We just covered Grok’s Latest Stock Portfolio in 2026: Elon Musk’s AI Chatbot’s Top 10 Stock Picks. Microsoft Corporation (NASDAQ:MSFT) ranks #1 (see Grok’s Latest Stock Portfolio in 2026: AI Assistant’s Top 5 Stock Picks).
Number of Hedge Funds: 312
Microsoft reported strong earnings, but the stock wavered amid CapEx and AI-related concerns. CapEx guidance for the calendar year is about $190 billion, driven largely by AI infrastructure buildout. Around $25 billion of this increase is due to higher component costs, including memory and GPUs.
The market is not fully accounting for the fact that Microsoft’s CapEx is not coming at the expense of profitability. In the most recent quarter, operating margins stood at 46.3%, with operating income of $38.4 billion. Net income reached $31.8 billion, reflecting a 38.3% margin, while gross profit was $56.1 billion at a 67.6% margin. This shows the business remains highly profitable even during a heavy investment cycle.
Another concern weighing on sentiment is the idea that AI could eventually weaken Microsoft’s core software products. The argument suggests that if AI can perform tasks directly, the usage of tools like Excel or PowerPoint could decline. However, this view ignores Microsoft’s own AI adoption progress. Microsoft 365 Copilot paid seats have now surpassed 20 million, with seat growth up 250% year over year.
Nearly 90% of the Fortune 500 are building agents on Microsoft’s low-code stack. More than 10,000 companies are managing tens of millions of agents within Agent 365.
Aristotle Value Equity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q1 2026 investor letter:
“Microsoft Corporation (NASDAQ:MSFT), the global leader in software and enterprise services, was the biggest detractor for the quarter. The decline was largely driven by a broad-based sell-off across software companies in early 2026 as investors weighed both the potential disruption from artificial intelligence and the near-term impact of elevated investment in AI infrastructure on margins and returns. Despite this, Microsoft delivered … (Click Here to Read the Letter in Detail).”
Photo by Microsoft 365 on Unsplash
While we acknowledge the risk and potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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