New York, February 11, 2026, 11:17 (EST) — Regular session
- Microsoft dropped roughly 2.3% by late morning, giving up earlier gains.
- UBS downgraded its outlook on U.S. tech, pointing to unpredictable trends in software and hefty AI data-center investments.
- Friday’s U.S. inflation report is on traders’ radar as they look for fresh clues on where rate expectations could head next.
Microsoft Corp shares gave up early gains and dropped 2.3% by late Wednesday morning in New York, changing hands at $403.74. After starting the session at $416.20, the stock touched an intraday low of $402.91.
Microsoft isn’t backing away from a market where investors have grown wary of heavy capital outlays, especially those tied to artificial intelligence. On Tuesday, UBS cut its rating on the U.S. information technology sector to Neutral, flagging that “capex”—the dollars funneled into data centers, chips, and supporting hardware—has shot up so much it’s starting to squeeze cash flows. 1
Demand and pricing power are under scrutiny, not only spending. “The market is pricing in worst-case AI disruption scenarios that are unlikely to materialize over the next three to six months,” wrote JPMorgan strategists headed by Dubravko Lakos-Bujas. Morgan Stanley’s Katy Huberty, for her part, described the current valuation split as “sentiment-driven, not fundamental.” 2
The day brought another twist: a robust U.S. labor report. Employers put 130,000 new jobs on the books in January, while unemployment slid to 4.3%. According to Reuters, those numbers suggest the jobs market is holding up—possibly giving the Federal Reserve cover to leave rates where they are as it watches inflation. 3
Microsoft’s caught in a tricky spot here—a huge generator of cash, but those AI bets keep getting bigger and investors aren’t letting up on their demand for clearer signs the spending will stick as lasting profit. Shares have been weighed down since late January, after the company reported a record splurge on AI for the quarter and flagged a slowdown in its cloud business. 4
The broader software slide is now impacting deal conversations as well, with the latest volatility clouding valuations. “Everything’s down,” said Morgan Stanley’s Wally Cheng, noting investors seem driven by fear and skipping the usual work of distinguishing winners from losers. 5
UBS says the latest drop has pushed investors to be pickier, and it doesn’t expect the cloud of uncertainty hanging over certain software stocks to clear up just because AI hype is still running high. The firm also flagged worries that the surge in AI infrastructure investment might be topping out after its rapid climb. 6
The immediate question for Microsoft isn’t the importance of AI—it’s the timeline. Investors are watching for the moment cloud and AI revenue begin to reflect the scale of its spending on servers and infrastructure. Meanwhile, the sector is watching competitors in cloud and enterprise software as everyone adjusts to shifting pricing and fresh jockeying over market share.
The downside scenario is clear enough. Should AI-related expenses outpace revenue growth, or if fresh AI software pushes down prices ahead of schedule, Microsoft may see another squeeze on margins and cash flow — putting the brakes on the stock’s recovery.
Any hint that customers are committing to large-scale AI workloads—or that spending is starting to cool—has the potential to shift sentiment fast. The market continues to see Microsoft as a key indicator for enterprise tech, so the tone can turn quickly.
Stocks kicked off higher after the jobs numbers landed, with the S&P 500 and Nasdaq each tacking on roughly 0.5% during morning hours, according to Reuters. “The underlying employment picture looks like it’s stronger than what’s expected,” said Jordan Rizzuto, chief investment officer at GammaRoad Capital Partners. After the move, attention is turning to Friday’s inflation report—seen as the next key read on rate-cut timing. 7
