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"The Buck Stops Here,"
Dylan Jovine
Microsoft Is Sliding—An Insider Buy and Oversold Signals Are Changing the Setup
Authored by Chris Markoch. Originally Published: 2/24/2026.
Key Points
- Microsoft’s sharp decline reflects investor anxiety over heavy AI infrastructure spending, but the company continues to fund expansion with strong free cash flow.
- Concerns that AI could disrupt traditional software models overlook how Microsoft is embedding Copilot into its ecosystem and charging premium pricing.
- With insider buying emerging and valuation compressing to more typical levels, the sell-off may signal exhaustion rather than structural weakness.
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It's been another week of relative misery for Microsoft Corp. (NASDAQ: MSFT) shareholders. For the week of Feb. 16–20, MSFT stock fell 3.28%, continuing the stock's run of weak performance. Over recent intervals, MSFT stock is:
- Down 17.05% in the 30 days ending Feb. 20.
- Down 20.08% year-to-date.
- Down 18.14% in the last three months.
All of that has left Microsoft negative by 5.3% over the past 12 months — a fall from grace many investors didn't expect.
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That said, pullbacks in a blue-chip name like Microsoft often present buying opportunities. One data point supporting that view: an insider recently made a meaningful purchase of MSFT stock.
John W. Stanton, a Microsoft director, purchased 5,000 shares on Feb. 18. It's one thing for a retail investor to buy shares; insiders generally buy for one reason — they believe the stock is undervalued. One transaction doesn't establish a trend, but it is a useful data point suggesting MSFT may be oversold.
By now, the reasons for the stock's pullback are well known. In some respects, Microsoft checks many of the boxes that prompt investors to reduce exposure to the technology sector:
- The company is one of the leading hyperscalers and has committed billions in capital expenditures (CapEx) to build out AI infrastructure (datacenters).
- Microsoft is caught up in the "AI will eat software" sell-off.
- Analysts are questioning the return on the company's investment in OpenAI.
Those concerns deserve a balanced look to put the MSFT sell-off in context.
Hyperscaler CapEx Concerns
Microsoft is one of the "big three" hyperscalers, along with Amazon.com Inc. (NASDAQ: AMZN) and Alphabet Inc. (NASDAQ: GOOGL). In Q2 of fiscal 2026, Microsoft spent $37.5 billion in CapEx.
That level of spending, which isn't expected to abate, worries investors who want to know when returns will justify the outlay. Rising energy costs, long construction timelines and uncertainty about how quickly AI demand will absorb new capacity have compounded the concern.
It's worth noting, though, that Microsoft is funding this CapEx with cash on hand. And Evercore ISI recently forecast that, among the hyperscalers, Microsoft will be the only one to generate positive free cash flow this fiscal year.
The takeaway: Microsoft's underlying business appears profitable enough to fund expansion without burning through cash, and the company argues much of the AI spending is to meet contracted customer commitments rather than a speculative buildout.
The "AI Will Eat Software" Threat
Microsoft remains fundamentally a software company, with Windows, Office and related licensing forming the backbone of its recurring revenue. The rise of agentic AI has led some analysts to question the long-term viability of that licensing model — and to worry that AI could cannibalize Microsoft's most profitable businesses even if the company wins the AI race.
That view assumes Microsoft will be a passive participant. The reality is more nuanced: Copilot and other agentic AI tools are already embedded across the Microsoft 365 suite, allowing Microsoft to layer AI-driven revenue on top of existing streams and to command premium per-seat pricing.
Put another way, enterprise customers are not abandoning Microsoft's ecosystem; many are paying more to access AI capabilities within it.
The OpenAI Investment Under the Microscope
Microsoft has invested an estimated $13 billion in OpenAI. That deal made strategic sense when OpenAI led the AI frontier, but the competitive landscape has become more complex.
The rise of players like DeepSeek shows capable AI models can be developed at a fraction of the historical cost, raising questions about how durable OpenAI's technological moat is. There is also structural awkwardness in the partnership: OpenAI pursues its own commercial relationships and ambitions that do not always align perfectly with Microsoft's.
Analysts are increasingly asking whether Microsoft is getting a fair financial return compared with alternative strategies, such as building in-house or partnering elsewhere. But seeing the OpenAI investment solely as a financial wager misses strategic benefits: deep integration rights, priority model access and the ability to embed a widely recognized AI brand across Microsoft products. Microsoft has also continued developing its own models in parallel, reducing sole dependence on OpenAI and preserving a multi-pronged competitive stance. The partnership effectively bought Microsoft a two- to three-year enterprise AI head start that competitors cannot erase overnight.
