Microsoft stock has slumped 12 percent as part of a software industry sell-off, stoking fears of whether hefty investments in artificial intelligence will pay off across the sector.

The Redmond, Washington-based tech giant is on track Thursday to finish at its worst day since March 2020 and has seen approximately $400bn in valuation wiped out.

On Wednesday, the company reported a slowdown in growth for its cloud computing product Azure in its earnings report. Capital expenditures grew by 66 percent in the second quarter compared with the same period the year before, reaching a record $37.5bn for the quarter.

Meanwhile, Microsoft predicted Azure growth to stay stable in the period from January to March at 37 percent to 38 percent, after slowing in the last three months of 2025, partially due to AI chip capacity constraints.

“[Wall Street] wanted to see less cap-ex spending and faster cloud/AI monetisation … and coming out of the gates, it’s the opposite. We have said this is a multi-year journey, and Redmond needs to focus on its data center buildout with more customers heading down the AI path. It’s a balancing act with 2026 the inflection year for AI and MSFT [Microsoft],” Dan Ives, analyst at Wedbush Securities, said in a note provided to Al Jazeera.

Microsoft also faced pressure after a disclosure that OpenAI, its prized holding, accounts for 45 percent of its cloud backlog. Investors are worried that some $280bn could be at risk as the unprofitable startup loses momentum in the AI race.

On Wednesday, tech news website The Information reported that Microsoft is set to invest roughly $10bn in OpenAI – the maker of ChatGPT – as the company continues to accumulate debt. OpenAI holds nearly $100bn in debt.

Sebastian Mallaby, senior fellow at the nonpartisan think tank Council on Foreign Relations, predicts in a newly published op-ed in The New York Times that OpenAI will run out of money over the next 18 months.

“Microsoft disappointed, and there are some genuine concerns that AI investments will eat the software companies’ lunches,” John Praveen, managing director and co-chief investment officer of investment firm Paleo Leon in Princeton, New Jersey, told the Reuters news agency.

OpenAI had issued an internal “code red” in December after Google’s Gemini 3 launched to positive reviews, and is playing catch-up in AI coding to Anthropic’s Claude Code, which has hit an annualised run rate of more than $1bn.

“Microsoft’s deep ties to OpenAI underpin its leadership in enterprise AI, but they also introduce concentration risk,” Zavier Wong, market analyst at investment firm eToro told Reuters.

Nvidia and Amazon, which, according to The Information’s report, are also investing further into OpenAI, had their stocks turn down on Thursday in midday trading.

Amazon is down 1.3 percent and Nvidia is down 0.1 percent .