Microsoft Corp. shares have tumbled nearly 23% in 2026, shedding their untouchable status as investors focus on massive capital expenditures for artificial intelligence infrastructure. The stock is on pace for its steepest monthly drop since December 2000, with market cap falling from approximately $4 trillion twelve months ago to $2.65 trillion. Despite the business thriving, the market is valuing Microsoft based on the enormous cost of its future buildout rather than its present earnings, according to Futurum Equities strategist Shay Boloor.

Boloor argues that Wall Street is "significantly overselling" the stock due to short-term fears regarding GPU spending and declining free cash flow. He attributes the sell-off to a hyper-fixation on AI spending, noting that investors are punishing the stock today while ignoring durable earnings power expected by 2027 and 2028. Capital spending hit $38 billion last quarter, and Bank of America estimates Microsoft's 2026 capex will approach $190 billion, driving up prices for chips and memory.

The company's core engine is accelerating, with overall revenue growing 18% year-over-year and earnings per share expanding by 23%. Microsoft's cloud segment surpassed $54 billion, with Azure soaring by 40%. Boloor points out that Microsoft possesses "one of the strongest enterprise distribution moats in all of technology," embedding AI into everyday tools like Outlook and Excel to monetize work.

The surge in capex is pressuring margins and reducing free cash flow. Microsoft's capital spending rose 63% year over year, while free cash flow fell 10%. Hyperscaler capex has climbed from 70% of operating cash flow in 2025 to nearly 100% in 2026, leaving less capital for buybacks and dividends. While the Magnificent Seven stocks have struggled, the semiconductor sector has surged, indicating capital is flowing to companies building the AI stack.

Microsoft Corp has raised prices for its Xbox Series X and Series S consoles, attributing the increase to soaring memory and storage costs fueled by unprecedented demand for AI infrastructure. The company announced that component prices have already risen by more than 2.5x and warned that it expects another doubling by the fall of 2027. This price hike, effective Aug. 1, reflects broader industry pressures as technology companies shift production toward high-margin chips for AI data centers, tightening supplies for consumer electronics.

In a blog post, Microsoft stated it had worked with suppliers for months to avoid another increase but ultimately could not absorb the higher costs. Alongside the price adjustments, the company introduced buy now, pay later and zero-interest financing options to make consoles "more accessible" to consumers. The updated pricing structure places the Xbox Series S 512GB at $500, the 1TB model at $600, the Xbox Series X 1TB Digital Edition at $750, and the 1TB disc-drive version at $800. Microsoft also confirmed it will discontinue the 2TB Xbox Series X.

Updated Xbox Pricing

Industry-Wide Cost Pressures

Microsoft is not alone in passing higher costs to consumers. Sony Group has raised PlayStation 5 prices multiple times, while Nintendo Co is set to increase Switch 2 prices after previously hiking costs for the original Switch. Apple Inc joined the trend on Thursday by raising prices on select MacBooks and iPads, with CEO Tim Cook noting that higher memory and storage costs had become unavoidable. The collective moves highlight a shift in the consumer electronics landscape, where AI infrastructure investments are reshaping component availability and pricing strategies.

Microsoft shares closed Thursday down 3.46% at $352.83 and rose 0.74% to $355.44 in after-hours trading.