Selling May Be Nearing Exhaustion
There's no sugarcoating it: the MSFT chart looks weak. The stock has been in a steady downtrend since November 2025 and is within roughly 10% of erasing the gains from the rally that began in late April 2025.
Technical indicators show signs of potential relief: the Relative Strength Index (RSI) is slipping into oversold territory, and momentum measures such as daily volume and the MACD suggest selling pressure may be easing.
That said, this remains a headline-driven market and further downside is possible. Still, with MSFT shares down almost 30% from their all-time high and trading near roughly 24x earnings, many investors will view this pullback as a buying opportunity.
ServiceNow's Massive Fall: Analysts Eye +70% Gains Amid AI Risks
Authored by Leo Miller. Originally Published: 2/10/2026.
Key Points
- Investors have recently crushed shares of software giant ServiceNow, like many names in its industry.
- However, the firm's 2025 results and 2026 guidance did not show many signs of weakness.
- While the company's AI tools are gaining steam, the technology could also pose a structural risk to NOW's long-term growth.
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So far, 2026 has been rough for software stocks. The iShares Expanded Tech-Software Sector ETF (BATS: IGV) is a useful proxy for the sector. As of the Feb. 9 close, the fund was down nearly 20% year-to-date.
This steep decline comes as markets fret over new artificial intelligence (AI) software development tools. Some investors believe that as AI makes software easier to build, incumbent vendors will face meaningful competitive pressure. Yet the selling has been broad and, at times, indiscriminate — with little regard for how real the threat is to each company.
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These broad sell-offs can create opportunities to buy high-quality companies at discounted prices. One software behemoth worth examining is ServiceNow.
Despite reporting strong financial results, ServiceNow's stock had fallen roughly 55% from its all-time high by the second week of February. Let's review the positives and negatives around ServiceNow (NYSE: NOW) and update the outlook for this tech stock.
ServiceNow: 2025 and 2026 Numbers Paint an Impressive Picture
ServiceNow delivered a strong 2025 on the financial front. Revenue grew 21% year-over-year, adjusted operating margin expanded by roughly 150 basis points to just over 31%, and free cash flow rose 34%. Free cash flow margin came in at 34.5%, more than a 300-basis-point improvement versus 2024.
The company's outlook for 2026 is also notable. It expects subscription revenue growth of 19.5%–20%, which includes a 1-percentage-point contribution from its Moveworks acquisition — implying core subscription growth of roughly 18.5%–19%. While that represents a deceleration from prior years, it is still robust growth.
ServiceNow projects operating and free cash flow margins expanding to about 32% and 36%, respectively, in 2026 as it uses AI internally to reduce costs. The annual contract value (ACV) for the Now Assist AI agent doubled in Q4 to $600 million, and the company is targeting over $1 billion in Now Assist ACV for 2026. Overall, these metrics point to continued strong growth and margin expansion.
AI Is a Double-Edged Sword for NOW
Reading between the lines, however, raises some concerns. The company expects growth to decelerate even as Now Assist gains traction. That tension captures a core debate about ServiceNow and other incumbent software vendors: the risk is less that AI will directly replace ServiceNow's products in the near term — its software is deeply embedded in customers' operations — and more that AI could undermine the company's primary growth engine.
ServiceNow's revenue growth has historically been driven by customers adding employees or "seats" to their subscriptions. But the most direct way for customers to capture value from AI is to automate tasks and use fewer people to achieve the same or greater output. If AI enables companies to reduce headcount or slow hiring, a seat-based pricing model could face a structural headwind.
To adapt, ServiceNow is rolling out more consumption-based pricing — for example, charging when an AI agent completes a task. Consumption pricing makes revenue less predictable and, when tied to AI, increases variable costs (inference and compute expenses) that can pressure margins over time.
Another risk is that new AI tool launches are likely to continue, and these releases alone have recently been enough to send software stocks lower.
Wall Street Sees Significant Upside in NOW
Wall Street analysts remain generally bullish on ServiceNow. The consensus price target near $193 implies roughly 86% upside. The average of targets updated after the company's latest earnings report is a bit lower, near $182, which still implies around 75% upside.
The concerns around ServiceNow are real, but the stock has fallen to a level that may be overly pessimistic. That creates a long-term opportunity for investors who believe the company can manage AI-driven changes to its business model. Still, additional AI product releases could keep pressure on shares until ServiceNow demonstrates the market has overestimated their disruptive impact.
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