Microsoft shares drop 2.8% on AI regulation fears after midterm shift

Microsoft shares fell 2.8% in intraday trading today, dropping from Wednesday's close of $555.80, as post-election market sentiment reversed sharply from optimism over Democratic midterm gains to concerns about stricter AI regulation under the new congressional majority. The decline reversed Wednesday's rally, when investors bet Democratic policies slowing data center construction would benefit established cloud providers. Analysts now warn legislative limits on AI infrastructure spending could constrain cloud growth, which drove Microsoft's Azure platform to 48% revenue growth last quarter. Shares opened at $555.75, peaked at $557.62, then slid to a low of $532.67. Broader market weakness amplified the drop, with the Nasdaq falling nearly 4.8% and the Philadelphia Semiconductor Index declining sharply, marking the worst week for AI-related stocks since April 2025's tariff shock. Microsoft's decline was less than half the Nasdaq's, supported by strong recent earnings and diversified revenue. The stock had hit a 52-week high of $559.15 just one day earlier.