Quick Read
Ackman initiated a $2 billion MSFT stake in February calling it a compelling value, but shares are already down 17% year to date, leaving him underwater.
MSFT’s Q3 capex jumped 84% to $31 billion, free cash flow fell 3%, and all seven recent insider transactions were disposals with zero purchases.
Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Microsoft didn’t make the cut. Grab the names FREE today.
David Tepper’s Appaloosa Management cut its Microsoft position by roughly 82% in the first quarter of 2026, while Bill Ackman’s Pershing Square went the other direction, initiating a brand-new stake of roughly 5.65 million shares worth about $2.09 billion at quarter-end. Ackman started accumulating in February after Microsoft (NASDAQ:MSFT) sold off following fiscal Q2 earnings, calling the stock a “highly compelling valuation” on the strength of Azure and AI. It was his only new buy of the quarter, and the name is also a core holding in Pershing Square USA, giving Ackman dual-vehicle conviction here.
So far, Tepper looks like the one positioned correctly.
What Ackman Actually Bought, And Why
Ackman’s thesis rests on the same engine that has powered Microsoft for three years: cloud and AI. In the most recent quarter, Azure grew 40%, the Intelligent Cloud segment hit $34.68 billion (+30% YoY), and the AI business surpassed a $37 billion annualized run rate, up 123% year over year. The forward visibility is the part value investors fixate on: commercial remaining performance obligations reached $627 billion, a contracted backlog that stretches multi-year demand into clear sight.
The valuation case is also real. Microsoft trades at a forward P/E of 21 with a return on equity of 34% and analyst target price of $560.95. The Q3 earnings report at $4.27 EPS vs. $4.07 expected marked a fourth straight quarterly beat. For an investor buying $2 billion of a single name, that combination of beat history, backlog, and a meaningfully lower entry price clears the bar.
Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Microsoft didn’t make the cut. Grab the names FREE today.
Why Tepper Is Winning The Trade So Far
The scoreboard is unambiguous. Microsoft is down more than 8% since Feb. 2, falling from $421.49 to $387.95 and is down nearly 18% year to date. Tepper trimmed at higher prices. Ackman bought into the slide and is currently underwater on his entry.
The bear case Tepper appears to be respecting is the spending side of the AI story. Q3 CapEx jumped 84% to $30.88 billion, on top of $29.88 billion the prior quarter. Full-year FY25 free cash flow fell 3% as capex surged 45%. OpenAI-related investment losses climbed to $3.1 billion in Q1 FY26 from $523 million a year earlier. Insiders are not stepping up to defend the price either: Seven insider transactions in the March-June window were all disposals, with no purchases.
