This Famous Investor Just Sold All Of His Alphabet Stock and Loaded Up On Microsoft Stock. Should You?

Bill Ackman — the billionaire investor and CEO of hedge fund Pershing Square — made two huge disclosures on X (previously Twitter) final week. On Friday, May 15, he revealed that Pershing Square had quietly constructed a 5.65 million-share place in Microsoft (MSFT 0.16%) throughout the first quarter. The subsequent day, he confirmed that the agency had funded the brand new guess by totally exiting its multi-year lengthy funding in Alphabet (GOOG 0.40%)(GOOGLE 0.36%) — Google’s father or mother firm.

Naturally, the transfer turned heads. Alphabet has been one of many market’s clearest artificial intelligence (AI) winners this 12 months, with shares climbing roughly 23% 12 months to this point and even hitting all-time highs at one level in mid-May. The Windows maker, in the meantime, is down about 14% 12 months to this point as of this writing, buying and selling far beneath its 52-week excessive of greater than $555.

Ackman insists the commerce is not a guess in opposition to Google.

“To be clear, our sale of $GOOG was not a bet against the company,” he wrote on

So, what’s really occurring right here? And ought to on a regular basis buyers mirror the commerce?

Inside Ackman’s Microsoft guess

According to Ackman’s feedback on X, the agency began accumulating Microsoft shares in February — proper after the software program large’s fiscal second-quarter report triggered a pointy sell-off over softer Azure development and a deliberate ramp in AI spending. Ackman mentioned the agency constructed the place at about 21 instances ahead earnings.

Additionally, Ackman argued that Microsoft 365 — the corporate’s productiveness suite — is “tightly integrated into the daily workflow of nearly every large enterprise” and powerful to dislodge. He can be leaning onerous on what he sees because the market’s underappreciation of Microsoft’s roughly 27% financial curiosity in ChatGPT-maker OpenAI, a place he pegs at about $200 billion — or roughly 7% of Microsoft’s complete market capitalization.

And the underlying enterprise is notably performing exceptionally properly. Microsoft’s fiscal third quarter (the interval ended March 31, 2026) delivered Azure development of 39% in fixed foreign money, closing in on a 40% year-over-year development charge after a quick dip to 38% the prior quarter. Total income rose 18% 12 months over 12 months to $82.9 billion, and the corporate’s business backlog ended the quarter at $627 billion. Microsoft additionally mentioned the annualized run charge of its AI enterprise hit $37 billion, up 123% from a 12 months earlier.

Why I believe it is the improper transfer

The catch is that Microsoft’s cloud rivals are seeing much more vital accelerations of their year-over-year development charges.

First, take into account Alphabet. In the primary quarter of 2026, Google Cloud’s income surged 63% 12 months over 12 months to $20 billion, whereas its backlog practically doubled sequentially to greater than $460 billion. This was an enormous soar from 48% development within the prior quarter.

“Cloud accelerated again this quarter due to strong demand for our AI products and infrastructure,” Alphabet CEO Sundar Pichai mentioned throughout the firm’s first-quarter earnings name.

Then there’s amazon‘s AWS, which grew 28% 12 months over 12 months in Q1 — its quickest tempo in 15 quarters, and a major step-up from 24% development within the prior quarter.

Microsoft’s Azure development, in contrast, has held roughly regular within the high-30s vary for a number of quarters now.

There’s additionally an ungainly shift in Microsoft’s relationship with OpenAI. In late April, the corporate revised its partnership phrases, ending OpenAI’s exclusivity with Azure and ending Microsoft’s revenue-share funds to OpenAI, whereas OpenAI’s revenue-share funds to Microsoft proceed by means of 2030, topic to a cap. Any cloud supplier can now serve OpenAI’s fashions. That would not unwind the fairness stake Ackman highlighted, but it surely does chip away at a part of the moat Microsoft had constructed round AI workloads.

Today’s Change

(-0.16%)$-0.69

Current Price

$419.46

Key Data Points

Market Cap

$3.1T

Day’s Range

$415.72 – $426.24

52wk Range

$356.28 – $555.45

Volume

1.3M

Avg Vol

34M

Gross Margin

68.31%

Dividend Yield

0.63%

Layered on high of all that is the broader concern that has hung over software program shares this 12 months — the concern that AI instruments may ultimately disintermediate conventional enterprise software program, together with elements of Microsoft 365. Ackman thinks that worry is overdone. And he could also be proper. But it is an actual danger, and it complicates the bull case at a time when Microsoft is committing to roughly $190 billion of capital expenditures in 2026 — a 61% soar from 2025.

Yes, Microsoft seems to be moderately priced. But Alphabet — with Google Cloud rising a lot sooner than Azure’s tempo and search income reaccelerating to 19% development within the first quarter — might merely supply a greater risk-reward right now.