Microsoft plunge sends software stocks into bear market, drags S&P lower

Tech stocks tumbled on Thursday after Microsoft’s earnings, pushing software shares into a bear market and dragging major US indexes lower. Microsoft shares plunged 10% after the company said it spent a record amount on AI, reported slowing cloud growth and issued soft guidance on profits for the next quarter.

The software sector slipped into bear-market territory, with the iShares Expanded Tech-Software Sector ETF off more than 20% from its October high. Notable moves included Microsoft -10%, ServiceNow -10%, Oracle -2%, Salesforce -6% and Broadcom -1%. Major indexes were dragged lower: the S&P 500 fell more than 1% and the Nasdaq Composite dropped 2%.

At the 4 p.m. market close, the S&P 500 was 6,969.01 (down 0.1%), the Dow 49,071.56 (up 0.1%, 56 points) and the Nasdaq 23,685.12 (down 0.7%). Investors have become sensitive to signs that demand for AI may be weaker than expected and to heavy capex spending by tech giants.

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