Microsoft shares have been on a run not seen in 26 years, erasing losses the stock had accumulated over the course of 2026, according to MarketWatch. Analysts said the rally has legs because the company's heavy capital spending on artificial intelligence is beginning to show a payoff.
The stock's move comes against a broader backdrop in which major tech companies have benefited not just from their core operations, but from rising valuations in their private AI investment portfolios. Microsoft holds a stake in OpenAI, and like Amazon and Alphabet, it was required to book gains on that investment as OpenAI's private market valuation climbed toward $1 trillion during the quarter.
CNBC reported that those kinds of investment gains have played a significant role in shaping the earnings picture for large technology companies this quarter. Tajinder Dhillon, head of earnings and equity research at LSEG, said aggregate S&P 500 earnings growth of around 48% from a year ago drops to roughly 29% once gains from Alphabet and Amazon's private company stakes are removed. Most analysts have been excluding these one-time items from their non-GAAP estimates, but the raw headline numbers have pushed more companies to beat expectations by wider margins than usual.
For Microsoft specifically, investors appear to be responding to more than just the paper gains. The MarketWatch report noted that the rally is driven in part by evidence that the company's capital spending is producing returns, a key question that has hung over the entire AI infrastructure buildout across big tech.
The Magnificent Seven group of tech stocks, which includes Microsoft, accounted for roughly 35% of all S&P 500 second-quarter revenue, according to LSEG. That concentration means moves in these stocks carry significant weight for the broader market.
Gil Luria, managing director and head of technology research at D.A. Davidson, told CNBC that while the investment gains inflated headline numbers, "these types of moves tend to even out over time, which is why we typically exclude them from a non-GAAP view and from forecasts."
Microsoft's 26-year rally streak, combined with the broader AI investment story unfolding across big tech, puts the stock at the center of ongoing investor debate over how much of the sector's reported earnings reflect genuine business strength versus accounting effects from the AI boom's inflating private valuations.