2. Microsoft Corporation (NASDAQ:MSFT)
YTD Stock Performance: -12%
Philippe Laffont’s Stake: $2.50 Billion
Microsoft Corporation (NASDAQ:MSFT) shares recently came into the spotlight after the company amended its deal with OpenAI. The deal reportedly caps how much OpenAI must pay Microsoft and would also end Microsoft’s exclusive right to sell OpenAI’s AI models. Evercore, which has an Outperform rating and a $580 price target on Microsoft, said this change would provide more flexibility for Microsoft Corporation (NASDAQ:MSFT).
Microsoft Corporation (NASDAQ:MSFT) shares are up 8% over the past 12 months but down 12% so far this year. AI-disruption fears are impacting the stock. The concerns are simple: if everyone uses AI for daily office tasks like writing, making spreadsheets, presentations and analysis, how could Microsoft Corporation’s (NASDAQ:MSFT) software suite and offerings survive in the future?
Microsoft 365 (Word, Excel, Teams subscriptions) growth is slowing. Copilot has only 15 million users (~3% penetration), while rivals like Gemini Enterprise are gaining faster. Competitors like Alphabet and Amazon are investing more aggressively, while Microsoft Corporation (NASDAQ:MSFT) still relies heavily on Nvidia for chips.
But Microsoft Corporation (NASDAQ:MSFT) bulls believe the company is not just another SaaS player. It can easily shift from a per-seat pricing model to a per-workload model. It has the largest enterprise distribution networks in the world, with over 450 million commercial users across an ecosystem. There are about 3.7 million businesses and more than 80% of Fortune 500 companies use Microsoft software.
Microsoft Corporation (NASDAQ:MSFT) can monetize higher usage through Copilot, automation, and cloud compute even if its basic software offerings decline.
Vulcan Value Partners stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q1 2026 investor letter:
“Microsoft Corporation (NASDAQ:MSFT)is the world’s largest software company with a broad range of offerings including Microsoft office, gaming, Azure cloud computing, LinkedIn, and more. Microsoft also has a large investment in OpenAI which allows them to have full access to all of OpenAI’s intellectual property. We think Microsoft is one of the most competitively entrenched businesses in the world and will be a beneficiary from AI.
Microsoft delivered another strong quarter, with revenues up +15% and operating profits up +19% on a constant currency basis. Our value grew nicely. Microsoft’s cloud business, Azure, grew at a robust +38% constant currency rate. Microsoft continues to invest heavily in capital spending as it continues to build cloud capacity to meet customer demand, which continues to outstrip supply. Despite this heavy capital spending, which has attractive returns, free cash flow remains very robust.
We believe the company is trading at a remarkably attractive valuation. We believe we are paying roughly fair value for its intelligent cloud business, including Azure, and getting the software business for free. Alternatively, we are paying roughly fair value for the software business and getting its intelligent cloud business for free. We think we own Microsoft with a substantial margin of safety.”
