Microsoft’s Stock Valuation Declines
Microsoft (NASDAQ: MSFT) is now the cheapest company among the “Magnificent Seven” tech stocks, with a price-to-earnings ratio of 25, the lowest since the 2022 bear market. This decline comes amid increasing concerns over its heavy reliance on OpenAI, which represents 45% of its $625 billion backlog. In the first half of fiscal 2026, Microsoft expects to spend $100 billion on capital expenditures, significantly impacting investor sentiment.
Despite these challenges, Microsoft reported a revenue of $159 billion for the first half of fiscal 2026, marking an 18% increase year-over-year. The company generated over $97 billion in free cash flow and holds $89 billion in liquidity, indicating strong financial health. Analysts predict the AI industry could grow to $3.5 trillion by 2033, suggesting that the investments could yield significant returns in the long term.
