Since last October, when Microsoft (NASDAQ: MSFT ) Having risen to an all-time high of $540 per share, the stock is in free fall. As of March 3, shares are down nearly 24% from their October high of $410 per share.
The decline is due in part to investors exiting overvalued tech stocks, but there are also concerns specific to Microsoft that have caused the price to drop. Most of the decline came after Microsoft reported earnings for its fiscal second quarter, which ended on December 31. Shares fell more than 17% to $400 on multiple concerns.
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Part of this was higher capital expenditure (capex) and artificial intelligence (AI) spending for 2026. Investors are concerned that while Microsoft’s Azure AI cloud computing revenue is strong, it grew at a slightly slower pace last quarter. And expectations for the next quarter are even slightly slower. We’re talking about a 40% growth rate going down to 37% to 38% growth, so it’s not like a big decline.
However, this was enough to bother some investors, especially when combined with the fact that Microsoft had a record capex spend last quarter and is anticipating even higher capex spending this fiscal year.
Another concern is Microsoft’s partnership with OpenAI. The bulk of its $625 billion in outstanding performance obligations, or RPO — AI contracts in the pipeline — comes from OpenAI, about 45% to be exact, according to Microsoft CFO Amy Hood in the latest earnings call.
There are concerns about Microsoft stock as there are fears that OpenAI will not be able to meet the contracts due to reports that OpenAI expects to lose money in 2026. Also, investors see the RPO numbers as probably inflated because some of OpenAI’s RPO is from Microsoft’s investment in the company.
Overall, this represents a focus risk for Microsoft as investors worry about the true value of RPO.
These are valid concerns, but perhaps a bit exaggerated. Microsoft Azure’s growth rate is still incredibly strong, and it’s growing faster than ever Amazon.
The risk of OpenAI’s concentration remains to be seen, but the same report that said it will lose money in 2026 said the company expects to be profitable by 2029. Additionally, OpenAI has historically grown rapidly, with a 233% run rate revenue growth in 2025, so it remains a long-term growth engine for AI.
