4. Microsoft Corp. (NASDAQ:MSFT)
Motley Fool Asset Management’s Stake: $130.38 Million
Microsoft Corp. (NASDAQ:MSFT) shares are down 10% so far this year amid concerns that AI tools like Claude Cowork could crush the company’s products. The company’s CEO Satya Nadella has reportedly issued a code red at the company to spur growth for Copilot. BNP Paribas recently said these efforts, including Agent Mode, Copilot Cowork, Critique, Council, and Agent 365, could improve the product. The firm said in its note that it believes Microsoft Corp. (NASDAQ:MSFT) can still beat consensus Azure expectations over the coming quarters, even if 50% of new capacity is allocated internally. See more details of BNP’s call here.
Microsoft Corp. (NASDAQ:MSFT) bulls believe the company is protected from the AI threats to SaaS business models. They think the company can shift from a per-seat pricing model to a per-workload model, while its huge base of 450 million commercial users gives it an ecosystem to thrive upon. Over 3.7 million businesses rely on its software, while nearly 486,000 organizations run on Azure, including 85% of the Fortune 500.
Microsoft Corp. (NASDAQ:MSFT) is also foraying into the chip segment to cut its reliance on outsiders. Its Maia 200 AI accelerator chip is designed to run large-scale AI workloads inside Microsoft data centers, while the Cobalt 200 CPU is aimed at improving general cloud computing efficiency on Azure. Together, these custom chips reduce dependence on external suppliers and improve long-term cost control, performance, and scalability.
Mar Vista U.S. Quality Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q1 2026 investor letter:
“Microsoft Corporation’s (NASDAQ:MSFT) stock came under pressure in Q1 as investors grew concerned about the rising costs required to fund its accelerating AI infrastructure build-out in 2026. This, combined with heightened expectations for Azure growth, led to a sell-off following the December quarter earnings report, when Azure revenue grew “only” 39% year over year.
Investors have increasingly questioned the return on investment associated with Microsoft’s large and rapidly expanding capital expenditures tied to AI infrastructure. While these investments are substantial, we believe Microsoft is well positioned to support this growth through its strong and expanding operating cash flows. Although the company has meaningful exposure to OpenAI, OpenAI’s ability to raise over $100 billion should help alleviate investor concerns regarding its capacity to meet large contractual commitments.
Microsoft remains a top portfolio holding, supported by its financial strength, diversified revenue streams, and broad customer base, all of which provide resilience. The company is experiencing strong growth in Azure, its hyperscale cloud platform, which is capacity constrained, alongside increasing adoption of its Copilot offerings across its extensive enterprise customer base. We believe Microsoft should be well positioned to generate attractive long-term returns from its partnership with OpenAI and to effectively monetize generative AI capabilities across its global enterprise IT footprint through its expanding suite of Copilot and AI-enabled products.”
