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What's going on everyone? Welcome back to the channel. Today, we need to talk about something that honestly caught my attention in a big way. Billionaire investor Bill Ackman, one of the most closely watched hedge fund managers in the world, has been selling his massive position in Google or Alphabet and buying billions of dollars worth of Microsoft stock instead.
Now, think about that for a second. Just recently, many investors were arguing that Google looked historically cheap. At the same time, Microsoft had become one of the most debated mega-cap stocks in the market. Some investors were bullish, others were warning about AI disruption, slowing growth, and overinvestment.
So, why would Ackman rotate from Google into Microsoft? What does he see? And more importantly, should long-term investors be paying attention right now? Because Microsoft stock has quietly pulled back significantly from recent highs. At one point, shares were down nearly 30%. Even now, the stock remains down meaningfully from its peak.
And valuation-wise, Microsoft is trading near one of its lower forward earnings multiples of the past decade. Not the absolute cheapest, but definitely cheaper than where it has traded for most of the AI boom. So, in today's video, we're going to break down why Bill Ackman is buying Microsoft, the bull case and the bear case, the AI risks nobody is talking about, whether Microsoft is actually undervalued today, and what I personally think happens next.
So, if you enjoyed deep dive stock analysis that's still beginner-friendly, hit that like button, subscribe to the channel, and let's talk about Microsoft. So, first, let's understand the core thesis here. Why would a billionaire investor rotate out of Google and into Microsoft? Well, from Ackman's perspective, Microsoft is one of the highest quality businesses on Earth.
And honestly, that's hard to argue against. When you look at Microsoft, you're not looking at just one product. You're looking at an entire ecosystem. You have Microsoft 365, Azure cloud computing, LinkedIn, Xbox gaming, Activision Blizzard, Edge browser, search advertising, enterprise security, AI products like Copilot, and of course, the OpenAI partnership.
This is a gigantic platform business. And importantly, a lot of these businesses are deeply embedded into the global economy. For example, Microsoft 365 has hundreds of millions of daily users worldwide. Companies rely on Word, Excel, PowerPoint, Teams, Outlook. These tools are deeply integrated into enterprise workflows.
And once businesses adopt Microsoft products, switching becomes extremely difficult. That creates something investors love. Sticky recurring revenue. Now, let's talk numbers. Because despite all the concerns surrounding AI competition and valuation, Microsoft's financial results remain extremely strong.
Recent quarterly results showed revenue growth around 15 to 18% operating income growth near 20% operating margins around 46% earnings per share growth above 20%. These are ridiculous numbers for a company worth trillions of dollars. Most companies at Microsoft's size grow slowly, but Microsoft is still compounding at rates that many smaller tech companies would envy.
And this is exactly why investors like Bill Ackman are interested. Because when a world-class business temporarily trades at a lower valuation, long-term investors pay attention, especially when the underlying fundamentals remain strong. Now, in my opinion, the most important part of Microsoft today is Azure.
Azure is Microsoft's cloud computing business, and it's become one of the biggest AI infrastructure platforms in the world. This matters because AI requires enormous computing power, and companies need cloud infrastructure to run AI workloads. That's where Azure comes in. Azure has been growing incredibly fast, around 30 to 40% depending on the quarter.
And AI demand is becoming a major growth driver. This is also tied heavily to Microsoft's partnership with OpenAI. Remember, Microsoft invested billions into OpenAI very early. That relationship gave Microsoft a massive advantage in the AI race. And now they're integrating AI across nearly every major product they own.
That includes Microsoft Office, Copilot, Azure, developer tools, enterprise workflows. So, when Ackman looks at Microsoft, he probably sees one of the best-positioned companies in the world for enterprise AI adoption. Now, here's where things get interesting, because despite all the positives, there are legitimate concerns investors should understand.
And beginner investors especially need to hear both sides. First, Microsoft is spending huge amounts of money on AI infrastructure. Capital expenditures have exploded higher. The company is building data centers aggressively. They're buying AI chips, expanding cloud capacity, funding AI development, and because of that, free cash flow has actually come under pressure recently.
