TLDR
- Bill Ackman’s Pershing Square disclosed it bought Microsoft stock and sold its Alphabet position last quarter
- Ackman cited Microsoft’s “highly compelling valuation” after recent sell-offs as his reason for buying
- Microsoft stock rose as much as 4.1% Friday, trading up ~3.7% around noon ET, while the S&P 500 fell 1.2%
- TCI Fund Management sold most of its $8 billion Microsoft stake, citing AI uncertainty over the company’s competitive position
- Microsoft’s Azure cloud grew 40% last quarter; the company has 20 million paying Copilot seats out of ~450 million total business seats
Microsoft (MSFT) stock jumped Friday after hedge fund billionaire Bill Ackman disclosed that his firm, Pershing Square Capital Management, bought the stock as a “core holding” — dumping its Alphabet position in the process.
The stock was up 3.76% to $424.81 around noon ET. It touched a session high of $426.44, up as much as 4.1% on the day. The broader market was heading the other way, with the S&P 500 down 1.2% and the Nasdaq off 1.4%.
Ackman shared his thinking in an 887-word tweet Friday morning, calling Microsoft’s valuation “highly compelling” after a stretch of selling that has left the stock down 13% so far in 2026 and 22% off its all-time high.
The trade is a direct swap — Pershing sold out of Alphabet entirely to fund the Microsoft position. Ackman pointed to the company’s cloud-infrastructure business and its dominance in office productivity software as the backbone of the investment case.
Two Funds, Two Opposite Bets
Not everyone agrees with Ackman. TCI Fund Management, run by Chris Hohn and widely considered one of the most profitable hedge funds in the world last year, quietly sold most of its $8 billion Microsoft stake — a position it had held for a decade.
TCI told its investors the reason plainly: “We reduced our investment in Microsoft because the rapid progress in AI introduces uncertainty over Microsoft’s competitive position in the future.”
That’s two well-regarded funds looking at the same company and reaching opposite conclusions. Wall Street is watching closely to see who gets it right.
Microsoft CEO Satya Nadella was in an Oakland courthouse this week, testifying in Elon Musk’s lawsuit against OpenAI. Microsoft has invested nearly $12 billion in OpenAI over seven years and holds a 27% stake now valued at roughly $230 billion. Musk’s case seeks to undo that relationship, making the trial a real concern for Microsoft’s AI strategy.
Copilot Adoption and the AI Spending Question
On the business side, Microsoft reported adjusted earnings of $4.27 per share on revenue of $82.9 billion for its fiscal third quarter — beating estimates of $4.05 per share on $81.4 billion. Azure cloud growth hit 40%.
Microsoft’s capital spending has climbed from $24 billion in fiscal year 2021 to $88 billion in fiscal year 2025, with $190 billion projected for the current calendar year. That figure is getting more scrutiny as questions grow about whether AI tools are converting into real customer value.
The company currently has 20 million paying seats for its premium Copilot AI product, out of roughly 450 million total business seats. Tigress Financial Partners has a Buy rating on the stock with a $680 price target — well above its current trading price — citing triple-digit year-over-year growth in paid Copilot seats.
However, the Wall Street Journal reported that some customers have been confused by Microsoft’s various AI product branding, with some gravitating toward Google’s Gemini instead. Microsoft recently reshuffled leadership in its AI teams.
Judson Althoff, who took over the commercial side of the business in October, pushed back on the concerns: “They don’t concern me, because I think the market is still trying to figure out AI.”
A white paper published by Microsoft Research this week added a wrinkle to the AI enthusiasm, concluding that large language models “introduce sparse but severe errors that silently corrupt documents, compounding over long interaction.”
The paper’s three authors are from Microsoft Research.
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