Microsoft Stock Is an AI Bargain That Investors Are Missing

Amit Singh

Sun, May 17, 2026 at 3:00 PM EDT 3 min read

Despite dominating the cloud computing and artificial intelligence (AI) space, Microsoft (MSFT) stock has gone nowhere.

Over the past year, shares have fallen roughly 9.6%, lagging rivals such as Alphabet (GOOG) (GOOGL), whose stock has surged on AI enthusiasm, and Amazon (AMZN) , which has gained 28%.

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Microsoft’s underperformance relative to peers suggests its AI strategy is becoming expensive.

Why Microsoft Stock Has Struggled?

Microsoft is spending aggressively to win the AI race. The company plans to spend nearly $190 billion on capital expenditures in 2026, including roughly $25 billion on rising component costs.

Those investments are pressuring margins and frustrating investors looking for faster, near-term returns.

At the same time, management expects only a modest acceleration in Azure (its cloud computing platform) growth in the near future, even as spending ramps higher. Ongoing supply constraints, especially around AI infrastructure capacity, are expected to persist through at least 2026, limiting Microsoft's ability to meet demand.

In short, soaring spending and only gradual growth have weighed heavily on sentiment.

The Bull Case Investors May Be Overlooking

While MSFT stock has underperformed, the key issue isn’t demand. Microsoft continues to see strong enterprise adoption of AI tools, rising usage across its cloud platform, and expanding customer demand for compute capacity. In other words, the business fundamentals remain intact.

In the latest quarter, Microsoft generated $82.9 billion in revenue, up 18% year-over-year. Microsoft Cloud revenue climbed 29% to $54.5 billion, while Azure and related cloud services grew 40%, driven by broad enterprise AI adoption across industries and geographies.

More importantly, management said demand continues to exceed available capacity. This doesn’t indicate that MSFT’s business is slowing.

Supporting its investment case is the strong commercial remaining performance obligation (RPO), which surged 99% to $627 billion. Roughly one-quarter of that backlog is expected to convert into revenue over the next 12 months. Further, MSFT’s longer-duration commitments jumped 138%.