The month of June felt eerily reminiscent of December 2000 for Microsoft (MSFT -0.53%). The software behemoth shed more than $570 billion in market cap in the past month. The stock is back to where it was in 2023. The drop has been brutal for current investors, but for those in it for the long haul, could this be a rare opportunity to buy?
NASDAQ: MSFT
Key Data Points
Don't let fear overrun strong fundamentals
The crushing of Microsoft's stock this month is more about fears and skepticism than actual fundamentals, in my opinion. Microsoft is spending money on artificial intelligence and data centers at an incredible rate. Expenditures are projected to reach $190 billion in 2026, a 63% year-over-year increase. This is causing concern on Wall Street as investors struggle to justify the heavy spending.
Image source: The Motley Fool.
Investors are worried that investment in AI infrastructure will erode margins. With tools such as Word and Excel facing new competition from AI tools, will the company sustain permanent damage as well? These fears are justified but largely overblown. Microsoft's Azure and other cloud services increased revenue by 39% in the past quarter, but that wasn't enough to calm investors.
It's worth noting that Microsoft is still expecting revenue to grow 17% this fiscal year. The company's financials are strong, and shareholders received $12.7 billion in dividends and share repurchases in the second quarter of 2026, which is a 32% increase from the year prior.
Microsoft's current valuation is an opportunity. In times like this, I try to remember the wisdom of Warren Buffett, who preaches that good investors are greedy when others are fearful. For Microsoft investors, the recent 20% decline fits Buffett's mantra.
