Billionaire investor Bill Ackman has placed one of his biggest wagers in years on Microsoft (MSFT), building a stake now worth roughly $2.4 billion that accounts for about 15% of Pershing Square Capital Management’s concentrated equity portfolio. The position, disclosed in May after Microsoft shares had tumbled from their highs, has already rallied sharply following blowout quarterly results, raising a critical question for investors watching from the sidelines: does the stock still make sense at these levels?
The answer hinges less on Ackman’s conviction and more on whether you share his specific thesis about how Microsoft’s artificial intelligence strategy and massive capital spending will play out over the next decade. For Ackman, this is not a short-term trade. He has been explicit that he sees Microsoft as a quintessential beneficiary of the AI era, with its Azure cloud platform, data center infrastructure, and developer tooling positioned to capture outsized economics as AI workloads grow.
Pershing Square began buying Microsoft in February 2026 after the stock sold off following its fiscal second-quarter report. Concerns about decelerating cloud growth, the sustainability of AI demand, and a heavy capital expenditure plan had pushed shares down roughly 23% year-to-date by late June, to around $373. Ackman was able to build the position at approximately 21 times forward earnings, roughly in line with the broader market and well below Microsoft’s historical average multiple of around 31 times. “In our 13F which we will file later today, we will disclose a new position in Microsoft, a company we have followed for many years now offered at a highly compelling valuation,” Ackman wrote in a post on X on May 15. “Microsoft operates two of the most valuable franchises in enterprise technology, which account for approximately 70% of the company’s overall profits: M365 and Azure.”
What makes Ackman’s thesis particularly distinctive is his view on Microsoft’s 27% stake in OpenAI. He estimates that if valued independently, that stake could be worth about $200 billion, or roughly 7% of Microsoft’s total market capitalization. In his assessment, the market is underpricing Microsoft’s AI assets and overreacting to near-term spending concerns.
Since Microsoft reported fiscal fourth-quarter earnings on July 29, the stock has gone what some analysts describe as parabolic, surging from $390 per share to $488 by August 5, a gain of 25% in a matter of days. The results validated several elements of the bull case. Revenue rose 18% and earnings climbed 32% in the period ended June 30, crushing estimates. Azure cloud revenue accelerated to 43% growth, up from 40% the prior quarter. For the current quarter, management guided for 45% Azure growth, signaling that the massive spending on AI infrastructure is providing the capacity to meet rising demand.
Earlier worries that had weighed on the stock have also eased. Concerns about Microsoft’s exclusive partnership with OpenAI and OpenAI’s profitability were partly addressed when the two companies reworked their agreement, removing the exclusivity clause. Meanwhile, cloud growth showed renewed momentum in the March-ended quarter, and management’s projections for the second half of the fiscal year suggest the AI investments are beginning to pay off.
Ackman’s portfolio moves underscore his conviction. To make room for Microsoft, he trimmed other big tech holdings, including selling a solidly performing position in Alphabet (GOOGL). The fund’s portfolio remains exceptionally concentrated, with just seven stocks accounting for 98% of total value. Beyond Microsoft, these include Meta Platforms (META), which Ackman added in the first quarter, as well as Amazon (AMZN) and Uber Technologies (UBER). “We believe concerns around META’s AI-related spending initiatives are underestimating the company’s long-term upside potential from AI,” Ackman has said of his Meta stake.
Yet the same factors that make Microsoft attractive also create risk. The company is committing roughly $190 billion to capital spending over 2026 to build out AI and cloud capacity. If AI demand or pricing falls short of expectations, those investments could drag on returns. Competition in AI infrastructure is intense, and while Ackman believes Microsoft’s competitive moats and cash flows are underappreciated, the market could remain cautious longer than he anticipates.
There is also basic concentration risk. A 15% position works for a hedge fund that accepts volatility and has a track record of uneven but ultimately market-beating returns since Pershing Square’s launch in 2004. Individual investors may need more diversification. Even after the recent surge, Microsoft trades at around 25 times earnings, still below its historical average, suggesting there could be further room to run if earnings growth continues to accelerate. However, the easy money from the post-earnings rally has already been made, and new buyers are effectively betting that Ackman’s long-term AI thesis will unfold as expected.
For investors considering whether to follow Ackman into the stock, the calculation is straightforward. If you believe Microsoft’s AI platform, OpenAI stake, and cloud infrastructure will generate returns that justify both the current valuation and the enormous capital spending underway, the stock can still be attractive as a long-term holding even off the lows. If you are less certain, the concentration and execution risks may give pause. Ackman has made his bet. The market, for now, is rewarding it.