Is the market turning away from Microsoft?

The current situation with Microsoft perfectly illustrates one of the most unpleasant but useful market lessons: a good company does not always mean a good entry point into a stock.

Microsoft remains one of the fundamental pillars of the global IT industry. The company is deeply embedded in the corporate sector, controls key software ecosystems, and is one of the main beneficiaries of two megatrends at once – cloud technologies and artificial intelligence. Azure continues to grow, Copilot is gradually being rolled out across Microsoft 365 products, and analysts increasingly call MSFT a “core winner 2026” – a stock meant to be held in portfolios for years.

At the same time, the share price looks frankly weak and is setting local lows. This raises a natural question: what is wrong?

Capital rotation

The first and key reason lies not in Microsoft, but in the market. An active rotation of capital is underway. Money is flowing out of Big Tech and everything associated with the “long future.” Investors are tired of paying for high multiples and promises of growth years down the line. The focus has shifted either to fast speculative stories or to defensive assets with clear cash flows here and now.

In this environment, Microsoft finds itself in an awkward position: the company is too large, too high-quality, and too “long-term” for a market that lives in short cycles.

AI: expectations versus reality

Another important factor is the reassessment of expectations around artificial intelligence. In 2023-2024, the market was buying words, presentations, and roadmaps. In 2025, the situation has changed. Now investors care not about the mere fact of AI adoption, but about concrete numbers: how much revenue it generates, how it affects margins, and when investments will start to pay off.

Microsoft is indeed investing heavily in AI, but the scale of the company works against it. Any impact has to be massive to noticeably affect overall financial results. As long as the market does not see a sharp jump in profits, it prefers to remain skeptical.

Behavior of large players

The third reason is capital flows. When large funds reduce exposure to a sector, everyone comes under pressure, without exceptions. Even the best businesses fall, because this is not a question of company quality, but of market mechanics. If money flows out of ETFs and institutional portfolios, the stock declines regardless of reports and long-term prospects.

That is why arguments like “but Microsoft is a great company” do not work right now. The market is not disputing them, it is simply ignoring them for the time being.

What investors need to understand

Microsoft has not become weak. Its business has not been destroyed. Its positions in cloud and AI have not gone anywhere.

It has simply become inconvenient for the market at the current moment in time. These are fundamentally different things that beginner investors often confuse.

Our conclusion

MSFT looks like a very strong long-term story with a 2026-2027 horizon. It is a company that will most likely once again become a beneficiary of a market cycle shift and a return of interest in quality.

But today this is not a “buy because it is cheap” story. It is a waiting story. Waiting for a reversal, confirmation of strength, and stabilization of capital flows. Catching a falling knife in such stocks usually ends badly, even if the business itself is flawless.

The market almost always returns to quality. The question is not whether it will return to Microsoft. The only question is when exactly that will happen.