Stock Market Today, Feb. 10: Microsoft Stock Slips on Melius Downgrade Over AI Spending Risks
Microsoft (NASDAQ:MSFT), a global software and cloud solutions provider, closed Tuesday’s session at $413.27, down 0.08%. The stock moved as investors weighed a Melius downgrade focused on AI spending risks against bullish analyst commentary and data highlighting resilient long-term AI earnings power.
Trading volume reached 44.6 million shares, about 48% above its three-month average of 30.2 million shares. Microsoft IPO'd in 1986 and has grown 424,974% since going public.
How the markets moved today
The S&P 500 (SNPINDEX:^GSPC) slipped 0.33% to 6,942, while the Nasdaq Composite (NASDAQINDEX:^IXIC) fell 0.59% to finish at 23,102. Within information technology, industry heavyweights Apple (NASDAQ:AAPL) closed at $273.68 (-0.34%) and Alphabet (NASDAQ:GOOGL) ended at $318.58 (-1.77%), underscoring pressure across large-cap software and internet names.
What this means for investors
Analysts are starting to voice concern over Microsoft’s lofty capital spending plans. The higher AI capex introduces risk to cash flow and may give investors pause in buying the stock. This week, analysts at Melius downgraded Microsoft to a “hold” with a $430 price target, pointing to higher AI capex and cash flow risk.
Stifel analyst Brad Reback also recently downgraded the stock and dropped his price target by nearly 30%. The analyst said it is "time for a break" after all the AI hype.
Investors should still expect AI-driven earnings growth, however. The company’s Azure and other cloud services revenue increased 39% in the recently announced fiscal second quarter. That should give long-term investors confidence to hold onto shares of this tech giant.
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Howard Smith has positions in Alphabet, Apple, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Apple, and Microsoft. The Motley Fool has a disclosure policy.
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