Microsoft Corporation (NASDAQ:MSFT) has been a painful holding for retail investors on Reddit. The stock is down about 17% so far this year. But they remain bullish on long-term recovery. They are optimistic about MSFT because the company’s fundamentals haven’t deteriorated—it’s simply been caught in a speculative AI downturn.
MSFT is becoming a popular buy-the-dip AI stock in investing communities on Reddit, based on our research of several discussion boards on the platform.
The Case for Buying the Dip
One Redditor summed up the mood: “I’m at $300 cost basis and am never selling MSFT. I’ll just buy the dip and keep buying.” Bulls argue Microsoft’s fundamentals haven’t cracked, it’s just gotten caught in a broader AI-spending panic. Azure grew 40% last quarter. Microsoft’s AI business hit a $37 billion annual revenue run rate, up 123% year over year. Microsoft 365 Copilot passed 20 million paid seats. Commercial remaining performance obligations, a measure of future contracted revenue, reached $627 billion.
Bulls say the stock can retest $400 and push into the $560 range, in line with Wall Street’s average price target near $589. One commenter flagged an underappreciated angle: “Their ERP positioning is not even priced in yet with this stock beatdown. Easily 500+ eoy.” The argument is that Microsoft is embedding AI into everyday enterprise software instead of chasing consumer chatbots. As one poster put it: “Microsoft isn’t going anywhere and they’re actually in a position to make AI useful for operational improvements.”
Not Everyone Is Convinced
Bears push back hard. One critic argued Reddit treats Microsoft as untouchable when its execution across products tells a different story: “they do everything but they’re the absolute worst at everything they do. Even Windows, they have managed to turn into the worst OS that you only use if you have no other choice, cloud platform, gaming console, social media, business tools, all the absolute worst in their respective categories.”
There’s a real financial version of this bear case too. Microsoft is spending close to $190 billion on capital expenditures this year, mostly on GPUs that depreciate fast. Gross margins and EBIT margins have both slipped to multi-year lows as that spending ramps. Roughly two-thirds of the capex goes to short-lived hardware, meaning depreciation costs will keep climbing for years.
How Microsoft Stacks Up
Two comparisons put Microsoft’s spending debate in context. Oracle (NYSE:ORCL) is chasing the same AI infrastructure boom but funding it with heavy debt, posting negative free cash flow of $23.7 billion in its full fiscal 2026 despite a $638 billion backlog. Microsoft, over just the first nine months of its own fiscal 2026, generated $127.5 billion in operating cash flow and still produced $47.3 billion in free cash flow after $80.1 billion in capex — funding its buildout from operations rather than borrowing.
The Bear Case in Full
Microsoft’s core risk is a widening gap between spending and payoff. Capex is set to hit roughly $190 billion this year, and if Copilot adoption or Azure growth stalls even slightly, margin compression could last well beyond 2026. The company also faces a securities class action tied to its January earnings reaction over Azure and Copilot disclosures, plus a $135 billion OpenAI stake that’s sensitive to any delay in OpenAI’s expected IPO. None of this breaks the long-term thesis, but it explains why the stock hasn’t found a bottom despite genuinely strong growth numbers.
Janus Henderson Global Sustainable Equity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q1 2026 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) shares underperformed amid concerns over near-term returns from elevated cloud infrastructure investment and slower growth in the legacy software segment. While we trimmed the position in favor of more attractively valued opportunities, our long-term thesis remains intact. Microsoft benefits from powerful network effects and a deeply embedded ecosystem across productivity, cloud, and developer platforms, reinforcing its competitive moat. Its carbon-neutral Azure cloud platform plays a critical role in enabling businesses to decarbonize energy-intensive computing operations across sectors globally.”
Photo by Microsoft 365 on Unsplash
While we acknowledge the risk and potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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