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Microsoft Stock Falls Nearly 2% as AI Rout Weighs on Tech Giants Despite Wave of Price Target Increases IBTimes UK

NEW YORK — Shares of Microsoft fell nearly 2% on Friday, giving back the previous day's gains as a sell-off in artificial intelligence stocks continued to weigh on large technology companies.

Microsoft shares were down $10.43, or 1.93%, at $529.00 as of 12:18 p.m. Eastern time on the Nasdaq.

The decline erased Thursday's 1.08% gain, when the stock closed at $539.44 after several Wall Street firms raised their price targets. Microsoft had closed near its 52-week high of about $553 earlier this week.

Analysts upbeat

Microsoft stood out as a bright spot on Thursday, when five Wall Street firms raised their price targets, citing demand for its Azure cloud platform and growing enterprise adoption of AI.

Citigroup raised its target to $636 from $600, while Jefferies lifted its target to $650 from $575, both maintaining Buy ratings. Scotiabank raised its target to $615 from $510 earlier this month.

Of analysts covering the stock, 42 rate it a Buy, four a Hold and two a Sell, according to MarketBeat.

Broader pressure

Despite the optimism, Microsoft has not been immune to the broader sell-off in technology shares. Hotter-than-expected inflation data this week raised concerns about further Federal Reserve rate increases, and worries about debt-financed AI infrastructure spending have weighed on the sector.

Microsoft's premium valuation leaves the stock sensitive to any disappointment in Azure growth, AI monetization, capital spending or profit margins, analysts said.

Heavy AI investment

Microsoft is investing heavily to expand its AI infrastructure, including its Maia 300 custom chip and more than $130 billion in reported data center leases. The spending is aimed at meeting surging demand for Azure cloud services but raises costs.

Earlier this year, Microsoft's shares suffered their biggest one-day drop since 2020 after the company signaled faster growth in AI spending, before recovering to near record highs.

New hardware launch

The share decline came on the same day Microsoft began shipping its Surface Laptop Ultra, a high-end laptop powered by Nvidia's RTX Spark chip, starting at $2,599. Early reviews praised the device's design and AI capabilities.

Insider activity

Chief Financial Officer Amy Hood sold 7,305 Microsoft shares on Oct. 13, according to regulatory filings.

What's next

Microsoft is scheduled to report fiscal first-quarter results on Oct. 28. Investors will watch for Azure growth rates, capacity constraints, capital spending plans and evidence that AI products such as Copilot are generating meaningful revenue.

Microsoft has a market value of about $4 trillion, making it one of the world's most valuable companies.