Billionaire Bill Ackman has disclosed a stake in Microsoft. He believes the market is undervaluing it

Billionaire Bill Ackman revealed in X that his hedge fund Pershing Square has bought a stake in major software developer Microsoft, taking advantage of the company's stock decline.

Pershing Square has tracked Microsoft for years and began forming a position in February when the stock became more attractive, Ekman said. Microsoft's stock then collapsed after a quarterly report in which the company reported record capital spending on AI and slowing cloud infrastructure sales growth. After the stock plunged, Ackman's hedge fund was able to open a position in Microsoft at a valuation of 21x forecast earnings - on par with the market-wide multiple and well below the average over the past few years.

Eckman did not disclose exactly how much he invested in Microsoft. He said Pershing Square will disclose the position in a report on Form 13F. In such reports, large investors show the number of stocks in their portfolios at the end of the quarter.

Microsoft operates some of the most valuable enterprise technology franchises - the Microsoft 365 suite of programs and the Azure cloud platform, which account for about 70 percent of the company's revenue, Ackman said.

Microsoft 365 dominates the smart labor operating system, with more than 450 million workers using Word, Excel, PowerPoint, Outlook and Teams every day, Eckman said. Investors are underestimating the sustainability of this business, he said.

"Unlike point-and-click software solutions that can be supplanted by more efficient artificial intelligence alternatives, Microsoft 365 is tightly integrated into the daily workflow of nearly every large enterprise," the billionaire wrote, adding that Microsoft's services are "virtually impossible to replicate."

Azure in turn directly benefits from the migration of enterprise IT workloads to the cloud, accelerated by the growing demand for compute workloads for AI output, Eckman noted.

Microsoft's market valuations do not take into account the value of Microsoft's stake in OpenAI. As a result of the restructuring of the ChatGPT developer, the corporation received 27% in the commercial structure of OpenAI, which can be valued at $200 billion.

Microsoft shares are down 15% YTD and have lost more than a quarter of their value since peaking last fall. The fall came amid a broader sell-off in the software sector and investor concerns about large AI spending.

After the news of Ekman's investment, Microsoft shares were gaining 0.5% on the premarket. At the same time, the Nasdaq technology index was falling by 1.4%.

This article was AI-translated and verified by a human editor