In a notable divergence from the move by TCI, one of the world's most profitable hedge funds, which recently liquidated its stake in Microsoft, prominent Wall Street investor Bill Ackman has taken a contrarian stance. His firm, Pershing Square Capital, established a significant new position in Microsoft during the first quarter. The position comprises 5.65 million shares, valued at approximately $2.09 billion, representing 15.26% of the firm's portfolio and making it the fourth-largest holding.
**Contrarian Investment at a P/E of 21** Ackman disclosed on social media platform X that the investment was made in stages following a post-earnings decline in Microsoft's share price in February. He noted that the forward price-to-earnings ratio at the time of purchase was only 21, "roughly in line with the overall market and well below its average valuation over the past several years." As of May 15, Microsoft's stock price had fallen more than 26% from its all-time high set in July 2025, a sell-off largely driven by market concerns over AI investment returns and competitive dynamics.
Ackman views this as a rare opportunity. He wrote, "As two of the most powerful forces in the equity market—rising indexation and the increasing control of capital by extremely short-term, highly leveraged investors who cannot tolerate volatility—converge, we occasionally get the opportunity to buy some of the most powerful, highest quality compounders at attractive valuations."
He addressed two key market concerns: * **On M365 Competitiveness:** While the market worries that the M365 suite faces challenges from AI lab products like Anthropic's Claude Coworker, Ackman argues M365 is deeply integrated into the workflows of nearly all large enterprises. He believes its reliance on Microsoft's identity, security, compliance, and data governance systems makes these capabilities "nearly impossible to replicate." Furthermore, the integration of the AI agent Copilot into M365 products is expected to facilitate a gradual shift from a pure per-seat licensing model to a hybrid model that includes usage-based fees. * **On Azure Growth Sustainability:** Ackman pointed out that Microsoft has raised its capital expenditure guidance for the year to $190 billion, with roughly two-thirds allocated to servers and networking equipment. He classifies this as "growth capex" that will directly drive revenue growth. He also emphasized that Microsoft's recent restructuring of its partnership with OpenAI was not a "concession" but a strategic move towards a more open, multi-model architecture.
Notably, Ackman highlighted that Microsoft's stated valuation does not reflect the value of its 27% stake in OpenAI. Based on OpenAI's latest financing round valuation, this stake is worth approximately $200 billion, equivalent to about 7% of Microsoft's market capitalization.
**Portfolio Adjustments: Major Alphabet Reduction, Hilton Exit** The 13F filing revealed other significant adjustments to Pershing Square's portfolio in Q1: * **Alphabet:** The position in Class C shares was drastically reduced from 6.1 million to approximately 312,000 shares, a cut of 94.94%. The Class A share position was reduced from about 678,000 to roughly 32,000 shares, a decrease of 95.23%. * **Uber:** The holding was slightly reduced from 30.2 million to 29.95 million shares. * **Meta Platforms:** The position was marginally decreased from 2.67 million to 2.66 million shares. * **Hilton Worldwide:** The position was completely liquidated. Previously, Pershing Square held about 3.03 million shares, representing roughly 5.6% of the portfolio.
Previously disclosed information shows Pershing Square also purchased Amazon following a post-"Independence Day" sell-off in April of last year and established a position in Meta in November, both being contrarian moves during periods of widespread pessimism about AI capital expenditures.
As of the end of the first quarter, Pershing Square Capital's portfolio held 11 stocks. The top five holdings and their respective portfolio weights were: 1. Brookfield Corp: 17.62% 2. Amazon.com: 17.39% 3. Uber: 15.71% 4. Microsoft: 15.26% 5. Restaurant Brands International: 12.20%
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