NEW YORK, Feb 5, 2026, 09:36 EST — Regular session.
- Microsoft shares climbed after an initial drop, despite Stifel downgrading the stock to “hold”.
- After a tough week for software and cloud stocks, investors are taking another look at big tech’s AI spending plans.
- Traders are focused on today’s U.S. data and a fresh batch of megacap earnings for hints about demand and capex.
Microsoft shares climbed roughly 0.7% to $414.19 in early Thursday trading, clawing back some losses amid growing scrutiny over the expenses tied to the AI expansion.
It’s crucial now, with software and cloud stocks undergoing rapid repricing. Investors are pressing hard: how long will companies keep sinking money into chips and data centers before margins and cash flow improve?
Stifel weighed in, cutting Microsoft to a “hold” from “buy” in a Feb. 4 note. Analyst Brad Reback flagged consensus 2027 estimates as overly optimistic, citing concerns over Azure’s growth and hefty AI investments. 1
The stock slipped in premarket, echoing the broader selloff among mega-caps after Alphabet revealed plans for increased spending, reigniting concerns that AI investments might be outpacing short-term returns. “The result is a move away from blind optimism toward profitability, funding discipline and more balanced positioning,” said Russell Shor, senior market analyst at Tradu. 2
Software stocks found footing on Thursday following steep declines earlier this week, as concerns grew that emerging AI tools might undercut demand for traditional software offerings. “The market is questioning if the earnings-compounding nature of software companies would get disrupted,” said Manish Kabra, lead U.S. equities strategist at Societe Generale. 3
Alphabet’s earnings report a day earlier put the spotlight on spending comparisons. The Google parent flagged a possible jump in 2026 capital expenditures to between $175 billion and $185 billion. Analysts noted that its cloud growth is pushing competitors to rethink their own spending plans and timelines. 4
Microsoft’s spending path has drawn attention since last week’s earnings. CFO Amy Hood flagged that capex will dip a bit this quarter but cautioned that rising memory costs might pressure cloud margins down the line. 5
Some investors have been keenly watching for proof the company can sell enough AI tools to justify its spending. In the latest earnings update, CEO Satya Nadella revealed M365 Copilot — the $30-a-month AI add-on for business clients — has 15 million annual users. 5
The risk for Microsoft and its rivals lies in cloud growth tapering off faster than expenses shrink, or customers holding back on major AI deployments while exploring cheaper options. A slip in Azure’s growth rate usually hits the stock fast, given how central it is to Microsoft’s valuation.
On the macro front, growth stocks tied to interest rates are reacting to fresh U.S. data. Weekly jobless claims climbed more than forecasts predicted. Economists are watching the labor market’s slowdown closely, weighing its implications for the Federal Reserve’s trajectory this year. 6
Traders have their eyes on the delayed January U.S. employment report, now set for Feb. 11. The data could shift rate expectations and trigger moves in megacaps. 7
Microsoft’s next test probably hinges on investor response to upcoming big tech reports on AI demand and spending, expected later today and through next week. Only after that will focus return to Azure growth and capex guidance.
