Daave “3 and 30” Tepper
Institutional Endowment Investor
Microsoft and Oracle are down and out because they are software businesses, and the market is rational to trade them like the software sector rather than like pure GPU scalers such as CoreWeave and Nebius, or Alphabet, a scaler without software exposure. Meta is an outlier with its own issues: secular uncertainty and no cash flow after capex. x.com x.com
Microsoft's bottom is probably in, absent a market shock, and the narrative is about to shift. Satya Nadella announced Microsoft's MAI model family is coming to every developer in Foundry, including MAI-Transcribe-1, which he called the world's most accurate transcription model across 25 languages, plus MAI-Voice-1 and MAI-Image-2. x.com
CoreWeave's growing backlog, active power and GPU pricing make its declining shares look cheaper, though debt and customer cancellations remain risks. Blossom reports backlog rose from $99B to $129.2B, active power from 1GW to 1.5GW and GPU-offering prices by 25%. Its debt burden remains a valid concern. Unusual Whales reports Microsoft pulled out of an Nscale deal, illustrating the risk of hyperscalers leaving neocloud contracts. x.com x.com x.com
Microsoft and software stocks broadly still look expensive, because AI will get exponentially better over the next two years and the market may reset software valuations much lower. Software valuations have always been ludicrous, and heavy stock-based compensation behind many software revenues is widely ignored. Winners will emerge, but picking them is not worth trying. x.com x.com
Microsoft's 50% Azure growth and prospect of positive cash flow in 2027 make the stock look bulletproof. Headcount cuts, lower Anthropic spend, a better Copilot routed to cheaper tokens, and coming proprietary chips and model usage add to the case. It should get Apple's multiple plus recognition for cybersecurity. x.com x.com
Microsoft is this generation's IBM and will bleed market cap and cloud share through over-reliance on an AI lab that is, rightly, not loyal to it. Apple at least has a hardware and consumer ecosystem edge while it sits this wave out. x.com
Microsoft is a secular loser trading at a high multiple, a profile that struggles in this market. It finished red on a day the Dow rose over 1,000 points. x.com
Microsoft's AI spending is producing faster growth with better economics: Azure accelerated to 48% on a $100B+ base while capex was $39.4B, below expectations. Management then guided Azure to 49-50% and said demand still exceeds supply, ending the debate over whether AI investment is paying off. Overweight, $625 target. x.com x.com x.com
Microsoft faces AI disruption that could erode its software moat and compress its high multiple. Chris Hohn, the best stock picker ever and not one to move lightly, cut Microsoft from 10% to 1% of his portfolio, about $8 billion, citing AI disruption. The question that matters is whether a business can be disrupted: when code becomes a commodity the moat erodes, and multiple compression from a high base does severe damage. x.com
Microsoft's Azure has little chance against Google Cloud and AWS because the AI infrastructure race is becoming a hardware race. Amazon has Trainium and Google has TPUs, while Microsoft is still supply-constrained, so rivals can scale faster and cheaper. @DJ1P2 counters that enterprise integration, hybrid distribution and software lock-in keep Azure a dominant AI powerhouse, still growing 40%. x.com x.com
Microsoft's hold on enterprise software and the cloud running AI makes it one of tech's best positions to own. Fiscal Q1 revenue rose 19% on Azure and the AI stack, while operating income rose 21% and net income 32%. Grade: A. x.com
Oracle looks mispriced because $11 of current consolidated earnings power puts it at 11x earnings without a breakup. It trades below its software business's value despite the highest gross retention in software; separating pre-AI OCI, AI operations and AI development makes it an obvious long. Future funding will cost more, but current leverage is no issue and all contracts are well below spot, leaving nowhere near neocloud risk. Fundamentals may not matter during panics. x.com x.com x.com
