Wall Street's Great Rotation: Tech Stocks Sold Off
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
0mins
Should l Buy MSFT?
Source: Fool
- Shift in Investor Preference: In 2026, Wall Street's enthusiasm for tech stocks wanes, leading to significant discounts for giants like Microsoft, Amazon, and Alphabet, reflecting a broader shift towards value stocks and tangible goods producers amid declining interest in the AI narrative.
- Microsoft's AI Ecosystem: Microsoft's forward P/E ratio stands at 21, a 45% discount from its 2024 peak, despite nearly 40% year-over-year growth in Azure cloud revenues, indicating market undervaluation of its AI software, which could impact future investor confidence.
- Amazon's Innovative Moves: Amazon's enterprise value to EBITDA ratio has dropped to 18, the lowest ever, with AWS remaining the business backbone, while new AI products like Bedrock provide foundational models for enterprise clients, driving business growth.
- Alphabet's Hidden Value: Although Alphabet's forward P/E ratio is 29, slightly above its two-year average, its PEG ratio of 0.91 suggests reasonable pricing relative to earnings growth, and its partnership with SpaceX could provide strategic advantages for future AI inference capabilities.
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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: 432.920
Low
500.00
Averages
631.36
High
678.00
Current: 432.920
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
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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See More
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- Inflation's Impact on Client Spending: Krishna highlighted that inflation could lead to reduced consumer spending at clients like Walmart, indirectly affecting IBM's business activity, reflecting the potential threats economic conditions pose to tech companies.
- Dual Impact of AI Tools: IBM's consulting business faces threats from more sophisticated AI tools, although TMF's CIO Andy Cross noted that mainframes remain essential infrastructure for complex computing systems, suggesting that AI's impact on the industry is multifaceted.
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See More
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- Concentration Risk: The planned IPOs of these three companies may exacerbate market concentration risks, especially given that the so-called Magnificent Seven already account for about one-third of the S&P 500 index weight, leading to potential over-reliance on tech stocks by investors.
- Profitability Threshold Impact: According to S&P Dow Jones Indices, companies must achieve four consecutive quarters of profit to be considered for inclusion in the S&P 500, meaning SpaceX, OpenAI, and Anthropic may face years without structural buying support, impacting their long-term stock performance.
See More
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- ServiceNow Revenue Hit: ServiceNow flagged subscription revenue impacts due to delays in Middle Eastern deals in Q1; despite exceeding analyst expectations for overall revenue and profit, the results failed to alleviate market concerns about the software sector's challenges.
- Market Reaction: In premarket trading, shares of major software companies like Microsoft, Adobe, and CrowdStrike fell, reflecting investor anxiety over the potential long-term impacts of AI technologies, contributing to a more than 13% decline in the overall software and services index.
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See More
