Ackman Dumps GOOGL for MSFT: Was It the Right AI Trade?
💡 Key Takeaway
Ackman's swap from Alphabet to Microsoft has paid off short-term, but both remain solid long-term AI plays with different risk profiles.
Ackman's Big Swap: Out of Google, Into Microsoft
Bill Ackman's Pershing Square made a bold move last quarter, selling its entire stake in Alphabet (GOOG/GOOGL) and using the proceeds to buy more Microsoft (MSFT). The timing suggests Ackman locked in multibagger gains on Alphabet before rotating into a cheaper AI giant.
Microsoft had been a laggard in early 2026, down about 20% from its Q2 highs, as investors worried about AI disrupting enterprise software and OpenAI's speed bumps. But those fears proved overblown: Microsoft's commercial 365 revenue grew 14% year over year, and its cloud business surged 27% to $59.3 billion, with remaining performance obligations up 84% to $678 billion.
Meanwhile, Alphabet's stock fell 15% since mid-Q2, while Microsoft rallied 26% and is now near all-time highs. Microsoft is now Pershing Square's largest position.
The valuation gap was a key driver: Microsoft traded at a forward P/E in the low 20s, versus Alphabet in the low 30s and Apple in the high 30s. Ackman likely saw Microsoft as the better value with a massive AI backlog.
Why This Trade Matters for Your Portfolio
This high-profile swap highlights a classic investing dilemma: do you chase the cheaper, beaten-down giant or stick with the pricier but faster-growing leader? Ackman chose value, and so far it's working. But it's not a clear-cut win.
Alphabet's Google Cloud is growing at 82% year over year, much faster than Microsoft's cloud. And Google Search revenue rose 17%, showing no signs of AI disruption yet. The market's fear is that AI agents like ChatGPT could eventually erode Google's search dominance, but that hasn't materialized in the numbers.
Microsoft's appeal lies in its diversified AI strategy, strong backlog, and reasonable valuation. It's less dependent on OpenAI now and has a sticky enterprise software base. However, its growth is slower than Alphabet's cloud.
For investors, the takeaway is that both stocks can thrive in an AI-driven world. The choice depends on your risk tolerance and time horizon. Short-term, Microsoft's cheaper multiple and momentum make it attractive. Long-term, Alphabet's faster cloud growth and search resilience could win out.
Source: The Motley Fool
Analysis generated by Bobby AI quantitative model, reviewed and edited by our research team. This is not financial advice. Always do your own research before making investment decisions.
Bobby Insight
Ackman's trade worked short-term, but both Microsoft and Alphabet are strong long-term AI plays—investors should consider holding both rather than choosing one.
Microsoft offers better value and a diversified AI strategy, while Alphabet has faster cloud growth and a resilient search business. The AI race is too close to call, and both companies are likely to benefit from the secular trend. Diversifying across both reduces risk and captures different strengths.
What This Means for Me
