Why Microsoft’s AI “Problem” Is Actually a Big Opportunity Today
MSFT is down ~7% in pre-market trading this morning, but I say don’t let a small stock dip fool you—the company is stronger than ever.
Microsoft just reported another set of impressive numbers. Revenue grew in the double-digits, earnings beat expectations, and its balance sheet is solid enough to handle massive spending on artificial intelligence (AI). But instead of celebrating, the stock at $448 is down about 7% in pre-market trading. Why? Because, the promoted narrative is pointing to growth in its cloud service, Azure, has slowed slightly, AI spending is higher than expected, and a large portion of future business depends on one AI company, OpenAI.
For long-term investors, this reaction is overlooking the bigger picture. Microsoft’s current share price (~$448) is much lower than what many believe it’s truly worth. I have a fair value of $660. So, I want to explain why the selloff is more about short-term feelings than real problems—and why this might actually be a good time to consider investing.
What’s Making Investors Nervous
There are three main concerns:
Azure’s growth is slowing down a little.
Azure grew 39% compared to last year—down from 40% the quarter before. While still incredibly strong, some investors hoped AI would make growth speed up even more, not slow down slightly.AI spending is huge.
Microsoft is spending billions on AI and cloud infrastructure—up 66% this quarter. Some investors worry this will hurt profits in the near future.Too much depends on OpenAI.
Almost half of Microsoft’s future business commitments are linked to OpenAI. If OpenAI struggles, Microsoft could face challenges.
These are real points to consider, but I think they are getting too much attention compared to Microsoft’s overall strength.
The Good News That’s Being Overlooked
Microsoft’s business is still doing incredibly well:
Revenue is growing fast, especially for a company of its size.
Profits are strong even while investing heavily in AI.
The balance sheet is rock-solid, with plenty of cash to handle surprises.
This isn’t a company in trouble—it’s a leader using its profits to build for the future.
Understanding the Azure “Slowdown”
Yes, Azure growth dipped from 40% to 39%, and next quarter might be 37–38%. But that’s still truly outstanding growth. The “disappointment” comes from extremely high expectations set by some analysts, not from poor performance. AI demand is real—it’s just taking time to show up fully in the numbers.
Is AI Spending a Problem or an Advantage?
Microsoft is spending so much because demand for AI and cloud services is through the roof—they literally can’t build fast enough. This spending isn’t wasteful. It’s building the infrastructure that will likely make Microsoft a central player in AI for years to come. Today’s spending should become tomorrow’s competitive advantage.
The OpenAI Factor: A Risk, But Not a Dealbreaker
Having so much tied to one company is a risk, but Microsoft’s AI plans don’t begin and end with OpenAI. AI is being built into Office, Windows, GitHub, and many other services. Even if OpenAI faces challenges, Microsoft has other partnerships, its own research, and plenty of ways to keep growing in AI.
The Bottom Line: A Chance to Invest in a Leader
The recent drop in Microsoft’s stock looks to me more like a reaction to sky-high expectations than a sign of real weakness, and a reason to dump the stock. The company is still growing fast, investing wisely, and has the financial strength to navigate uncertainty.
For investors who believe in AI’s future and can be patient, this dip is more an opportunity than a reason to walk away. The road ahead is never perfectly smooth for any company, but Microsoft is built to last and built to lead. To me, MSFT is a core holding, and I am buying the dip.