Why Microsoft Fell Today, But Then Recovered

Shares of tech giant Microsoft (NASDAQ: MSFT) fell on Wednesday, retreating as much as 3% early in the day before recovering to just a 1.6% decline as of 12:34 PM EDT.

This morning, tech news outlet The Information published a story that may have sent fears down the spines of Microsoft investors, and really all investors bullish on the prospects of generative AI.

However, Microsoft later denied the story, which led to the modest recovery. Still, a larger issue remains with Microsoft and its AI offerings.

Is Microsoft cutting AI sales quotas?

This morning, The Information reported that Microsoft was cutting quotas across its salesforce regarding generative AI sales. The implication is that Microsoft's AI-related add-on sales weren't as significant as expected, so the tech giant is cutting its sales force quotas to something more achievable -- sort of like a teacher lowering the threshold for an "A" when grading a tough exam on a curve.

In the story, The Information highlighted one specific example of a project at the Carlyle Group (NASDAQ: CG), which proved more difficult than expected in pulling data from the company's other applications.

However, later in the day, Microsoft officially denied the story, telling CNBC:

The Information's story inaccurately combines the concepts of growth and sales quotas, which shows their lack of understanding of the way a sales organization works and is compensated... Aggregate sales quotas for AI products have not been lowered, as we informed them prior to publication.

It's difficult to know what to believe is the absolute truth in this case. On the one hand, it appears Microsoft has made some changes to its sales quotas at a more granular level, though overall "aggregate" quotas don't appear to have changed.

Image source: Getty Images.

Mountain out of a molehill, or more?

While it appears The Information may be reading too much into this specific sale force quota issue, there may be other reasons for concern among Microsoft shareholders.

After all, Microsoft's main AI effort centers around OpenAI, of which Microsoft owns 27%, along with access to OpenAI's IP. However, following the release of Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Gemini 3 model on November 18, OpenAI CEO Sam Altman issued a "code red" alert to his staff, indicating Alphabet had closed the gap, or perhaps even taken the lead, over the latest OpenAI model.

The Gemini release has caused a real near-term shift in the balance of power among the AI races. While Microsoft/OpenAI had the early lead, it appears Alphabet will be a strong competitor, to say the least. Therefore, while The Information's report may be making a mountain out of a molehill regarding the sales force quota issue, there are reasons for Microsoft shareholders to be wary in light of heightened competition.

Nevertheless, investors shouldn't panic, especially with CEO Satya Nadella at the helm. After all, Alphabet had been doubted for the better part of two years, so Microsoft and OpenAI could also retake the AI lead at some point int he future. Investors should stay invested in both Microsoft and Alphabet to defray risk at this early stage of the AI era.

Billy Duberstein and/or his clients have positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.