Since early November, Microsoft shares have fallen by more than 16% despite the company reporting an 18% year-over-year rise in total revenue for its most recent quarter and 40% growth in its cloud segment. Management expects similar cloud growth in the coming quarters, driven by continued spending on AI workloads by enterprise clients. The company’s investment of roughly 80 billion dollars in data center build-out last year underpins this momentum, as Azure-supported infrastructure for partners like OpenAI and other AI developers remains in high demand.

TD Cowen’s recent update kept a Buy rating on Microsoft but trimmed its long-term price target by 30 dollars, reflecting a more cautious near-term outlook ahead of quarterly earnings. The firm’s analyst cited stable to strengthening demand for GPU and CPU infrastructure from cloud customers, and sees potential for Azure growth to surprise by two percentage points above current consensus. Capacity constraints could temper acceleration over the next few quarters, but are expected to ease by the second half of next year as data center expansion catches up with AI workload requirements.

At the World Economic Forum, Microsoft’s CEO highlighted that energy prices will be a critical determinant of national competitiveness in AI, since processing ‘tokens’—the basic units of AI computation—depends on affordable power. Hyperscalers, including Microsoft, committed hundreds of billions in capital expenditure in 2025 to expand AI infrastructure globally. Roughly half of this spending is occurring outside the United States, as the company seeks locations with favorable energy economics to optimize total cost of ownership for its next-generation data centers.