Asymmetric Bets
Hedge Fund Analyst, Private Company CFO, Idiosyncratic Stocks & Accelerating Fundamentals
Microsoft, like Meta and Salesforce, offers fairly high-probability returns of 15-20% over the next few years, while everyone is positioned in semiconductors for another double or triple. Just as bitcoin tends to suck liquidity out of altcoins, semis may be draining attention from these names, a sign that greed is high. x.comÂ
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.comÂ
AI's threat to incumbent tech makes SpaceX the preferred investment for the next decade. AI has begun taking business from Google, with Amazon and Apple next; Microsoft's 27% workforce reduction program signals desperation. x.comÂ
Microsoft is a great business but still an expensive bet at $385, because heavy AI capex is eroding free cash flow. Capex was revised to $190B for the year, $43B above expectations, and free cash flow fell to $15.8B. Revenue grew 18% to $82.9B, operating income 20%, Azure 40% and AI run rate reached $37B, with a 47% operating margin. The average analyst target of $560 implies 45% upside only if the AI spending converts on schedule. x.comÂ
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.comÂ
Microsoft's salesforce and governed platform unlock AI spending at conservative firms. Faster enterprise than consumer AI adoption makes it effectively the only pure play. M365 Commercial may top 20% growth next quarter, sooner than expected on tonight's guide; GitHub resegmentation helps, but it should do so this year anyway. Azure and M365, two-thirds of revenue, should grow above 50% and 20% and may accelerate. $24-25 CY27 EPS remains achievable, implying under 22x forward earnings. x.com … Show more
Microsoft's delivery delays are affecting earnings, making other sources of returns look safer now. x.comÂ
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.comÂ
Microsoft is one of the few Mag7 companies projected to generate substantial positive free cash flow despite massive AI spending. FCF is forecast at $34.6B in FY2027, $49.4B in FY2028 and $98.1B in FY2029. Microsoft and Apple lead the group in projected FCF, while Alphabet, Meta and Amazon face significant FCF pressure from AI infrastructure spending. x.com x.comÂ
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.comÂ
Anthropic's compute commitments point to future revenue for Alphabet, Amazon, Microsoft, Broadcom and Nvidia. Its S-1 reports 14-fold revenue growth, positive second-quarter 2026 EBIT and more than $600 billion committed to compute through 2045. The AI trade is alive and well, more than expected, provided demand keeps pace with those commitments. x.comÂ