Key Highlights
- Pershing Square Capital Management revealed it acquired Microsoft shares while exiting its Alphabet holdings in Q4
- Bill Ackman described Microsoft’s current valuation as “highly compelling” following recent market weakness
- MSFT shares climbed as much as 4.1% Friday, up approximately 3.7% by midday ET, even as the S&P 500 dropped 1.2%
- Meanwhile, TCI Fund Management liquidated the majority of its $8 billion Microsoft position, expressing concerns about AI-driven competitive risks
- Azure cloud services posted 40% growth in the latest quarter; Microsoft now counts 20 million paid Copilot subscriptions from ~450 million total enterprise seats
Microsoft (MSFT) stock experienced significant gains Friday following hedge fund titan Bill Ackman’s announcement that Pershing Square Capital Management had acquired shares as a “core holding” — simultaneously liquidating its entire Alphabet stake to fund the purchase.
Shares traded 3.76% higher at $424.81 by midday ET, reaching an intraday peak of $426.44, representing a 4.1% surge. This stood in stark contrast to broader market trends, with the S&P 500 declining 1.2% and the Nasdaq falling 1.4%.
Ackman elaborated on his rationale through an 887-word post Friday morning, characterizing Microsoft’s current valuation as “highly compelling” following a sustained selloff that has pushed the stock down 13% year-to-date in 2026 and 22% below its record high.
The transaction represents a complete portfolio shift — Pershing liquidated its entire Alphabet position to finance the Microsoft acquisition. Ackman highlighted the company’s cloud infrastructure operations and its commanding position in productivity software as foundational elements of his investment thesis.
Contrasting Perspectives from Major Investors
Ackman’s bullishness isn’t universally shared. TCI Fund Management, led by Chris Hohn and recognized as one of last year’s top-performing hedge funds globally, quietly divested most of its $8 billion Microsoft position — ending a decade-long investment.
TCI communicated its rationale transparently to investors: “We reduced our investment in Microsoft because the rapid progress in AI introduces uncertainty over Microsoft’s competitive position in the future.”
This represents two highly respected investment firms analyzing the same company and arriving at diametrically opposed conclusions. Market observers are eager to see which strategy proves correct.
Microsoft CEO Satya Nadella appeared in an Oakland courtroom this week to testify in Elon Musk’s legal challenge against OpenAI. Microsoft has committed nearly $12 billion to OpenAI across seven years and currently owns a 27% equity stake valued at approximately $230 billion. Musk’s lawsuit aims to dismantle that partnership, presenting genuine risks to Microsoft’s artificial intelligence roadmap.
AI Product Adoption and Capital Investment Concerns
Operationally, Microsoft delivered adjusted earnings of $4.27 per share on $82.9 billion in revenue for its fiscal third quarter — surpassing analyst projections of $4.05 per share on $81.4 billion. Azure cloud expansion reached 40%.
Microsoft’s capital expenditures have surged from $24 billion in fiscal 2021 to $88 billion in fiscal 2025, with projections pointing to $190 billion for the current calendar year. These escalating investments face increasing scrutiny as stakeholders question whether AI technologies are generating tangible customer returns.
The company reports 20 million paying subscribers for its premium Copilot AI product, representing a fraction of approximately 450 million total enterprise seats. Tigress Financial Partners maintains a Buy rating with a $680 price target — substantially above current levels — pointing to triple-digit year-over-year expansion in paid Copilot subscriptions.
Nevertheless, the Wall Street Journal documented customer confusion surrounding Microsoft’s multiple AI product offerings, with some enterprises migrating to Google’s Gemini alternative. Microsoft recently reorganized its AI division leadership.
Judson Althoff, who assumed control of the commercial business in October, dismissed these worries: “They don’t concern me, because I think the market is still trying to figure out AI.”
A research paper released by Microsoft Research this week introduced additional complexity to the AI narrative, determining that large language models “introduce sparse but severe errors that silently corrupt documents, compounding over long interaction.”
The paper’s three co-authors are affiliated with Microsoft Research.
