Key insights
- Ackman's Pershing Square disclosed a new stake in Microsoft, citing a compelling valuation and long-term growth potential in Azure and M365. He views concerns about competition and changes to the OpenAI partnership as overblown and supports Microsoft's $190 billion spending plan. This endorsement from a prominent investor could provide a short-term boost to MSFT shares and sentiment in the tech sector.
May 15 (Reuters) - Bill Ackman's hedge fund Pershing Square will disclose a new position in Microsoft later in the day, the billionaire investor said on Friday, arguing that the tech giant sits at a "highly compelling valuation".
In a post on social media platform X, Ackman framed his Microsoft bet as the latest in a series of investments in technology companies with attractive valuations and the potential for dominant long-term growth.
Microsoft, Ackman said, operates two of the most valuable enterprise technology businesses in its Azure cloud-computing division and the M365 Office productivity suite that includes Excel, Word as well as the $30-a-month Copilot AI assistant, placing it at the center of rising AI adoption by businesses.
Pershing began building its position in Microsoft in February following a slump in the company's stock after its December quarter results disappointed Wall Street, Ackman said. The company had posted slower cloud computing growth coupled with a massive ramp up in capital spending.
Microsoft shares have fallen more than 15% this year, as investors worry that the company's early-mover advantage in the AI race is losing ground as Google and Amazon make strong progress in their own AI efforts, while Microsoft's coveted relationship with OpenAI has loosened.
Ackman said competition concerns on Azure and recent changes to the OpenAI partnership that strip Microsoft of its exclusive rights to resell the startup's technology on its cloud were overblown.
He also backed the $190 billion spending plan that Microsoft has laid out for 2026, saying it is essential to fuel future revenue growth.
The stake will be disclosed in a regulatory filing on Friday. Ackman's new closed-end fund Pershing Square USA, which debuted last month, has also made Microsoft a core holding, but will not be putting out a filing, he said.
Pershing bought shares in Alphabet, which is in a close race with Nvidia for the title of the world's most valuable company, in 2022 after the release of ChatGPT knocked its shares on fears of disruption to search, Ackman said.
It also bought Amazon in the weeks after last year's Liberation Day, when U.S. President Donald Trump slapped tariffs on many countries, and Meta more recently after the company rattled investors with a massive spending forecast.
(Reporting by Deborah Sophia and Aditya Soni in Bengaluru; Editing by Arun Koyyur)