Microsoft Loses $357 Billion in Market Cap Amid Selling Frenzy
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 29 2026
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Should l Buy MSFT?
Source: Newsfilter
- Market Cap Decline: Microsoft experienced a staggering $357 billion drop in market capitalization, closing at $3.22 trillion on Thursday, indicating investor disappointment following its earnings report.
- Cloud Growth Weakness: The growth rate for Azure and other cloud services was reported at 39%, falling short of the 39.4% consensus, highlighting increasing competitive pressures in the cloud computing sector.
- Data Center Construction Lag: Analysts emphasized the need for Microsoft to accelerate its data center construction to meet rising computing demands, particularly in the competitive cloud services landscape.
- Capital Expenditure Adjustment: Microsoft's CFO indicated a slight decline in capital expenditures for the current quarter, reflecting a cautious approach to resource allocation that may impact future growth potential.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for MSFT is 631.36 USD with a low forecast of 500.00 USD and a high forecast of 678.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 401.140
Low
500.00
Averages
631.36
High
678.00
Current: 401.140
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company that develops and supports software, services, devices, and solutions. Its Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. It comprises Microsoft 365 Commercial products and cloud services; Microsoft 365 Consumer products and cloud services; LinkedIn, and Dynamics products and cloud services. The Intelligent Cloud segment consists of its public, private, and hybrid server products and cloud services. It comprises server products and cloud services, including Azure, and enterprise and partner services, including Enterprise Support Services. Its More Personal Computing segment primarily comprises Windows and Devices, including Windows OEM licensing; Gaming, including Xbox hardware and Xbox content; Search and news advertising, comprising Bing and Copilot, Microsoft News, and Microsoft Edge.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Opportunity in OpenAI Investment: Microsoft holds a 27% stake in OpenAI, and while OpenAI's contribution to Microsoft's overall business is limited, investing in Microsoft provides indirect exposure to generative AI, enhancing the attractiveness of Microsoft stock for investors.
- Attractive Valuation for Investment: Microsoft's current operating price-to-earnings ratio is near its lowest levels since 2020, and despite trading at a premium in the past, this valuation correction presents a compelling buying opportunity for investors, with significant upside potential expected over the next few years.
See More
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- Product Update Plans: Altman also mentioned that OpenAI plans to release an updated chat model this week, and its AI coding tool Codex has grown by about 50% in the past week, which will further enhance its product competitiveness.
- Ad Testing Launch: OpenAI is set to begin testing ads in ChatGPT today, facing criticism from competitor Anthropic; Altman emphasized the goal of making AI accessible to a broad user base that cannot afford subscription fees.
- Market Valuation Surge: OpenAI's valuation is expected to soar above $800 billion, while Anthropic's latest funding round could elevate its valuation to $350 billion, indicating strong growth potential for both companies in the AI sector.
See More
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- Diverse Functionality: Copilot offers various plans, including a free version and Microsoft 365 Premium, which provides higher usage limits and enhanced security, aimed at catering to different user needs and boosting product appeal.
- Enterprise Adoption: Major clients like Fiserv and ING have over 35,000 Copilot seats, indicating a strong acceptance of Copilot in specific industries, which could drive future market expansion.
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See More
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- Ad Testing Launch: OpenAI confirmed that it will begin testing advertisements in ChatGPT starting today for free and Go subscription users, aiming to support more powerful features while maintaining user trust.
- User Tier Restrictions: The ad testing will only apply to free and Go subscription users, with Pro, Business, Enterprise, and Education tiers unaffected, indicating OpenAI's differentiated strategy for various user segments.
- Pricing Strategy: ChatGPT Go is priced at $8 per month, while ChatGPT Plus and Pro are priced at $20 and $200 per month respectively, reflecting OpenAI's efforts to attract more users through diverse service offerings.
- Shifting Competitive Dynamics: OpenAI's confirmation of ad testing comes a day after competitor Anthropic aired ads during the Super Bowl, highlighting the intensifying competition among AI companies for mainstream users, which could impact OpenAI's market position.
See More
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- Surging Capital Expenditures: Alphabet anticipates capital expenditures reaching $185 billion in 2025, more than double last year's figures, reflecting the company's significant commitment to AI and infrastructure, which may impact its core advertising profitability.
- Bond Financing Plan: To support its AI ambitions, Alphabet plans to raise $20 billion through a U.S. dollar bond sale, expected to occur in four tranches, including a 100-year sterling bond, indicating strong market interest with oversubscription by five times.
- Compute Capacity Risks: CEO Sundar Pichai highlighted compute capacity, energy, and supply chain constraints as major challenges during the earnings call, indicating that Google must effectively manage its resources to maintain competitiveness amid rapidly growing AI demand.
- Ad Revenue Growth: Despite potential threats from AI to its search and advertising business, Google's fourth-quarter ad revenue increased by 13.5% year-over-year to $82.28 billion, demonstrating the company's success in adjusting its advertising strategies to meet market changes.
See More
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- AI Risk Disclosure: In its latest financial report, Alphabet highlighted for the first time the potential impact of AI on its advertising business, noting risks of 'excess capacity' that could affect core revenue streams and necessitate a reassessment of investment strategies.
- Bond Financing Plan: Alphabet plans to raise $20 billion through a bond sale, including a 100-year bond, expected to be issued in four tranches, indicating strong market interest in its financing needs with oversubscription reaching five times.
- Surge in Capital Expenditures: The company anticipates capital expenditures to reach $185 billion in 2025, more than double the previous year, indicating significant financial pressure from heavy investments in AI infrastructure that require careful fiscal management.
- Gemini User Growth: The monthly active users of Alphabet's Gemini AI application have increased from 650 million to 750 million, reflecting rapid adoption of generative AI, but also posing risks to its search business, necessitating adjustments in advertising strategies to adapt to market changes.
See More
