not only Microsoft, but other major tech corporations have recently raised their investment forecasts again, and market participants are now looking for opportunities to capitalize on related areas, the analyst added.

After the publication of Microsoft's financials last week, Bernstein analyst Mark Merdler reiterated an "outperform" rating, equivalent to a buy recommendation, and raised his target price for the stock from $637 to $645. This target implies a 40% upside potential for the stock. Merdler noted that the company's results could have been even better if it had more data centers for AI. He stressed that he remains optimistic about Microsoft's prospects and advises investors to consider the current decline in quotations as a favorable moment to buy, Barron's writes .

Overall, Wall Street sees no fundamental risks that could permanently slow the company's growth. According to MarketWatch, all 62 analysts tracking its securities recommend buying them.

This article was AI-translated and verified by a human editor