chatSBC
Equity & Macro Commentary, Technology Investing
Microsoft has become tech's return-free risk, with TSMC replacing it as investors' risk-free rate in tech. On a sum of the parts, Office is worth roughly an Adobe multiple of 9x earnings and Bing and Windows a Yelp or IBM multiple of 5-7x, so the math only works with a big multiple on Azure. x.com x.com
Microsoft's delivery delays are affecting earnings, making other sources of returns look safer now. x.com
Microsoft's position is the most crowded among the Magnificent Seven, and fund flows are against it as funds sell those stocks to reserve cash for Anthropic's IPO. It faded despite an excellent earnings report. 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
Anthropic's S-1 and @UncleAlpha007's claim that Microsoft is growing despite a 27% headcount cut have turned the near-term tech-equity view bullish. At least a tradable rally is expected; further upside depends on Iran developments and PCE. Stay nimble. x.com x.com
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 enterprise ecosystem is one of the deepest moats in tech: Azure, M365, security, identity, compliance, distribution and now AI infrastructure reinforce each other and are very hard to disrupt. The market fixated on capex and AI competition, while long-term investors see a fortress balance sheet, pricing power, switching costs and global distribution. Volatility-intolerant investors are handing over an elite compounder at a market multiple, the kind Bill Ackman describes buying. x.com
Microsoft is cheap but not a long-term holding, because it is not growing fast enough while Nvidia is cheaper, growing much faster and better positioned. Microsoft may be re-rating, but the backdrop could also push it to a 15x P/E, so for now it is only a tradable situation. x.com
Microsoft's underperformance is structural, not a dip, because it is still trying to be ten things at once. Per a post the author replies to, it hit fresh 7.5-year lows relative to the Nasdaq-100, and it couldn't catch a bid on a day the index rose 0.7%. It won't turn until it does what Mark Zuckerberg did at Meta and cuts everything down to one narrative. x.com
Record-high positioning in hyperscalers and the Magnificent Seven could bring short-term weakness if the market trades against crowded holdings. The medium-term hyperscaler thesis still looks attractive, but the near-term positioning risk tempers it. x.com
Microsoft is not cheap even after a 20% drop: it fails a strict 20% margin-of-safety valuation hurdle. x.com