MSFT – Daily Chart
MSFT lost more than -3% on Monday with the stock below $30. The dip buyers saved it for now but there is risk of a move lower with earnings.
Microsoft releases its latest earnings on Wednesday after the market closes and there is now risk to the downside with the arrival of China’s DeepSeek AI tool. A clear threat to ChatGPT, investors will now put extra focus on MSFT earnings this week and could punish the stock with any negatives.
One issue the market may have is any sign of increased AI spending from Microsoft. Investors may also look for references to ChatGPT after a cheaper and more accurate model has emerged. Tech companies have been given high valuations on the belief that AI revenue was coming down the pipeline.
That is now at risk and stocks could get hurt after the big spending on chips and data centers from Big Tech.
“Investor sentiment has shifted negative as a ‘wall of worry’ around gross margins, capex, GenAI monetization and the OpenAI relationship builds,” Morgan Stanley analysts said. They also noted that Microsoft has underperformed other large-cap software firms over the last quarter.
Wall Street expects Microsoft to deliver revenue of $68.9 billion, up 11% year-over-year; with earnings of $23.36 billion, up from $21.87 billion. Revenue from Microsoft’s Intelligent Cloud segment, which includes its Azure cloud computing platform, is expected to climb 20% to $25.76 billion.
However, markets may see a drop in cloud spending coming if the DeepSeek app becomes the most popular application for AI. Microsoft wrote in its blog that it was expecting a “new, large Azure commitment” from OpenAI, the maker of ChatGPT, but that was before this week’s news.
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