Microsoft Corp. stock fell more than 24% this year and was on track for its worst first-half performance since 2000, leaving the software giant as the weakest name in the Magnificent Seven while chip stocks raced ahead. Early Thursday, Microsoft was also among the most-discussed stocks on Stocktwits.
The slide has put Microsoft at a moment traders cannot ignore. The stock trades at 20.2 times forward earnings, its lowest PE ratio since late 2016, a sharp reset for a company that has long been treated as one of the market’s most dependable growth stories. On Stocktwits, retail sentiment for MSFT flipped to bearish from bullish the previous day, a sign that the mood has turned even as analysts have not.
That split matters because the stock’s decline is happening alongside a very different move in semiconductor shares. Micron reported blowout quarterly results on Wednesday, and chip stocks such as Intel, Micron and Western Digital have risen nearly four times in the first six months of the year, while Microsoft has lagged badly. The contrast has made MSFT stock a focus for investors trying to decide whether the market is rewarding one part of AI-linked spending and punishing another.
Microsoft’s weakness is also a reversal from the strong gains it had logged in recent years, powered by its early partnership with OpenAI and the spread of AI across its cloud and software businesses. That history helps explain why the selloff feels more abrupt now: a stock once lifted by the AI trade is suddenly being judged against the same enthusiasm that helped carry it higher. At the same time, Microsoft has reportedly explored restructuring its Xbox business and considering integrating China-based DeepSeek models into its Copilot platform, adding more questions around how it plans to keep momentum.
Analysts, though, have not bought into the breakdown. Fifty-three of 56 Microsoft analysts rate the stock Buy or higher, and the average price target is $561.39, which implies 53% upside from Monday’s close. That leaves the market with a mismatch that is hard to miss: the most bearish retail reading in recent memory, a stock down more than 24% for the year, and Wall Street still expecting a rebound.
For now, the key question is not whether Microsoft has lost its place in the market, but whether this is a temporary valuation reset or the start of a longer repricing for one of Big Tech’s best-known names. The answer will determine whether the current drop becomes a buying opportunity or the first chapter in a deeper rerating.