Now, some investors are okay with that, because they believe AI investment today leads to larger profits tomorrow. But others worry Microsoft could be overspending, especially if AI monetization takes longer than expected. Now, here's the really fascinating debate. And honestly, this may become one of the most important questions for Microsoft over the next decade.
Could AI actually weaken Microsoft's software bundle? Think about this carefully. Historically, Microsoft dominated because businesses relied on their ecosystem. You used Word, Excel, PowerPoint, Teams, all bundled together. But in the future, AI agents may change how software gets used entirely. Imagine you simply tell an AI, create a financial presentation.
The AI might pull data automatically, build charts, write summaries, generate slides, and use multiple software tools in the background. At that point, the individual software products matter less. The AI layer becomes the interface, and some investors worry this could eventually reduce the importance of Microsoft's bundled ecosystem.
Now, to be clear, we are not seeing that happen yet. Microsoft remains extremely dominant, but this is one of the existential risks investors are thinking about long-term. Now, the OpenAI question is another huge issue investors debate because, ironically, one of Microsoft's biggest strengths could eventually become a risk.
Right now, OpenAI drives enormous demand for Azure infrastructure. That helps Microsoft tremendously, but OpenAI is also partnering with other cloud providers, including Amazon, Google, and Oracle. And over time, OpenAI may become less dependent on Microsoft exclusively. So, investors are asking, could today's AI tailwind eventually become less powerful?
Could margins come under pressure? Could Azure growth slow if OpenAI diversifies further? Again, these are not immediate problems, but they matter when valuing a trillion-dollar business. So, is Microsoft actually undervalued today? Personally, I'd say Microsoft looks reasonable, not screamingly cheap, not wildly expensive, reasonable.
And honestly, I think that's also why investors like Bill Ackman are interested, because truly elite businesses rarely trade at bargain valuations. You usually have to buy them when they're fairly priced. Microsoft today trades around 21 to 22 times forward earnings. Historically, that's lower than much of the last decade, especially considering the company is still growing revenue double digits with incredible margins.
Now, could the stock still decline further? Absolutely. If interest rates rise, if AI spending slows, if macro conditions worsen, large tech stocks could absolutely reprice lower. That's why position sizing matters. That's why diversification matters. And that's why even great companies can still be risky investments at certain prices.
So, there's the question on everyone's mind. Why wouldn't Warren Buffett be buying Microsoft? And honestly, the answer probably comes down to valuation discipline. Buffett and Berkshire Hathaway currently hold enormous cash reserves, over 300 billion dollars. Why? Because Buffett waits for outlier opportunities.
He waits for moments when assets become dramatically mispriced, usually during major crises. Microsoft may be reasonably valued, but it's not necessarily a once-in-a-decade bargain. That's the difference. Now, before we wrap up, I want to mention something important happening in the broader market. One major risk investors are watching right now is interest rates.
If treasury yields continue rising significantly, that creates pressure for stocks overall, especially expensive growth stocks, because higher interest rates reduce future valuations mathematically. And if yields spike sharply, you could absolutely see another major tech sell-off. That's why position sizing matters.
That's why diversification matters. And that's why even great companies can still be risky investments at certain prices. So, overall, here's my view. I completely understand why Bill Ackman is buying Microsoft here. The company remains exceptionally profitable, deeply embedded into enterprise software, a major AI infrastructure player, financially dominant, and strategically positioned extremely well.
At the same time, there are real long-term questions around AI disruption, OpenAI dependence, and future software behavior. So, this isn't a risk-free investment, but honestly, very few companies on Earth combine scale, profitability, AI positioning, enterprise dominance, and financial strength better than Microsoft does today.
So, personally, I think Microsoft remains one of the strongest long-term compounders in the market. Not necessarily a screaming bargain, but still an incredibly quality business. Now, let me know your thoughts down below. Are you buying Microsoft stock right now? Do you agree with Bill Ackman? Or do you think Google is actually the better value?
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