Key points
- Microsoft (MSFT) has climbed about 12% from its June 25 low of $349 to around $391, even as chip stocks keep selling off.
- The main driver is a rotation out of AI hardware and into AI software, where Microsoft is the largest name.
- A 5-year Haleon AI deal and Michael Burry going long added fuel to the turn.
- Looking ahead, Wall Street is broadly bullish, with a consensus target near $560 and a commercial backlog of about $627 billion.
Microsoft (MSFT) is having its best stretch of a rough year. The stock has climbed from a low of $349 on June 25 to around $391 on July 2, a gain of roughly 12 percent in about a week. What makes the run stand out is the backdrop. It is happening while chip stocks fall. The main semiconductor ETF dropped again on July 2, yet Microsoft rose. That split is the whole story.
Here is what is driving the move and what could push the stock higher from here.
The rotation out of chips and into software
The biggest force is a rotation. For most of the AI boom, investors crowded into the companies that build the hardware, led by the chipmakers. That trade cracked when Meta said it would rent out its spare AI computing power to outside customers. Suddenly the market worried that the giant buyers of chips might slow their orders. Money rushed out of semiconductors and into software instead.
Microsoft is the largest software company in the world, so it is the natural home for that money. The software ETF (IGV) has been climbing while the chip ETF (SMH) falls. We laid out the mechanics of the sell-off in our chip selloff piece and covered the hit to the compute-rental names in our look at the neocloud drop. Microsoft sits on the winning side of that trade. It sells the AI software and cloud services that the spending is meant to produce, rather than the hardware that investors now fear is overbuilt.
A five-year Haleon deal put revenue behind the story
Rotations need something real to hang on, and Microsoft got it on July 1. Haleon, the consumer-health company behind brands like Advil and Sensodyne, signed a five-year agreement to roll out Microsoft 365 Copilot, AI agents, and Azure across its global operations. It is one of the largest enterprise AI deals yet in the healthcare industry.
The deal matters for more than its size. Microsoft's stock struggled this year in part because investors feared the company was spending enormous sums on AI data centers without enough paying customers to show for it. A marquee, multi-year Copilot and Azure contract is exactly the kind of proof that the spending is turning into revenue. That is the argument the bulls needed, and they got a concrete example.
Michael Burry going long lit the match
The turn began with a familiar name. On June 26, Microsoft jumped 5.7 percent in a single session, its sharpest one-day gain of the year, on about four times its normal trading volume. The spark was a disclosure that investor Michael Burry had bought bullish Microsoft call options. Burry is best known for betting against markets, so a rare long position in a beaten-down megacap drew attention. We covered his recent trades in our piece on his moves. His buy did not change Microsoft's business, but it helped mark the bottom and pull other buyers back in.
What could push the stock higher
The forward case rests on the cloud and the backlog. Microsoft's commercial backlog, the value of contracts signed but not yet recognized as revenue, reached about $627 billion, nearly double a year earlier. Roughly a quarter of that is expected to convert to revenue within twelve months, which gives the company unusual visibility into its sales.
Azure is the other lever. In its most recent quarter the cloud unit grew about 39 percent, and management has said new AI data-center capacity coming online in the second half of 2026 should help Azure growth reaccelerate. If that plays out, and if more enterprises sign Copilot deals like Haleon's, the revenue picture strengthens through the rest of the year.
Wall Street is already leaning that way. Across dozens of analysts the consensus price target sits near $560, well above the current $391, with almost no sell ratings. Firms including Wedbush, Morgan Stanley, and Bernstein carry targets in the $625 to $650 range, citing Azure strength. Microsoft also reports its fiscal fourth-quarter earnings on July 28, after the close, which will be the first hard test of whether the AI spending is paying off.
The other side of the trade
None of this makes the turn a sure thing. Microsoft was one of the weakest big technology stocks in the first half of 2026, falling from a high near $555, because the market feared its AI capital spending was eating into free cash flow. That worry has not disappeared. The current move is a recovery from a deeply oversold level, not a confirmed return to the old highs. A rotation can reverse as quickly as it started, and a disappointing earnings report could cool the enthusiasm fast.
For now, though, the pieces line up in Microsoft's favor. The money is moving toward software, the Haleon deal shows the AI spending converting to sales, and the backlog and analyst targets point higher. That is why a stock that spent the year going down has spent the past week going up.
Sources
- Prices, volume, and 52-week range from exchange data through July 2, 2026.
- Microsoft and Haleon, five-year AI collaboration (July 1, 2026).
- Analyst price targets and commercial backlog figures via published Wall Street research summaries, July 2026.
This is general market commentary and opinion, not investment advice. Prices are as of July 2, 2026 and will move. Markets can go down as well as up, and you can lose money. Always do your own research and consider speaking with a licensed financial professional before making any investment decision.
