Microsoft(US:MSFT) The Economic Times·2026-01-02 18:04Core Viewpoint - Microsoft shares opened the first trading session of 2026 under pressure, declining more than 2% as investors reassessed positions in big tech following a year of AI enthusiasm and changing interest-rate expectations [1][14][15]. Group 1: Market Performance - The decline in Microsoft shares was notable due to its influence on major indexes, with the Nasdaq 100 tracker Invesco QQQ down approximately 0.8%, and other tech giants like Amazon and Apple also experiencing declines of 0.7% [2][16]. - The pullback occurred after a firmer tone in futures, indicating that investors were still adjusting after volatility in late 2025 [3][16]. Group 2: AI and Technology Spending - Microsoft is viewed as a key indicator of corporate technology spending, particularly through its Azure cloud business, with investors keenly observing the transition from early AI experimentation to broader deployment [4][5][16]. - Analysts, including Dan Ives from Wedbush Securities, have described fiscal 2026 as a pivotal year for AI adoption, maintaining a price target of $625 for Microsoft after a 16% gain in 2025 [7][8][17]. Group 3: Operational Focus and Valuation - Microsoft is enhancing security features for enterprise customers, with upcoming updates to Microsoft Teams aimed at improving messaging safety [10][17]. - The company's current valuation stands at around 37 times earnings, which may amplify market reactions to shifts in cloud growth expectations [11][17]. - Investors are anticipating Microsoft's next earnings report for insights into cloud demand and AI momentum, expected to be released in late January [12][17]. Group 4: Interest Rates Impact - Interest rates are a significant factor for large-cap tech companies, with higher yields potentially pressuring technology valuations; the 10-year US Treasury yield was around 4.16% in pre-market data [13][17].