Software Stocks Decline, Nvidia CEO Rebuts Market Reaction
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 10 2026
0mins
Should l Buy MSFT?
Source: NASDAQ.COM
- Illogical Market Reaction: Nvidia CEO Jensen Huang argues that the market's reaction to AI is irrational, stating that many software companies are under pressure due to the belief that AI will replace them, which he describes as 'the most illogical thing in the world.'
- Microsoft's Cloud Market Share Growth: Microsoft increased its share of cloud infrastructure and platform services spending from 20% in September to 21% in December, indicating ongoing growth in its cloud computing market share driven by enhanced compute capacity and demand for Foundry AI services.
- Strong Financial Performance for Datadog: Datadog reported a 29% revenue increase to $953 million in Q4, with remaining performance obligations rising 52% to $3.4 billion, suggesting robust future revenue growth potential, although non-GAAP net income grew only 20% due to heavy R&D spending.
- AI Boosting Demand for Observability Software: Datadog was ranked as a leader in AI for IT operations by Forrester Research, and as cloud adoption and AI proliferate, its market share in core observability is expected to continue growing, making it a top priority for many IT departments.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 370.170
Low
500.00
Averages
631.36
High
678.00
Current: 370.170
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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- Cloud Growth Slowdown: Revenue growth for Microsoft's Azure has decreased from 39% in September to 38%, with expectations for further deceleration in the current quarter, a trend that lags behind competitors like Alphabet, raising investor concerns about future performance.
- Capital Expenditure Pressure: Microsoft plans to invest $120 billion in AI infrastructure this fiscal year; despite strong demand, the failure to meet return expectations has led to an overreaction in the market, resulting in a 35% stock price decline.
- Long-Term Potential Remains: Despite facing short-term challenges, Microsoft remains a key global technology player, with its Windows operating system installed on two-thirds of desktop computers worldwide, and analysts' target price of $587.77 suggests over 60% upside potential.
See More
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- Quarterly Decline: Microsoft faced its steepest quarterly decline since the 2008 financial crisis in Q1 2026, losing nearly a quarter of its market value, which raises concerns about its profitability and market position.
- Singapore Investment Plan: The company announced a $5.5 billion investment in Singapore aimed at expanding cloud and AI infrastructure by 2029, positioning Microsoft’s technology at the heart of Singapore's digital economy and potentially driving long-term growth.
- AI Investment Return Concerns: Despite efforts to boost revenue through the AI-powered Microsoft 365 Copilot, only about 3% of commercial Office customers currently hold licenses, leading investors to express skepticism regarding the returns on its AI investments.
- Azure Division Growth: Microsoft’s Azure division reported a 39% revenue growth in the December quarter, with a backlog of $625 billion in commercial commitments, providing a strong foundation for future growth despite overall performance pressures.
See More
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- Investment Opportunity: Analysts recommend that investors capitalize on the significant drawdown in Microsoft's stock price since October 2025 to build core positions in SaaS/software, emphasizing the importance of not attempting to time the market for this essential infrastructure company.
- Strategic Investment: Microsoft's investment in OpenAI is now valued at approximately $227 billion, with analysts noting that this relationship is mutually beneficial, as OpenAI relies on Microsoft's cloud services to operate its large language models, creating a symbiotic partnership.
- Market Potential: Microsoft's total addressable market is projected to reach $730.5 billion by 2025, with a CAGR of 11.4%, approaching $1.25 trillion by 2030, indicating its extensive influence and growth potential across all layers of the technology stack.
See More
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- Organizational Restructuring: Microsoft reorganized its Copilot AI operations in mid-March, consolidating consumer and commercial AI efforts under a unified Copilot organization led by former Snap executive Jacob Andreou, aiming to boost AI user growth to support its $145 billion capital expenditures.
- User Growth Challenges: Currently, Microsoft has about 15 million paying Copilot accounts, which, while seemingly substantial, pales in comparison to OpenAI's 50 million ChatGPT subscribers, with OpenAI projected to reach 220 million paying users by 2030, intensifying competitive pressures.
- Pricing Strategy Adjustment: Microsoft announced a 65% price increase for its high-end enterprise Copilot to $99, aiming to accelerate revenue growth and offset its massive spending on AI infrastructure, reflecting the company's focus on monetization strategies.
- Future Development Focus: AI chief Mustafa Suleyman will concentrate on superintelligence and developing new AI models, with the restructuring enabling him to deliver world-class models over the next five years, while Microsoft partners with Anthropic to introduce Claude Cowork, enhancing its competitive edge in the AI sector.
See More
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- Oracle Layoffs: Oracle is laying off employees globally to cut costs, although the exact number of layoffs is undisclosed, this move aims to bolster its artificial intelligence infrastructure, potentially enhancing its competitive edge in the AI sector.
- Microsoft Energy Partnership: Microsoft is in exclusive talks with Chevron and investment fund Engine No. 1 to build a $7 billion natural gas power plant in West Texas, projected to generate 2,500 MW of electricity, which will support a large data center operation.
- Cal-Maine Earnings Beat: Cal-Maine Foods reported fiscal third-quarter earnings that exceeded expectations, with revenue down 53% year-over-year to $667 million, yet the stock rose 3.85%, indicating investor confidence in future recovery.
- NIO Strong Deliveries: NIO delivered 35,486 electric vehicles in March, a 136% year-over-year increase, with total deliveries for Q1 reaching 83,465 vehicles, marking a 98.3% growth, and cumulative deliveries surpassing 1 million, reflecting robust growth in the EV market.
See More
Latest Wall Street Ratings Overview
- Boeing Rating: Wells Fargo initiates coverage of Boeing with a Buy rating, forecasting a significant recovery in free cash flow as production normalizes, setting a price target of $250 based on a 20x FCF multiple on its 2028 forecast, indicating strong confidence in future growth.
- Disney Upgrade: Raymond James upgrades Disney from Market Perform to Outperform with a price target of $115, viewing the current macro backdrop and international visitation challenges as an attractive investment opportunity, reflecting optimism about its valuation.
- Microsoft Buy Rating: Benchmark initiates Microsoft with a Buy rating and a price target of $450, describing it as a juggernaut in artificial intelligence, leveraging its comprehensive portfolio of digital applications and cloud services to drive enterprise and consumer transformation, showcasing its strong market position.
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