Microsoft, an early AI leader through its partnership with OpenAI, has been swept up in the broader negative sentiment surrounding software stocks.
- MSFT shares are down more than 20% from its recent peak on June 1 and 23% year to date.
- Investors appear to be rotating money out of software companies to buy chip stocks.
- Stocktwits sentiment for MSFT dipped to ‘bearish,’ but nearly all of the Wall Street analysts recommend buying the stock at current levels.
Microsoft Corp.’s shares fell 3.2% on Monday, pushing the stock more than 20% below its June 1 peak and into bear market territory, raising questions over how a key AI-driven tech leader has slid so sharply despite solid earnings and ongoing strategic momentum.
As of the last close, MSFT stock is down 23% in 2026, the worst among the Magnificent Seven group of equities. Shares rose 0.2% overnight trading ahead of Tuesday.
The iShares Expanded Tech-Software Sector ETF (IGV), seen as a proxy for the software sector, has declined 19% this year, while the benchmark S&P 500 gained 9.2%.
On the other hand, investors are piling into semiconductor stocks. Intel and Marvell have nearly tripled in 2026, while memory chip stocks have staged an almost unprecedented run: Micron is up 324% and SanDisk has surged 858%.
MSFT Woes Never-Ending?
Microsoft, an early AI leader through its partnership with OpenAI, has been swept up in the broader negative sentiment surrounding software stocks. At the same time, competition has intensified. Alphabet’s Gemini 3 helped drive a 12% gain in GOOGL shares over the past six months, while Anthropic continues to roll out new AI offerings at an aggressive pace.
In recent months, Microsoft has made several notable strategic moves aimed at strengthening its position in AI. The company is reportedly exploring options to spin off or restructure its Xbox gaming division and considering integrating China’s low-cost DeepSeek models into its Copilot ecosystem.
Recent Catalysts for MSFT
On Monday, Microsoft CEO Satya Nadella criticized the current direction of the AI race, arguing that a small group of companies is concentrating too much control over frontier models while warning that such dominance may not be socially or economically sustainable.
In comments to The Wall Street Journal, he said the public would not accept a future where a few firms “do all of the learning for the world,” especially amid fears around job losses and AI safety.
Nadella also outlined Microsoft’s push toward cheaper, more flexible AI models and greater user choice, including tools that allow switching between models and lower-cost alternatives – potentially intensifying competition with OpenAI, Anthropic, and Google.
Meanwhile, Chevron signed a 20-year deal with Microsoft to provide natural-gas fired power for its proposed West Texas data center. The power plant, named Project Kilby, is expected to provide first power by 2028 and will ramp up to 2.67 gigawatts over time.
Retail, Analyst View On MSFT
On Stocktwits, the retail sentiment for MSFT dropped to ‘bearish’ from ‘neutral’ the prior day, even as 24-hour message volume rose 740%. Investors were frustrated with the stock move, amid a debate whether the AI rout will go on for long or reverse soon
“$MSFT seems like a lot of semis $$$ will flow into MaG 7 this week. Starting with MSFT,” a trader said.
Another wrote: The stock “isn’t closing above $400 again in 2026. We should see a retest of $350 this week. If this breaks, it will continue a sharp drop. Microsoft is not what it used to be and will be replaced in the next 5 years.”
Still, analysts remain overwhelmingly bullish. Currently, 53 out of 56 analysts have a ‘Buy’ or higher rating on the stock, and the remaining three rate it ‘Hold,’ per Koyfin. Their average price target of $561.39 implies a 53% upside from the stock’s closing price on Monday.
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