The company endured its worst trading day since 2020

Microsoft shares have suffered their largest decline in more than five years, falling 10% this week after the company reported record spending on artificial intelligence alongside slowing growth in its key cloud unit.

The stock closed at $433.50 on Thursday, down from $481.63 at the end of the trading two days earlier, wiping about $357 billion off the company's market value in one of the largest single-day losses on record outside the Covid-era sell-off.

Microsoft has been among the most aggressive US tech companies in adopting AI, investing billions in infrastructure and deepening its partnership with OpenAI. The company is embedding generative tools into Windows, Office, and Azure while cutting thousands of jobs as part of restructuring.

The selloff reflects growing investor skepticism over whether the vast sums being poured into AI by Big Tech will deliver meaningful returns, according to Bloomberg. Microsoft reported a 66% jump in capital spending to a record $37.5 billion in its latest quarter, while growth at its Azure cloud unit slowed from the previous quarter.

"Since it is becoming even more evident that Microsoft is not going to garner a strong ROI from their massive AI investment, their shares need to be revalued back down to a level that is more consistent with its historic fair value," Matthew Maley, chief market strategist at Miller Tabak + Co, told Bloomberg.

The rout spilled over to other tech heavyweights, with Alphabet and Nvidia at one point each losing more than $100 billion in market value. Alphabet later pared losses to close up 0.7%, while Amazon.com ended the session down 0.5%.

Microsoft said its quarterly profit was lifted by investments in OpenAI, increasing its reliance on the partnership, even as its personal computing and gaming businesses posted a 3% decline.

The IMF's chief economist, Pierre-Olivier Gourinchas, warned earlier this month that the resilience of the global economy could be tested if the AI boom fails to deliver gains in productivity.

He warned that the global economy's growing dependence on a US-led AI boom leaves it exposed, with any shortfall in the technology's potential likely to trigger a sharp pullback in investment.

(RT.com)