Microsoft stock dropped in three consective trading days. On the one hand, investors may worry that the selling pressure would accelerate as it cancelled leases for AI data centers. On the other hand, falling stock price may just be a “misread” story. Let’s dive into the potential sscenarios and related options strategies with Microsoft stock.

1. Moderately Bearish

Microsoft stock is trading between $397.9 and $418.98 this month. A bear put spread strategy may be less risky if you are not optimistic about Microsoft’s near-future performance.

Microsoft Cancels Leases for AI Data Centers

Microsoft Corp. has begun canceling leases for a substantial amount of datacenter capacity in the US, a move that may reflect concerns about whether it’s building more AI computing than it will need over the long term, TD Cowen said in a report.

TD Cowen’s analysts wrote that their channel checks had unearthed a number of signals about Microsoft’s gradual retreat from datacenter construction and acquisition. They learned that Microsoft had let more than a gigawatt of agreements on larger sites expire, and walked away from “multiple” deals involving about 100 megawatts each (datacenter capacity is often stated in terms of the power they need to stay up and running).

Wall Street stepped up its questions about the massive outlays after the Chinese upstart DeepSeek released a new open-source AI model that it claims rivals the abilities of US technology at a fraction of the cost.

Option Strategy: Bear Put Spread

Structure: Buy $400 Put | Sell $395 Put (March 7 expiry)

• $MSFT Vertical 250307 395.0P/400.0P$

Rationale:

• Protects against further downside

• The $400 Put (bid: $5.2) and $395 Put (ask: $3.0) create a net debit of $2.2

• Max Profit: $282.50

• Break-even : 397.17

Source: Tiger Trade App

2. Moderately Bullish

Microsoft Reiterates Plan to Invest $80 Billion in AI

Microsoft said it might make some infrastructure adjustments but still plans to spend over $80 billion on capital expenditures this fiscal year, which ends in June.

“Our plans to spend over $80B on infrastructure this FY remains on track as we continue to grow at a record pace to meet customer demand,” a Microsoft spokesperson said in an emailed statement Monday.

“Thanks to the significant investments we have made up to this point, we are well positioned to meet our current and increasing customer demand,” Microsoft’s spokesperson wrote. “Last year alone, we added more capacity than any prior year in history. While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions. This allows us to invest and allocate resources to growth areas for our future.”

No Change in Demand for MSFT

Darren Aftahi, analyst at Roth said that the capacity decision had been made because of Microsoft’s changed relationship with OpenAI and not from a drop off in demand. Indeed, he said the “supply/demand imbalance is very much real and will be for the foreseeable future.” He said MSFT was actually expanding its Data Center capacity in areas such as San Antonio and Poland.

Bank of America also retained its Buy rating and $510 price target for the MSFT stock. It said that although the company may strategically adjust their infrastructure spending it is not “easing up on Capex in any material way.”

Option Strategy: Bull Call Spread

Structure: Buy $395 Call | Sell $400 Call (March 7 expiry)

• $MSFT Vertical 250307 395.0C/400.0C$ 

Rationale:

• Capitalizes on a rebound to $400

• Net debit: $2.7 (buy $395 Call at $8.9 bid / sell $400 Call at $6.2 ask).

• Max Profit: $217.5

• Break-even : $397.82

  Source: Tiger Trade App