Microsoft Corp (MSFT)

He has no software exposure (13% tech across the firm, a significant underweight). Have to pick your spots. Agentic AI puts software companies in a tricky position. Investing heavily in AI infrastructure, so less $$ to return to shareholders. Trading better than only 30% of S&P stocks in last 52 weeks.

On the other hand, sees semiconductors in a similar vein to copper and a call on the economy, and where pricing power gives inflation protection.

They have partnerships with OpenAI and Anthropic, so they are plugged into AI. The recent fluctuations are tied to index ETFs and not tied to fundamentals. MSFT will continue to do very well; strong balance sheet and earnings. Buy any dip.

The catalyst for their recent rally is their break up from openAI, a company that wasn't doing as well as peers. Also, MSFT is developing its own AI models.

It trades less than the market PE and is breaking out.

Concerns about Azure's growth, Copilot being underwhelming, ChatGPT, higher capex. But management's confident in Azure growth accelerating. A leading horseman of the AI revolution, but it's come off quite a bit on doubt about that. 

Buy the great companies when there's doubt. Please buy it when it's at a PEG ratio less than 1, like now. Growing 19%, trading 18x PE. Sweet spot of the Mag 7 right now. Yield is 0.86%.

Early affiliation with OpenAI hurt it; rewritten contract is encouraging. Report this morning that it's in talks with Anthropic for some work. Software base isn't in jeopardy. Quite inexpensive, in mid-20s PE. Tons of cashflow.

Concern for the hyperscalers has been capex. Still below 200-day MA, which is trending lower. Elite cloud-AI franchise. Real AI monetization down the road. Bar for execution is very high. Excellent long-term business, but technical picture is not clean at this point. Still 18% earnings growth, not unreasonably valued, but you have to pay attention to the charts.

Names like GOOG and AMZN are more diversified beyond the cloud. He also likes TSM. See his Top Picks.

Cloud business growing very quickly. Market's trying to decide whether it's a software company, cloud player, or AI company. Stuck between a rock (software company) and a hard place (OpenAI). OpenAI now can go to other platforms, but MSFT still owns the IP to distribute those licenses.

King of distribution, and distribution still matters. Sells subscriptions on per-head basis, and has to integrate models from other companies. In a grey area. He'd be more comfortable owning GOOG.

Pullback is great time to enter. She'd buy more, but she's already overweight this name. Still one of the most diversified, mega-cap tech companies in the world. Last night's numbers were spectacular, pushback is on the capex spending.

They reported. He's disappointed they didn't have more to say. Also, they're a software company.

The software business has been pummeled and trades at a very reasonable valuation. It is still growing 20%. It owns Copilot - most businesses use it and have to go through it to get to another system. It has a huge embedded data base in almost every company. They have agreed to drop the software dispute with Open AI but he is not concerned by this. We are at a very early stage of AI. It is moving very quickly and nobody knows how it will actually evolve. He uses it and finds it very helpful.