Bill Ackman just made one of the cleaner trades in Big Tech investing: dump Google, buy Microsoft. His hedge fund Pershing Square has fully exited its Alphabet position and rotated that capital into a significant new stake in Microsoft, framing the swap as a valuation opportunity wrapped in an AI thesis.
The math behind the move
Pershing Square began accumulating Microsoft shares in February 2023, buying at roughly 21 times forward earnings. That multiple is essentially in line with the broader S&P 500, which for a company of Microsoft’s quality is like finding a designer suit at outlet prices.
Microsoft’s stock had fallen about 15% year-to-date at the time of the purchases. The decline came amid concerns about competitive pressures from Amazon and Google in cloud computing. Ackman’s read on that dip was straightforward: buying opportunity.
Meanwhile, the fundamentals told a different story than the stock price. Microsoft reported revenue of approximately $82.89 billion, representing an 18% increase year over year. Azure cloud revenue was up roughly 40% over the same period.
Why Microsoft over Google
The product Ackman appears most excited about is Microsoft 365 Copilot, the AI assistant baked into Word, Excel, PowerPoint, and the rest of the Office suite. It’s priced at roughly $30 per enterprise user per month. If you think about the hundreds of millions of Microsoft 365 subscribers globally, even modest adoption of that add-on creates a revenue stream that would make most standalone software companies jealous.
Google’s core business model, advertising, faces existential questions in an AI-first world where users might get answers directly from chatbots instead of clicking through search results. Microsoft doesn’t have that problem because its revenue model is already built on subscriptions and enterprise contracts.
Azure’s 40% year-over-year growth also plays into this. Cloud infrastructure is the picks-and-shovels business of the AI boom, and Azure is the second-largest cloud platform globally. Every company building AI applications needs compute, storage, and model hosting. Azure provides all of that, increasingly bundled with OpenAI’s models through Microsoft’s strategic partnership.
What this means for investors
Ackman is not a trader. He runs a concentrated portfolio and tends to hold positions for years. When he makes a full exit from one stock and initiates a major position in another, it reflects a considered view about long-term competitive dynamics, not a quick momentum play.
One risk worth watching: Microsoft’s heavy capital expenditure on AI infrastructure. The company is spending aggressively on data centers and GPU capacity, and those investments need to generate returns within a reasonable timeframe. If enterprise adoption of Copilot is slower than expected, or if Azure’s growth decelerates, the bull case gets harder to defend.
There’s also the competitive angle. Amazon Web Services remains the largest cloud provider, and Google Cloud is growing quickly from a smaller base.
Still, Ackman’s willingness to buy into a 15% drawdown, at a multiple below Microsoft’s historical norm, suggests he sees the current price as embedding too much pessimism about those very risks.
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