(Bloomberg) — Microsoft Corp. (MSFT) has invested tens of billions of dollars into artificial intelligence, raising a significant question given its struggling stock performance: how quickly can these investments yield success? Most Read from Bloomberg Architects Explain Why These Homes Withstood the LA Fires NYC Commuters Have New Option to Avoid Traffic: $95 Helicopter Rides Will Americans Ever Move On From Telework? Chicago Agency Proposes $1. 5 Billion Plan to Address Transit Issues Scaramucci and Ackman Contribute to Whitney Tilson’s NYC Mayoral Campaign Since reaching a record high in July, Microsoft has been the worst performer among the Magnificent Seven, with shares declining due to ambitious spending and indications that the uptake of its AI services has been slower than expected. This cooling excitement could leave the stock vulnerable, as it is trading at a high multiple. Tim Pagliara, chief investment officer at Capwealth Advisors, said, “The market is realizing that AI adoption is taking longer and that expectations for immediate returns have become unrealistic. Although Microsoft is heavily focused on AI, it needs to validate its concept during a period when it has significant capital expenditures and its stock is fully valued by historical standards. ” Currently, the stock is roughly 10% lower than its record high achieved in July, and its performance since the beginning of 2024 has lagged behind that of the Nasdaq 100 Index. This situation reflects heightened scrutiny over the company's substantial AI-related expenditures, particularly as investors demand a more tangible return.

Microsoft’s capital expenditures for this fiscal year include investments of tens of billions in data centers. The next update on these trends is expected at the end of the month when the company releases its second-quarter results. The last two reports have disappointed, highlighting a modest growth forecast for its Azure cloud-computing business in the previous quarter and a slowdown in Azure activities prior to that. A slower adoption rate could further cloud the timeline for when Microsoft might see a return on its AI investments. According to Wedbush’s quarterly consumer internet survey, “Google Gemini, ChatGPT, and Meta AI are significantly more popular among users compared to Microsoft Copilot” and its other offerings. They found that only 13% of respondents reported using Microsoft’s Copilot in the past three months, while 25% used Gemini.