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🗞️ Microsoft's AI Scare
Big Moves Decoded: MRVL, Macy's and more!
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Market Performance
S&P 500: 6,849.72 ⬆️ 0.30%
Nasdaq: 23,454.09 ⬆️ 0.17%
Dow Jones: 47,882.90 ⬆️ 0.86%
Are AI Sales Slowing for Microsoft?
Microsoft (MSFT) shares tumbled over 2% on Wednesday after The Information reported that the tech giant lowered growth targets for its AI software sales—specifically its Foundry platform—after salespeople struggled to meet ambitious quotas.
Less than a fifth of one Azure unit hit the 50% growth target, while another unit saw quotas slashed from doubling sales to just 50% growth after most reps fell short.
Microsoft quickly pushed back, claiming the report "inaccurately combined the concepts of growth and quotas" and insisting aggregate AI sales quotas haven't been lowered. The stock pared some losses after CNBC reported this denial.
This episode exposes the gap between Silicon Valley's AI enthusiasm and traditional businesses' willingness to pay premium prices for largely unproven technology.
While AI companies happily rent Microsoft's cloud infrastructure—creating what critics call "circular deals" that inflate apparent growth—actual enterprise customers aren't biting at the same rate.
It's reminiscent of earlier struggles to sell Copilot, when consumers preferred OpenAI's ChatGPT.
MSFT stock has a Ziggma score of 90 and ranks below most peers in growth and valuation.
The tech giant is up 766% in the past decade and trades at a premium multiple in December 2025.
Our Takeaway
The AI gold rush is real for infrastructure providers, but the enterprise software opportunity may take longer to materialize than Wall Street expects.
Microsoft's capital expenditure on AI continues to climb while monetization remains uncertain—a combination that should make investors think twice about current valuations.
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Market Overview 📈
Markets rallied on Wednesday as disappointing jobs data paradoxically boosted investor sentiment.
ADP reported private payrolls unexpectedly fell by 32,000 in November—economists had expected a 40,000 gain—with small businesses cutting 120,000 jobs while large employers added 90,000.
Rather than panicking, traders interpreted the weakness as ammunition for the Federal Reserve to cut interest rates at next week's meeting.
The CME FedWatch tool now shows an 89% probability of a rate cut on December 10, significantly higher than mid-November odds.
Investors are betting that lower rates will spur loan growth and economic activity, lifting financial stocks like Wells Fargo and American Express.
The ISM Services PMI came in at 52.6% for November, slightly above the 52.5% forecast, suggesting the services sector continues to expand despite soft labor market conditions.
However, JPMorgan's chief U.S. economist warned that labor market weakness "looms large" into 2026, predicting "uncomfortably slow" employment growth over the next three to six months.
Treasury Secretary Scott Bessent attributed the weak payrolls to the government shutdown and deportation efforts rather than to tariff policies, while Commerce Secretary Howard Lutnick echoed similar explanations.
Meanwhile, 17 S&P 500 stocks hit 52-week highs, including Apple, Walmart, and General Motors, which reached all-time highs.
Stock Moves Deciphered 📈
💰 Microchip Technology (MCHP)
The semiconductor manufacturer surged 12% after raising its Q3 fiscal 2026 revenue and earnings guidance, signaling approximately 12% year-over-year revenue growth.
The upbeat forecast reflected strengthening demand across its product portfolio and a recovering semiconductor market, fueling significant investor confidence and driving double-digit stock gains as the company demonstrated positive momentum.
💉 Vertex Pharmaceuticals (VRTX)
Shares climbed 7% following Morgan Stanley's upgrade to "Overweight" and a raised price target, citing the promising potential of its kidney disease drug pipeline, including povetacicept and inaxaplin.
The upgrade highlighted a credible path for diversification beyond Vertex's dominant cystic fibrosis franchise, signaling new growth opportunities and expanding the company's addressable market in kidney disease treatment.
🏠 Alexandria Real Estate Equities (ARE)
The life sciences REIT plummeted to a 52-week low after slashing its quarterly dividend by 45%, reflecting severe distress in the life sciences real estate market.
The company cited anemic leasing activity and issued a weak 2026 funds from operations forecast, signaling prolonged headwinds as biotech funding remains constrained and lab space demand continues deteriorating across key markets.
⬇️ Netflix (NFLX)
Shares declined 5% on reports that the streaming giant submitted a mostly cash bid for Warner Bros. Discovery, potentially valued at around $70 billion.
Investors expressed concerns about the hefty price tag, the risk of a bidding war with suitors like Paramount and Comcast, and whether the acquisition would meaningfully expand Netflix's market share given existing content overlap.
Headlines You Can't Miss 👀
📈 Small caps outperformed on Wednesday, with the Russell 2000 jumping 1.3%, outpacing the Dow's 0.7% gain.
🏦 Wells Fargo initiated Oracle with an “overweight” rating with a $280 price target, implying 39% upside based on AI-fueled growth potential.
⚡ Deutsche Bank raised GE Vernova's price target to $769 from $724 ahead of the company's December 9 investor update.
💰 Genius Sports surged 8% after setting ambitious 2028 targets of $1.2 billion in group revenue and $220 million in free cash flow.
🛒 Jefferies downgraded Wayfair to hold, citing a near 40% premium to peers and November web traffic down 300 basis points from October.
⚠️ Michael Burry warned the AI bubble could unravel within the next two years, comparing it to prior market peaks.
Trending Stocks 📊
🚀Marvell Technology (MRVL)
The semiconductor company jumped over 7% after beating third-quarter expectations with adjusted earnings of $0.76 per share on revenue of $2.08 billion, topping consensus estimates.
Management's forecast of 25% data center revenue growth for the next fiscal year exceeded analyst expectations.
Marvell also announced a $3.25 billion acquisition of Celestial AI, potentially rising to $5.5 billion if revenue milestones are met.
🩱Macy's (M)
Shares traded slightly lower despite posting a surprise third-quarter profit of $0.09 per share (adjusted) versus expectations for a 14-cent loss. Revenue of $4.71 billion beat the $4.62 billion consensus forecast.
The results demonstrated resilience in the department store's turnaround efforts as the company navigates a challenging retail environment heading into the critical holiday shopping season.
🔒 CrowdStrike (CRWD)
The cybersecurity provider gained over 1% as it beat third-quarter estimates and issued full-year guidance above analyst expectations.
CrowdStrike continues to demonstrate solid execution in the enterprise security market, with strong demand for its cloud-native endpoint protection platform.
What’s Next?
Key market and macro news 👇
💸 DocuSign is expected to report its quarterly earnings after the market closes, with investors watching for growth in customer acquisition and the company's outlook.
🎤 HPE is scheduled to release its quarterly earnings, and the results will be scrutinized for insights into enterprise spending and the technology hardware sector.
🧑🏭 The Department of Labor will release the weekly jobless claims data, a key indicator of the health of the labor market, which can influence investor sentiment.
📊 The release of the report on the international trade in goods and services for the previous month will provide insight into the country's trade balance and economic health.
🏭 The Census Bureau will release data on factory orders, a measure of manufacturing activity, which can signal future business investment and economic momentum.
Chart of the Day
Source: Visual Capitalist
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