Microsoft Stock Dips Amid Rising Treasury Yields and AI Spending Pressure
Microsoft's stock price dropped by approximately 0.9% to $502.59 on Tuesday morning as the 10-year Treasury yield closed in on 4.8%. This sudden increase in yields has significant implications for tech giants like Microsoft, which is spending heavily to win the AI race.
The company deployed a whopping $41 billion in capital expenditures during its fiscal fourth quarter, with two-thirds of that funding going towards shorter-lived equipment such as processors and GPUs. Meanwhile, free cash flow came in at $19.6 billion, which is less than half the quarter's reported capital spending.
Despite this, Microsoft's balance sheet remains healthy, with operating cash flow reaching $55.4 billion and Azure revenue skyrocketing 43%. However, investors are now demanding faster returns on their massive AI investments, as every new data center must work harder to deliver profits in the near future.