- MSFT faces pressure, including a broader flight from tech stocks and concerns about returns on its AI investments.
- NVDA has fared the best among Mag7s in Q1.
- Stocktwits sentiment for MSFT has improved in the last two days, with many arguing that the stock is a generational buying opportunity at the current price.
Microsoft Corp. is on track for its worst quarterly stock performance in nearly 18 years, as pressure from multiple fronts weighs on shares. Still, retail investors remain constructive, pointing to long-term upside.
MSFT has dropped 23.1% so far in the first quarter, the worst showing among the “Magnificent Seven” group. If the trend holds through month-end, it would mark the stock’s weakest quarter since the December quarter of 2008.
Q1 Marred With Sharp Tech Selloff
The entire tech sector has fared poorly in the first three months of 2026, as investors rotated their money into defensive sectors such as energy and consumer staples amid concerns over stretched tech valuations and the question of whether heavy AI spending will deliver expected returns.
The pressure intensified after a broader market selloff tied to the ongoing U.S.-Iran conflict, which has now stretched close to a month. Among Big Tech, Nvidia has fared the best, with a 4.2% drop in the current quarter.
Microsoft’s weakness is also tied to what appears to be a fraying relationship with key partner OpenAI. Recent reports point to disagreements over cloud exclusivity, including potential legal action tied to OpenAI’s growing use of non-Azure infrastructure.
Stocktwits reported on Wednesday that the gap between MSFT's price and its 200-day moving average (DMA) is now the widest since 2008, underscoring the severity of the recent pullback.
Analysts Trim Targets But Stay Bullish
While sentiment remains broadly positive, some analysts are dialing back expectations. UBS lowered its price target to $510 from $600, saying the “narrative around Microsoft 365/Copilot needs to improve” for a meaningful re-rating.
Even so, Wall Street remains overwhelmingly bullish: 54 of 57 analysts rate the stock a ‘Buy’ or ‘Strong Buy,’ with the rest at ‘Hold,’ according to Koyfin. The average price target of $589.90 implies roughly 60% upside from current levels.
Microsoft also now trades at about 21.1x forward earnings, making it one of the more reasonably valued names within the “Magnificent Seven.” For comparison, Apple Inc. trades near 29.4x, while Tesla, Inc. commands a much richer multiple of around 185.5x.
Retail Sees Buying Opportunity
On Stocktwits, retail sentiment for MSFT has climbed sharply over the past two days and was ‘bullish’ early Thursday, amid ‘extremely high’ message volume, which has nearly tripled over the past week.
Although traders are hotly debating whether the company's AI investment, including its massive bet on OpenAI, is truly a value-add or a costly liability, many also see the recent drop to support levels like $370 as a historic, once-in-a-decade long-term buying opportunity.
“MSFT everyone should be buying hand over fist at this price. In 12 months you’ll have a double,” a user said. Another bullish wrote: “this is the cheapest valuation in at least 5 years.”
Users also had contrarian views. “The only big tech companies I would hold long is $NVDA and $GOOG. So, not interested in $MSFT long. My concern is that MSFT and other AI trades jumped a lot in the past year; when such an AI trade fades and we have a bear market/recession, you'll get FAR MORE lower prices,” argued a user.
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