Key Points
Microsoft’s stock has declined 19.9% this year, making it the biggest “Magnificent Seven” loser, and is now 3.1% above its 200-week moving average.
Historically, Microsoft’s stock has rebounded significantly after trading within 3% of its 200-week moving average, gaining 14.9% or more.
Investor concerns over Microsoft’s AI spending and cloud growth, 39% for Azure versus Google Cloud’s 48%, have lowered its valuation.
According to history, betting against Microsoft's stock over the longer term has been a fool's errand. Will it be different this time?
Microsoft's stock $(MSFT)$ has emerged as the biggest "Magnificent Seven" loser in 2026 thus far. After peaking at a record close of $542.07 on Oct. 28, shares of Microsoft have dropped 28.5% since, including a 19.9% decline this year. The downward slide has Microsoft's stock approaching a key technical indicator: the 200-week moving average.
Microsoft's stock is currently 3.1% above its 200-week moving average of $375.80, which X user @jbulltard1 pointed out and Dow Jones Market Data confirmed. The last time Microsoft's stock closed below its 200-week moving average was in January 2013.
微软公司股票价格及200移动平均线图表。
The 200-week moving average roughly represents the average price of a stock over the past four years. While it's not uncommon for a stock to dip below a shorter-term technical indicator such as a daily moving average during a bad news cycle, the 200-week moving average is a signal of much longer-term trends.
An upward-sloping 200-week moving average shows a long-term bull market, while a downward-sloping 200-week moving average points a stock potentially entering long-term decline. Microsoft's 200-week moving average hasn't declined in consecutive weeks since January 2012.
Microsoft's stock is approaching a critical juncture. The 200-week moving average has historically served as bottoming point for the stocks of companies with intact long-term growth stories facing temporary stock setbacks.
In previous instances when Microsoft's stock ended a week within 3% of its 200-week moving average, the stock has gone on to rebound. The last time this occurred was in January 2023, where Microsoft's stock would go on to gain 14.9% over the next four weeks, according to Dow Jones Market Data.
Prior to that instance, Microsoft's stock also closed within 3% of its 200-week moving average in November 2022, then gained 15.2% over the next four weeks.
The recent selloff has resulted in Microsoft's valuation sliding below Alphabet's $(GOOGL)$ $(GOOG)$, reversing a nearly decade-long trend. Microsoft's stock also temporarily traded at a lower forward earnings multiple than IBM's $(IBM)$ in recent weeks.
Historically, investors have been willing to pay a premium for Microsoft's stock, but the company's exposure to software and lack of acceleration in its cloud business has made investors question Microsoft's aggressive AI spending. Microsoft currently trades at 21.4x forward earnings, while Alphabet trades at 26.5x.
To some, the pessimism surrounding Microsoft's stock has gotten out of control.
Heightened fears about AI re-rating software businesses have led to increased short-term volatility, Matt Stucky, chief portfolio manager of equities at Northwestern Mutual, told MarketWatch. Microsoft Azure's 39% cloud growth in the fourth quarter paled in comparison to Google Cloud's 48% growth, and investors were displeased by Microsoft's decision to allocate more computing power to internal projects.
But over a longer time horizon, it could be more valuable for Microsoft to allocate computing to internal projects to retain their existing customer base, rather than to resell their available computing through Azure services, Stucky pointed out.
"I think you just have to be open-minded in these types of volatile environments that companies are going to make strategic decisions about what to do with their available compute capacity, especially when it's in a shortage situation like this," Stucky said. "Narratives can be quickly formed."
