Microsoft (MSFT) Stock Jumps 3% as Chip Selloff Sends Money Into Software

TLDR

• Microsoft stock fell 23% in H1 2026, its worst first half since 2000
• The stock is up ~3% this week as a rotation from chips to software has helped lift it
• The iShares Tech-Software ETF (IGV) is up 7% over eight trading days; the SOXX semiconductor ETF is down 8.5% over the same period
• Microsoft launched a new AI division, Microsoft Frontier Co., with a $2.5 billion investment and roughly 6,000 staff
• MSFT trades at $389.51, roughly 30% below its GF Value of $560.33, with a P/E of 23.19 versus a five-year median of 34.01

Microsoft had a brutal first half of 2026. The stock dropped 23% between January and June, its worst H1 performance since 2000. June alone was down 17% — the stock’s worst month in over 25 years.

But the second half is starting differently.

MSFT rose 3% on Wednesday and added another 1.4% on Thursday, even as the S&P 500 slipped 0.1% and the Nasdaq fell 0.8%. The Dow was the only major index in the green that day, up 0.7%.

Microsoft Corporation, MSFT

The move comes as money rotates out of semiconductors and into software. That shift has quietly turned one of Microsoft’s biggest liabilities — its heavy software exposure — into a short-term tailwind.

The iShares Expanded Tech-Software ETF (IGV) has climbed for four straight sessions through Wednesday and was up another 0.2% on Thursday. Over the last eight trading days, IGV is up 7%. The iShares Semiconductor ETF (SOXX) dropped 5.4% on Thursday alone and is down 8.5% over the same eight-day window.

Microsoft Bets $2.5 Billion on Enterprise AI

On July 2, Microsoft announced the creation of Microsoft Frontier Co., a new division backed by $2.5 billion. The unit will employ around 6,000 staff focused on AI implementation services for enterprise clients.

The model, built around what Microsoft calls “frontier on-site engineers,” puts human technical resources directly at client sites to help companies integrate AI into their workflows. It will pull together existing engineers, technical consultants, and sales teams from across Microsoft’s enterprise business.

The move comes just after Amazon revealed a $1 billion investment in a similar program. Microsoft has already spent hundreds of billions on data centers to run its generative AI models, though commercial traction has been uneven.

Copilot Adoption Struggles Weighed on the Stock

Microsoft 365 Copilot and GitHub Copilot have both faced slow market adoption, and that has been a drag on investor confidence throughout 2026. The stock’s 21% decline this year reflects, in part, frustration over whether Microsoft can convert its AI infrastructure spend into real revenue.

The Frontier Co. structure is a direct response to that problem. Rather than relying solely on software rollouts, Microsoft is putting people in the room with clients.

At $389.51, MSFT trades at a P/E of 23.19 — well below its five-year median of 34.01. GuruFocus puts the stock’s GF Value at $560.33, suggesting it is roughly 30% undervalued at current prices.

Insider activity over the past three months shows no buying, with sales totaling approximately $10.5 million.

The SOXX ETF closed down 5.4% on Thursday as the chip-to-software rotation continued into the second day of H2 2026.

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