Microsoft stock down 23% as investors flee to chips

What happened

Microsoft shares dropped 3.2% on Monday, pushing the stock more than 20% below its June 1 peak. The stock is down 23% year to date, the worst performer among the Magnificent Seven. Meanwhile, semiconductor stocks have surged—Intel and Marvell have nearly tripled in 2026, while Micron is up 324% and SanDisk has surged 858%.

Why it matters

Microsoft was an early AI leader through its partnership with OpenAI, but it has been swept up in negative sentiment around software stocks. At the same time, competition in AI has intensified, with Alphabet's Gemini 3 driving a 12% gain in Google shares over the past six months and Anthropic rolling out new AI offerings. CEO Satya Nadella has also criticized the current direction of the AI race, warning that a small group of companies is concentrating too much control over frontier models.

What to watch

Retail sentiment for MSFT on Stocktwits has dropped to 'bearish,' though 53 out of 56 Wall Street analysts have a 'Buy' or higher rating on the stock, with an average price target of $561.39 implying a 53% upside from Monday's closing price. Microsoft is also pursuing strategic moves including reportedly exploring options to spin off or restructure its Xbox gaming division and considering integrating China's low-cost DeepSeek models into its Copilot ecosystem.