Bill Ackman's Pershing Square Made Microsoft Its Largest AI Holding by Selling Alphabet. Here's the Thesis Behind the Switch.

Key Points Microsoft is now Pershing's biggest AI stock holding. Microsoft's quarterly revenue was up 18% from a year ago to $90 billion. The company has surpassed $100 billion in Azure revenue over the past year. 10 stocks we like better than Microsoft › When considering the stock market, it sometimes pays to look at what some of the nation's most prominent investors are up to. One of those is Bill Ackman, the billionaire investor and CEO of Pershing Square Capital Management. Pershing, which typically keeps its portfolio confined to a small group of large-cap companies, has been a consistent investor in " Magnificent Seven " tech stocks, with Alphabet , Amazon , Meta Platforms , and Microsoft (NASDAQ: MSFT) all holding prominent weightings at one time or another. But there were some notable changes in the second quarter -- Ackman trimmed his position in Amazon by 25%, or 2.9 million shares, sold his entire stake of Alphabet, and bought another 553,000 shares of Microsoft stock . Those moves make Microsoft Ackman's biggest AI bet, with a $2.3 billion position that includes 6.2 million shares, representing 11.9% of the company's 14-stock portfolio. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » Why are Ackman and Pershing so bullish on Microsoft? And does it belong in your portfolio as well? Pershing Square Capital Management CEO Bill Ackman. Image source: Getty Images. Timing is everything First, give Ackman some credit: Pershing's Microsoft purchase was well timed. Microsoft posted huge gains at the end of July when it issued its fiscal fourth-quarter earnings report, and has gained 25% since. Microsoft's quarterly revenue was up 18% from a year ago to $90 billion, and net income was up 31% to $35.76 billion. For the full fiscal year, Microsoft reported $100 billion in Azure cloud revenue. Also critically important for investors: Microsoft still managed to generate $19.6 billion in free cash flow (FCF) and projected it will remain free-cash-flow-positive in fiscal 2027. That's huge, considering AI companies are struggling to remain FCF positive. Alphabet had negative FCF of $5.9 billion in its most recent quarter, while Amazon had negative FCF of $7.6 billion. In its June interim report, Pershing outlined its bullish sentiment toward Microsoft, citing the popularity of its 365 suite of software applications, such as Word, Excel, and PowerPoint , and the growth of Microsoft Azure. "With direct involvement from CEO Satya Nadella, the company has redoubled Copilot product innovation and growing adoption should further entrench M365 as agentic work scales," the report said. "In our view, Azure, the second largest public cloud hyperscaler, is well positioned in a supply constrained compute market, and its capital expenditures are prudent investments to accelerate growth." Microsoft's strong growth, positive free cash flow, and increasing demand for Azure help explain why Pershing now has Microsoft as its top AI stock. Its established collection of highly profitable businesses and productivity apps will enable Microsoft to continue investing in AI while generating profits for shareholders. Should you buy stock in Microsoft right now? Before you buy stock in Microsoft, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $431,488 !* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,279,584 !* Now, it’s worth noting Stock Advisor’s total average return is 958 % — a market-crushing outperformance compared to 212% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor , and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 26, 2026. Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy .

Microsoft's quarterly revenue was up 18% from a year ago to $90 billion.

The company has surpassed $100 billion in Azure revenue over the past year.

When considering the stock market, it sometimes pays to look at what some of the nation's most prominent investors are up to. One of those is Bill Ackman, the billionaire investor and CEO of Pershing Square Capital Management. Pershing, which typically keeps its portfolio confined to a small group of large-cap companies, has been a consistent investor in " Magnificent Seven " tech stocks, with Alphabet , Amazon , Meta Platforms , and Microsoft (NASDAQ: MSFT) all holding prominent weightings at one time or another.

But there were some notable changes in the second quarter -- Ackman trimmed his position in Amazon by 25%, or 2.9 million shares, sold his entire stake of Alphabet, and bought another 553,000 shares of Microsoft stock . Those moves make Microsoft Ackman's biggest AI bet, with a $2.3 billion position that includes 6.2 million shares, representing 11.9% of the company's 14-stock portfolio.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Why are Ackman and Pershing so bullish on Microsoft? And does it belong in your portfolio as well?

Pershing Square Capital Management CEO Bill Ackman. Image source: Getty Images.