Ackman builds a position in Microsoft, claiming its moat is "impossible to replicate," and reduces holdings in Google.

Bill Ackman announced that his hedge fund Pershing Square has established a new position in Microsoft, believing that the software giant’s core business is undervalued by the market and that its moat is “almost impossible to replicate.”

Ackman posted on X platform on Friday that Pershing Square began building a position in February this year and will submit relevant disclosure documents to regulators on the same day, while also listing Microsoft as a core holding.

He stated that the Microsoft 365 suite is “deeply embedded” in large enterprises, with a moat that is “almost impossible to replicate”; demand for Azure cloud services remains strong, and external concerns about its growth prospects are “completely misplaced.”

Meanwhile, Ackman revealed that he has reduced his holdings in Alphabet. According to Bloomberg data, Pershing Square sold about 4.1 million shares of Alphabet in December last year, leaving approximately 678k shares. This statement further confirms his ongoing stance of trimming Google holdings.

On Friday, Microsoft closed up 3.05%, while Google A declined 1.07%.

Why Microsoft Attracts Ackman

Ackman regards Microsoft as one of the most valuable assets in the enterprise technology sector.

He stated that the Microsoft 365 suite, including Word and Excel, is “deeply embedded” in large enterprises, with a moat built on the company’s existing infrastructure that is “almost impossible to replicate”; the strong demand for Azure cloud services proves that external concerns about its growth prospects are “completely misplaced.”

Microsoft’s stock has been under pressure this year, with main market concerns focusing on two points:

First, the enterprise adoption rate of AI assistant Copilot is below expectations; second, whether the 365 business can maintain its market share amid fierce competition. Additionally, Microsoft faces the challenge that data center capacity expansion is lagging behind cloud demand growth. Ackman believes that this stock price correction provides a good entry point for Pershing Square.

Regarding the adjustment of Microsoft’s partnership with OpenAI, Ackman also offers a different interpretation from mainstream market views.

In April this year, Microsoft gave up exclusive rights to sell OpenAI models, which was widely seen as a concession by Microsoft. Ackman believes this is a deliberate move by Microsoft toward a more open multi-model architecture, which is more beneficial for serving enterprise clients rather than simply retreating.

Long-term Contrarian Entry

In his X post, Ackman also elaborated on the current market structure, pointing out that two forces are converging: the continuously expanding scale of index-like holdings, and a large amount of capital controlled by highly short-term, highly leveraged, low-volatility-tolerance investors. Ackman believes that the combination of these two factors occasionally creates buying opportunities for high-quality assets.

This reasoning underpins his macro perspective of building a position in Microsoft: when the market experiences systemic sell-offs of quality assets due to short-term volatility, focused long-term investors can seize the opportunity to establish positions.

The recent addition of Microsoft to Pershing Square’s large tech portfolio is part of this strategy. Currently, the fund holds significant positions in Amazon and Meta, and the inclusion of Microsoft further concentrates its tech holdings.

When Pershing Square built its position in Meta, Ackman also stated that investors underestimated the company’s long-term AI potential; last year, when disclosing its Amazon holdings, he predicted the company would recover from its short-term cloud business downturn. The performance of these two stocks has diverged significantly this year: Meta down 6.3%, Amazon up 16%.

According to Bloomberg, Ackman’s net worth is currently $12.5 billion. Known as a bold investor, he is famous for establishing concentrated positions in a few stocks and making high-profile statements on social media.

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