Michael Burry, the investor who rose to fame for accurately predicting the collapse of the U.S. real estate market in the 2000s, has recently disclosed a market-surprising move: he bought shares of Microsoft (MSFT), a leading company in the artificial intelligence sector. This move has drawn attention because Burry had previously expressed concerns multiple times about the high valuations of AI stocks and held a bearish outlook on the entire industry.
Michael Burry first became known for shorting the U.S. subprime mortgage market. In the early 2000s, when the real estate market was booming, he bet against the market’s collapse, ultimately generating over $700 million in profits for his hedge fund’s investors. Just a few days ago, Burry disclosed that he holds a long position in Microsoft. This shift has surprised many investors, considering that last year he shorted popular AI stocks such as Nvidia (NVDA) and Palantir Technologies (PLTR), and compared the then-market to the dot-com bubble era – a time when capital was flooding into areas believed to be game-changers.
Microsoft offers AI products and services through its cloud business. Some investors worry that AI technologies from competitors could potentially replace certain traditional software, posing a potential risk to Microsoft. Based on Burry’s previous statements, Microsoft would not seem to be an obvious candidate for him to buy.
However, according to media reports citing Burry’s posts on Substack, Burry stated that he “examined Microsoft with forensic scrutiny” and, based on his findings, determined that the company possesses competitive advantages that support long-term growth. He emphasized that this does not mean he is broadly bullish on AI stocks, but rather that he is identifying companies within the sector that have the strongest ability to succeed over the long term.
From a fundamental perspective, Microsoft has the key elements needed for long-term success. The company is a market leader in software and cloud computing and has demonstrated its ability to consistently deliver profitable growth. Although Microsoft is investing heavily in building out computing capacity (provided by its cloud division), the company has ample resources and is already benefiting from AI-driven demand. For example, in the most recent quarter, Azure and other cloud services revenue surged by 39%. Microsoft is set to release its latest quarterly earnings this week. Combined with recent positive comments from Intel and TSMC regarding AI demand, the market is optimistic about Microsoft’s revenue growth.
As for the potential risk AI poses to Microsoft – some believe that AI models like Anthropic could eventually replace existing software. This may happen in certain simple software scenarios, but AI is unlikely to fully replace complete systems like Microsoft 365.
Currently, Microsoft’s stock is trading at about 25 times its expected earnings for the next 12 months, down from over 35 times last year.
