Microsoft Plunges 10% as Software Stocks Suffer Worst Day in 10 Months Amid AI Concerns

Microsoft (MSFT) and ServiceNow (NOW) each tumbled nearly 10% on January 29, 2026, dragging software stocks to their worst single-day drop since April 4, 2025. SAP (SAP) fell 16% after weak cloud backlog guidance, while Salesforce (CRM), Workday (WDAY), and Figma (FIG) dropped 6%-9%. The iShares Expanded Tech-Software ETF (IGV) sank 4.9%. Investors fear AI investments may not translate to revenue as free or low-cost AI tools threaten traditional software models. Mizuho analyst Klein noted Microsoft’s Azure growth (38% YoY, constant currency) showed no acceleration from Q3, fueling doubts. ServiceNow’s outlook also disappointed despite heavy M&A and AI spending. Year-to-date, Intuit (INTU) and ServiceNow lead S&P 500 losers, down ~25%. Meanwhile, chipmakers like Micron (MU), Lam Research (LRCX), and Intel (INTC) rank among top performers, widening the sector divergence.