Microsoft’s $440 billion wipeout, and investors angry about OpenAI’s debt, explained
Wall Street’s years-long bet on AI is facing a severe test on Thursday, as investors might begin to view OpenAI–and generative AI in general—not as a catalyst for continuous growth, but as a source of systemic risk for Big Tech.
A sharp selloff in tech stocks on Thursday underscored investors’ exhaustion with the “spend now, profit later” model that has propelled the AI bull market for three years. Microsoft led the retreat, with its shares plummeting 12% by noon, erasing more than $440 billion in market value, a collapse it hasn’t seen since the pandemic. The NASDAQ was down almost 2% at time of writing.
The immediate catalyst, it seems, is an intensifying focus on capex. Microsoft revealed that its spending surged 66% to $37.5 billion in the latest quarter, even as growth in its Azure cloud business cooled slightly. Even more concerning to analysts, however, was a new disclosure that approximately 45% of the company’s $625 billion in remaining performance obligations (RPO)—a key measure of future cloud contracts—is tied directly to OpenAI, the company revealed after reporting earnings Wednesday afternoon. (Microsoft is both a major investor in and a provider of cloud-computing services to OpenAI).
“It’s the collapse of software and the ascent of hardware and it is staggering,” CNBC’s Jim Cramer noted on X on Thursday, as the market punished companies that are spending billions on software infrastructure while failing to show immediate returns.
It’s an “ominous” statistic, Morning Brew founder Austin Rief wrote on X, especially combined with the fact that Meta is planning to spend most of their free cash flow on CapEx. Meta has gotten away from the selloff on a stronger-than-expected revenue forecast, showing a healthy 24% year-over-year revenue growth, driven by online ads. The fact that Wall Street is letting Meta get away with their also massive capex indicates the reason why investors are selling off: they don’t trust OpenAI to bring that revenue on their own without massive infusions of outside cash.
The sentiment shift is not limited to Redmond. Oracle Corp. has seen its shares halved from their September highs, erasing nearly $463 billion in value. Once a darling of the AI trade, Oracle has also struggled with investor confidence that the massive data centers it is building for OpenAI will get funded eventually. Additionally, the timeline for several projects has reportedly slipped to 2028, creating a gap between the company’s heavy debt-funded spending and the arrival of actual revenue.
OpenAI has made about $1.4 trillion in commitments to procure both the energy and compute it needs to fuel its operations. But its revenue barely crossed $20 billion in 2025.
Investors are increasingly critical of what they describe as “circular” deals involving the industry’s biggest players. On Wednesday evening, The Information reported that OpenAI is seeking a fresh $60 billion in funding from heavyweights like Nvidia and Amazon. However, market reaction suggests that more capital isn’t going to be a viable substitute for a business model anymore.“Maybe Oracle stock got way ahead of fundamentals and now the market’s saying, alright, show me, I want to see it,” Eric Diton, president of Wealth Alliance, told Yahoo Finance.
This story was originally featured on Fortune.com