Microsoft just put the “Slop” in “AI Slop”... 

We all remember when Satya Nadella literally asked us to stop calling it “AI slop” last week right? Yeah, now we know why. Microsoft dropped earnings after the close and… on paper… did everything right. Revenue beat expectations, earnings did as well… while Azure grew 48%. But instead, the market said “bet” and absolutely nuked the stock.

Live look at Michael Burry right now… 

(Source: Giphy) 

Why? Because Wall Street finally looked under the hood and realized Microsoft’s AI spending is about as tasty as low-grade dog food… and the AI money printer hasn’t started humming loud enough yet. Case in point: Capex was up 66% YoY. Which means, Satya presumably bought every GPU Jensen stuffed down their throats. 

In other words, $37.5 billion. In one year. For chips, data centers, power, cooling… all the works except ctual visible margin expansion. And when investors squinted at Azure expecting to see the payoff? They got… exactly what they were told to expect. No upside. No surprise. Just unimpressed. Which, unfortunately, is not the assignment when you’re lighting billions on fire in the name of AI. As a result the stock dropped -10% in a single session, wiping $350+ billion off Microsoft’s market cap. Ooof. 

(Source: Market Watch) 

And yet, the bigger problem is the fact that despite the metric f*k ton of splurging… Microsoft is still running into the unsexy phase of the AI cycle. They don’t have enough GPS to service the one too many internal projects they have opened. And every chip they allocate to Azure customers is one they can’t use for Copilot, internal tooling, or whatever Skynet-adjacent thing they’re building next. On the call, management basically admitted it. Azure growth isn’t constrained by demand… it’s constrained by capacity choices. Of course, that didn’t go over well. 

Now if you recall, three months ago, Meta was the market’s favorite punching bag for spending too much on AI with vibes instead of receipts. Then Meta posted numbers, ads printed, and everyone suddenly decided Zuck was a capital allocation savant.

(Source: imgflip) 

Now it’s Microsoft’s turn in the doghouse. And it stings extra because Microsoft was supposed to be the clean AI story. The one with direct monetization. The one that didn’t need to explain how it magically spun up revenue. But now, it turns out,  even the adults in the room have to eventually show the math. So yeah, long story short…  Microsoft beat earnings. And it still got rocked. Translation: Welcome to the hyperscaler world of the AI trade… where the story isn’t “who’s winning,” it’s “who’s spending the most without flinching.” Until next time, friends…

At the time of publishing, Stocks.News does not hold positions in companies mentioned in the article.