Microsoft Rally Gains 19% Since March, Valued at 23x Profits Despite AI Spending
Option traders have shifted focus to Microsoft ahead of earnings, favoring bullish structures over expensive calls after its shares rallied 19% since late March. Microsoft trades at 23 times profits and sits 22% below its October record despite driving part of the S&P 500’s $4 trillion tech rally with AI infrastructure investments.
1. Option Traders Shift to Bullish Bets
With implied volatility falling to near pre-conflict levels, option traders moved from protective puts to bullish call structures on Microsoft ahead of its earnings release. Demand for alternative strategies like worst-of calls reflects a preference for cost-efficient upside exposure after a rapid equity rebound.
2. V-Shaped Tech Rally and Microsoft Performance
Since the late March ceasefire extension, Microsoft has led the reversal in the technology sector, surging 19% off its March 27 low. Its performance contributed significantly to the $4 trillion market value added by the Magnificent Seven, pushing the S&P 500 and Nasdaq 100 to record highs.
3. AI Infrastructure Spending and Valuation Impact
Microsoft’s projected AI data-center investments, part of the combined $618 billion capex by major tech firms in 2026, have weighed on its valuation. The stock now trades at 23 times estimated profits and remains 22% below its October peak, reflecting investor caution over payoff timelines for these outlays.