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Shares Microsoft Corporation fell more than 20% in June, the steepest monthly decline since December 2000.
Twelve months ago, the Redmond, Washington-based company’s market capitalization hovered around $4 trillion. Today it stands at $2.65 trillion, trailing Nvidia company, Apple Inc. And Alphabet Inc..
Still, business is booming.
Revenue has grown 16% to 18% year over year for eight consecutive quarters. Earnings beat Wall Street estimates each time and also grew.
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So why is the stock down more than 35% since the start of 2026?
The answer is one word: capital investment.
Why the market stopped caring about how much Microsoft makes today
Capex – Capital expenditure is the money a company spends on physical infrastructure.
For Microsoft, that means data centers for artificial intelligence. It is this expense, rather than income, that is now driving the stock.
Capital expenditures reached $38 billion last quarter. Bank of America estimates Microsoft’s capital expenditures will reach $190 billion in 2026.
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Microsoft is not alone. Five largest hyperscalers – Amazon.com Inc.Microsoft, Alphabet, Meta Platforms Inc. And Oracle Corporation. — projected to spend more than $700 billion in 2026.
The building feeds itself. More and more data centers are overloaded with chip and memory supplies.
Prices are rising. Costs are rising again.
The chain that turns Microsoft into a falling stock
Rising capital expenditure means profitability is under pressure, meaning free cash flow is declining. Microsoft’s capital expenditures increased 63% year over year. Free cash flow fell 10%.
Less free cash means fewer buybacks and lower dividends, two things that reward shareholders.
Bank of America puts it bluntly. Hyperscale capital expenditures increased from 70% of operating cash flow in 2025 to nearly 100% in 2026.
Translation: shareholders have almost no free dollars left.
There is another side to trading. Since January, the semiconductor sector, according to iShares Semiconductor ETF — increased by 94%. The Magnificent Seven Tracked Roundhill Magnificent Seven ETFdecreased by about 6%.
Jeff Bezos once said: “Your profit is my opportunity.”
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The story continues
In 2026, this idea took on new meaning.
Every billion that hyperscalers divert from their profits goes to companies building the AI stack: memory, semiconductors, cooling systems, optical networks, batteries, energy infrastructure – everything needed to build AI data centers and train ever more powerful models.
The market no longer values Microsoft for what it makes today. He estimates the enormous cost of what he will have to build tomorrow.
Is Microsoft investing in the future or sacrificing the present to get there?
Now investors seem to believe the latter.
Image: Shutterstock
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Creating wealth not only in the market
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ARK7
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Miso Robotics
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Vinovest
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FarmTogether
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Fundraising
Private real estate and private debt can add income and stability to a stock-heavy portfolio. Fundrise offers access to diversified private real estate and credit strategies through an easy-to-use platform with professionally managed portfolios designed to generate passive income and long-term growth.
American Hartford Gold
American Hartford Gold is a precious metals dealer that helps customers purchase physical gold and silver coins and bars, either for direct delivery or as part of a Self-Directed Precious Metals IRA. The company’s services include gold and silver IRAs, IRA rollovers, and bullion home delivery, giving investors the ability to use tangible metals to diversify portfolios and protect against inflation and market volatility.
Mobile mode
Mode Mobile is changing the way people interact with their phones, allowing users to earn money through the same apps and activities they already use every day. Instead of platforms keeping all of the ad revenue, Mode Mobile shares some with users who interact with content, play games, and scroll through content on their devices. Named one of the fastest-growing software companies in North America by Deloitte, the company has built a large beta user base and is scaling a model that turns everyday smartphone use into a potential source of revenue.
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