Key insights
- The author argues that Microsoft's stock decline presents a buying opportunity, drawing parallels to past market corrections. Key catalysts include Azure's role in AI infrastructure, sticky enterprise contracts for AI solutions like Copilot, and the forced adoption of newer Microsoft products due to security concerns. The author suggests these factors create a resilient revenue stream and a strong foundation for future growth, making MSFT a compelling investment.
Everyone is saying that MSFT is the cheapest it’s ever been in a decade. 33% down from ATH is also reminiscent of only 4 other times in history for >30%:
-
dot.com crash 2000
-
GFC 2008
-
transition from mobile to cloud and 2-3x capex spending increase 2014-2016
-
inflation crisis 2022
And I see a huge resemblance between 3&4 with today.
- First Catalyst: Business transformation with Azure: MSFT is undergoing a HUGE transformation to their business. If we liken it to a simple analogy, They are literally building the ROADS and the TOLL machines. The cars are users and the driverless cars are Agents.
They are earning money as long as anyone is using AI / tokens on their Azure servers and it doesn’t matter even if they don’t have the strongest AI (OpenAI). They still win. This is the new transformation that the market is missing.
2) Second Catalyst: Sticky Enterprise AI: And i work at an S&P 500 company. And we always get into sub-par contracts with global providers like Workday, SAP, Microsoft, Zscaler for our solutions..
So even if people hate Copilot, Microsoft office, sorry to say but those top Global executives are still going to sign them anyway so really it’s much more sticky revenue and Enterprise AI is going to be a solid foundation for MSFT in the future.
3) Third Catalyst: Privacy & Security Risks from Switching: MSFT released Microsoft 11 and everyone hates it. But there is now no more support for Microsoft 10. So they are kind of FORCING you to move and get on their new version. And it is so embedded into business, servers, systems that companies cannot simply say ‘No’ or it creates a cybersecurity risk. So what do they do? They say ‘Yes’.
And here we are further getting sucked into this deep deep endless bottomless pit that we cannot climb out of.
Unless you are Batman. Or Talia al Ghul.
Started MSFT position this year and been DCA-ing since 420 and now average price is 390. Keep calm and carry on.