Billionaire investor Bill Ackman reveals he's betting on 'dominant' Microsoft to be an AI winner

• Bill Ackman announced a new investment in Microsoft.
• The billionaire investor said both his hedge fund and new closed-end fund had taken positions.
• Ackman touted Microsoft's ownership of M365 and Azure and the recent slump in its stock price.

Bill Ackman is betting big on Microsoft's success in the AI era.

Billionaire investor Ackman said on Friday that his hedge fund, Pershing Square Capital Management, has taken a position in Microsoft, saying he has been following the company for many years and that it now has a "highly compelling valuation."

Ackman introduced the Microsoft stake in an X post, saying his team has "found occasional opportunities to acquire some of the most dominant long-term compounding franchises at attractive valuations."

He gave Alphabet, Amazon, and Meta as examples in recent years.

Ackman explained his Microsoft wager by pointing to the company's ownership of "two of the most valuable franchises in enterprise technology," namely M365 —a software suite that includes Word, Excel and Powerpoint — and Azure, its cloud platform which is benefiting from "surging demand for AI inference workloads."

He also highlighted Microsoft's ownership of LinkedIn, Xbox, Activision Blizzard, Bing, and Edge.

Ackman said the position will be formally disclosed later on Friday when his hedge fund, Pershing Square Capital Management, releases an SEC filing known as a "13F," which will list its US stock holdings as of March 31.

"While $PSUS will not be filing a 13F tomorrow, it has also recently made $MFST a core holding," he added.

He listed Pershing Square USA, a closed-end fund marketed toward retail investors, on the New York Stock Exchange in late April.

Ackman said his team began investing in Microsoft in February after its stock slumped following its second-quarter earnings report in late January. They invested at 21 times forward earnings, "well below Microsoft's trading average over the last few years," he added.

He wrote that the company's valuation "does not reflect the value of Microsoft's approximately 27% economic interest in OpenAI, which would represent approximately $200 billion, or 7% of Microsoft's market capitalization, at OpenAI's most recent funding round valuation."

Ackman attributed Microsoft's sell-off to investor concerns over how M365 will stand up to new competitors such as Anthropic's Claude Cowork, and whether Azure's growth will endure.

He argued that investors are underestimating how resilient M365 is, given that it is "deeply embedded" in enterprises' workflow, and attractively priced.

As for Azure, Ackman pointed to the platform's revenue jumping 39% in constant-currency terms last quarter, and Microsoft guiding to a modest acceleration later this year.

He also championed Microsoft's plan to invest around $190 billion this calendar year as "growth capex that should drive future revenue generation."

Microsoft shares were marginally down in premarket trading on Friday. They've fallen about 15% this year as of Thursday's close, while the S&P 500 has jumped nearly 10% to record highs over the same period.

Ackman's hedge fund, Pershing Square Capital Management, owned about $2.1 billion of Alphabet stock, $2.2 billion of Amazon, and $1.8 billion of Meta stock at the end of December, per its latest 13F filing.

Those positions were among the largest in its portfolio of 10 stocks, along with a $2.8 billion bet on Brookfield and a $2.5 billion Uber wager.

"Like our purchases of $GOOG, $AMZN, and $META, we believe that $MSFT offers analogous and compelling long-term value at today's valuation," Ackman wrote on X.