Microsoft slides ahead of earnings as AI spending debate weighs on sentiment
Microsoft shares came under renewed selling pressure, falling back toward the $379 area after failing to sustain gains above $400. The latest decline reflects cautious positioning ahead of the company's quarterly earnings, with investors increasingly focused on whether accelerating AI investment will continue to translate into stronger revenue growth and expanding margins.
The broader technology sector has also weakened as traders reassess elevated valuations following recent earnings releases from other mega-cap companies.
AI investment remains central to the long-term story
Microsoft continues to benefit from strong enterprise demand for Azure, Copilot and AI infrastructure. In its latest reported quarter, revenue increased 18% year over year to $82.9 billion, while Microsoft's AI business exceeded a $37 billion annual revenue run rate, up 123% from a year earlier. Even so, the market is becoming increasingly sensitive to capital expenditure plans, and analysts expect AI spending guidance to become the key catalyst for the next major move in the stock.
Higher yields and geopolitical risks pressure technology stocks
The macro backdrop has become more challenging for growth stocks. Rising oil prices driven by the conflict in the Middle East have strengthened inflation concerns, pushing U.S. Treasury yields higher and reducing expectations for rapid Federal Reserve easing. Investors are increasingly worried that elevated financing costs and persistent inflation could limit valuation expansion across the technology sector despite resilient corporate fundamentals.
Technical picture weakens below key resistance
The hourly chart shows Microsoft extending its decline after failing to regain the $400 resistance area. The latest selloff has pushed the stock below its short and medium-term moving averages, while the price is now testing support near $378 to $375. A decisive break below this zone would expose $370, followed by the stronger support area around $360 to $350. As I noted in the article Microsoft rebounds from key support as AI momentum improves sentiment, the long-term outlook remains constructive, and a deeper correction could once again attract strategic buying interest. For the bullish scenario to regain momentum, buyers first need to reclaim the $390 to $400 resistance zone.
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