Earnings-triggered sell-off revives doubts over Big Tech’s AI spending boom as Azure growth slows and capital expenditure hits record $37.5 billion
Microsoft suffered one of the worst single-day value wipeouts in Wall Street history on Thursday, with investors erasing $357 billion from the company’s market capitalisation after earnings revived doubts about Big Tech’s artificial intelligence spending spree.
The stock plunged 10 per cent, its sharpest fall since March 2020, after the software giant reported record capital expenditure and a slowdown in growth at Azure, its closely watched cloud-computing business.
The $357 billion destruction of market value ranks as the second-largest one-day wipeout ever recorded. The only bigger rout came last year, when Nvidia shed $593 billion in a single session after the launch of DeepSeek’s low-cost AI model triggered fears that demand for expensive AI chips could cool faster than expected.
To put Thursday’s move in perspective, Microsoft’s one-day loss exceeds the total market value of more than 90 per cent of companies in the S&P 500 index, according to Bloomberg data.
AI spending under scrutiny
At the heart of the sell-off was Microsoft’s aggressive AI spending.
The company reported a 66 per cent surge in capital expenditure in the latest quarter to a record $37.5 billion, as it continues to pour money into AI infrastructure, data centres and chips. While revenue growth remained solid, Azure’s expansion slowed sequentially, raising concerns that returns on AI investments may take longer to materialise.
Investors have grown increasingly sceptical about whether the hundreds of billions of dollars being deployed by Big Tech into AI will translate into sustainable profits — or simply inflate costs in an arms race for computing power.
“Since it is becoming even more evident that Microsoft is not going to garner a strong ROI from their massive AI investment, their shares need to be revalued back down to a level that is more consistent with its historic fair value,” Matthew Maley, chief market strategist at Miller Tabak +, told Bloomberg News.
The broader market reaction suggested this was not an isolated repricing. Nvidia and Google-parent Alphabet each lost more than $100 billion in market value at one point during Thursday’s trading session. Alphabet later pared losses to close 0.7 per cent higher, while Amazon ended down 0.5 per cent.
A rare collapse in Microsoft’s history
Microsoft’s Thursday rout stands among the worst trading days in its four-decade history as a public company.
Since its 1986 initial public offering, the stock has registered only a handful of deeper percentage declines — notably during the 1987 Black Monday crash, the bursting of the dot-com bubble, and the Covid-19 market panic in 2020.
Yet the context today is different. Microsoft remains one of the world’s most valuable companies and a central player in the AI ecosystem through its partnership with OpenAI and its integration of AI tools across Windows, Office and Azure.
The market’s verdict on Thursday was less about Microsoft’s immediate earnings performance and more about the scale and timing of AI payoffs. With capital expenditure running at unprecedented levels across the sector, investors appear to be demanding clearer evidence that the AI boom can justify its towering price tag.
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