Thierry from arvy
CFA, Co-Founder & CIO of arvy, Quality Investing
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
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 losing AI share in coding, and private markets are signaling it before public ones. Jordan Novet lays out how GitHub lost the AI coding market, while Anthropic's valuation rose from $380 billion to $900 billion as Claude Code surged and SpaceX holds a $60 billion option on Cursor. Microsoft is down 13% this year; the private market is the leading indicator of these market-share shifts. 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 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.comÂ
Microsoft is the most exposed big tech company in the AI spending wave, and an AI writedown would land on it first. It had a genuine moat that needed almost no capital, but pledged $80B in data center spending, canceled Claude Code licenses because token costs were untenable, and tied its destiny to OpenAI, which it does not control. x.comÂ
Microsoft's OpenAI exposure is a very good reason to keep it alongside Anthropic exposure through Alphabet and Amazon. The prior thought of reducing or exiting Microsoft has given way to a tentative hold, with no plans to add for now. x.comÂ
Security software is arguably more of an AI bubble than semiconductors. Firms are bid up to nosebleed multiples on moderate AI-related revenue acceleration while facing medium- to long-term risks from Microsoft, Google and the AI labs and a 10-year Treasury yield above 5%. Their forward P/Es rest on non-GAAP earnings that exclude large stock compensation. A reversal could come from results missing high buy-side bars, security share gains by Microsoft or Google, or AI lab security launches. x.com … Show more
Alphabet, Meta and Microsoft keep raising capital spending while investors' patience runs out. The spending continues as if there is no tomorrow, and margin and option holders are getting decimated. x.comÂ
Microsoft's AI ROI is massive because it expects to sustain its current 18% year-over-year growth with 27% fewer employees. It is cutting its workforce by 27%, undercutting claims that AI has no ROI. x.comÂ
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.comÂ
