Tech sector plunges as Microsoft's earnings spark $357B market rout
Cloud growth disappointments trigger broad selloff, with shares down nearly 10% in heaviest trading since 2020
Technology stocks experienced their sharpest decline in months on Thursday as disappointing earnings from Microsoft triggered a cascading selloff across the sector, erasing roughly $357 billion in market value from the software giant and dragging down the broader Nasdaq index.
Microsoft shares plummeted 9.99% to $433.50, marking the steepest single-day decline since 2020, with trading volume surging to 128.4 million shares—four to five times the daily average. The $3.58 trillion company's losses rippled through technology peers as investors reassessed growth expectations for the cloud computing and artificial intelligence sectors.
The selloff accelerated after the bell as investors reacted to earnings results that revealed softer-than-expected cloud revenue growth, according to Wall Street Journal reporting. Microsoft's Azure cloud platform, which has been a primary driver of the company's growth and a key proxy for enterprise AI adoption, showed signs of deceleration that alarmed analysts and investors alike.
Technical indicators underscored the severity of the decline. Microsoft's relative strength index (RSI) dropped to 32.63, entering oversold territory, while the stock closed below both its 50-day moving average of $477.66 and 200-day average of $485.73—key support levels that had previously held during market volatility.
The broader technology sector felt the impact immediately. The software complex, which includes major cloud infrastructure providers and enterprise software companies, suffered its worst session since the DeepSeek artificial intelligence announcement rattled Nvidia and other AI-related stocks earlier this year. The Nasdaq Composite Index, heavily weighted toward technology names, posted its most significant decline in several weeks.
Market analysts pointed to concerns that Microsoft's earnings miss could signal a broader slowdown in enterprise technology spending, particularly in cloud infrastructure where Microsoft competes with Amazon Web Services and Google Cloud. The company's forward guidance, which typically provides insight into corporate IT budgets for the coming quarters, appeared to disappoint investors expecting stronger growth momentum.
The selloff represents a dramatic reversal for Microsoft, which had been among the market's best-performing mega-cap technology stocks over the past two years, driven largely by enthusiasm around its AI investments and partnership with OpenAI. Thursday's decline wiped out more than a third of the company's gains from 2024, highlighting the market's sensitivity to any signs of deceleration in the AI trade.
Traders noted that the sheer volume of shares changing hands indicated institutional investors were repositioning portfolios rather than retail investors driving the decline. The 128.4 million shares that traded hands represented one of the highest volume days in Microsoft's history, suggesting mutual funds and hedge funds were actively reducing exposure to the name.
Looking ahead, market participants will focus on upcoming earnings from other major cloud and AI infrastructure providers, including Amazon, Google parent Alphabet, and Oracle, to determine whether Microsoft's disappointment is company-specific or indicative of broader sector challenges. The results will be critical for determining whether Thursday's selloff marks a temporary setback or the beginning of a more prolonged rotation away from technology stocks.