Microsoft Short Interest Surges to Ten‑Year High Ahead of Q2 Results Amid AI Investment Uncertainties

Microsoft is approaching its quarterly earnings report amid heightened bearish sentiment toward the Windows maker, the most negative in over a decade. Investors doubt that the company’s substantial AI spending will generate adequate profits. Approximately 92 million Microsoft shares are currently sold short, representing 1.27 % of its public float, according to S3 Partners. This is the highest short‑interest ratio since May 2015 and the greatest increase among the Magnificent Seven. S3 notes virtually no short covering before the closely watched earnings release, scheduled after U.S. market close on Wednesday, as bearish investors maintain their positions. The pressure intensified after Alphabet raised its 2026 capital‑expenditure forecast and reported accelerating cloud growth, causing Alphabet’s stock to drop nearly 8 % last week. Microsoft fell 3 % as investors focused on the prospect of even larger AI infrastructure spending across the industry. Mark Mahaney, head of internet research at Evercore ISI, wrote that Alphabet’s capex boost raises the likelihood of similar moves by Amazon and Microsoft. The market reaction reflects a shift in investor sentiment after more than three years of AI enthusiasm since ChatGPT’s launch in late 2022. While AI service demand continues to rise, investors are increasingly skeptical about whether hyperscale technology firms can achieve attractive returns on the hundreds of billions of dollars earmarked for data centers, AI chips, and networking infrastructure. Microsoft, under CEO Satya Nadella, is a major AI investor. In April, the company projected about $190 billion in capital expenditures and finance leases for the year, including roughly $25 billion for higher component costs, as surging AI chip demand tightens memory‑chip supplies. Microsoft’s shares have declined more than 18 % this year, underperforming the S&P 500 by nearly 25 percentage points.

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