Microsoft hit as AI spending in sharp focus after DeepSeek market shock

Microsoft's Financial Performance - Microsoft's shares fell sharply due to higher-than-expected investment spending, with a forecast of $80bn for the year [1] - The company lost $7bn in market value, partly due to slower-than-expected growth in its Azure cloud business [5] - Despite group revenue and profits beating estimates, shares were down up to 4% in after-hours trading [7] AI and Market Impact - The AI spending forecast preceded a market rout for AI-linked stocks, with Nvidia losing almost $600m in market value in one day [2] - DeepSeek's emergence as a leading chatbot has forced US tech investors to question the high investment levels and market values of AI-exposed firms [3][4] - Microsoft, a major shareholder in OpenAI, faced pressure as the AI race intensified, with DeepSeek toppling ChatGPT in Apple's app store free downloads [3][4] Industry Trends - The Nasdaq constituents lost a combined total above €1trn, reflecting a broader market reaction to AI-related investments [4] - Microsoft added DeepSeek's model to its Azure offerings, signaling continued investment in AI despite market challenges [6] Capital Expenditure - Microsoft's capital expenditure was $1.6bn higher than consensus forecasts, contributing to investor concerns [6]