Microsoft after the selloff trades at 17x 2027 earnings. That's a 50% discount to its own 10-year median multiples.

What's behind the pessimism? $MSFT

1. Massive AI/cloud capex
Microsoft is spending tens of billions per year building data centers for Azure and AI infrastructure. The market fears the return on these investments will be lower than expected or arrive later. This weighs on free cash flow in the near term.

2. Questions around AI monetization
Copilot and AI services haven't yet delivered the explosive revenue growth that was priced in at the peak (~36x P/E). The market is reassessing the timeline and scale of generative AI monetization.

3. Broad tech sector re-rating
The entire expensive growth/quality sector has gone through multiple compression: higher rates, tariff wars, geopolitical escalation with Iran, and recession fears. Microsoft is no exception.