Microsoft faces worst month since 2000 as AI concerns hit stock

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Microsoft faces its worst month since 2000

Highlights

Microsoft shares are down 17% in June.
The selloff has erased more than $570 billion in market value.
The stock is heading for its worst month since 2000.
Investors are worried about AI spending and Azure margins.

AI spending becomes the main concern

According to Bloomberg, the selloff reflects two related fears. Investors are questioning whether Microsoft’s heavy spending on AI infrastructure will deliver returns quickly enough, while also weighing whether AI tools could eventually weaken demand for traditional software products such as Word, Excel and other parts of the Microsoft suite.

Those doubts intensified after Microsoft’s fiscal third-quarter results showed weaker-than-expected growth in Azure, its cloud-computing business. The company also projected $190 billion in capital expenditures through the end of December, above what Wall Street had expected.

That level of spending has become a central issue. AI requires massive investment in data centers, chips, cloud capacity and software integration. For Microsoft, the risk is not only the size of the bill, but whether the spending compresses margins before new AI revenue is large enough to offset the pressure.

Valuation falls to rare levels

The drop has made Microsoft unusually cheap by its standards. The stock trades at about 19 times expected profits over the next 12 months, below the S&P 500’s multiple of about 20 and far under Microsoft’s 10-year average of 27.

That has drawn interest from some investors. Michael Burry, known for betting against the U.S. housing market before the 2008 crisis, disclosed that he bought Microsoft call options with strike prices in the low $700s expiring in 2028. The disclosure helped Microsoft shares rebound 5.7% on Friday to $372.97, their best day since May 2025.

Even with that rebound, the stock remains on track for its worst month since December 2000. It also touched its lowest closing level since 2023 before recovering.

A test for the AI trade

Microsoft’s slump matters because it shows how quickly the AI trade has shifted from enthusiasm to scrutiny. The company remains expected to grow revenue 17% in the fiscal year ending June 30, with growth projected to accelerate in later years. That gives bulls a case for patience.

But the market is no longer rewarding AI exposure on its own. Investors now want proof that AI spending can turn into earnings growth without damaging margins. Microsoft’s scale, cloud position and partnership-driven AI strategy still make it one of the strongest players in the sector. The June selloff shows that even the strongest AI names are no longer immune to questions about cost, disruption and timing.

We have previously highlighted that the EU prepares new cloud rules for Amazon, Microsoft, and Google.

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