Markets Are Down Today but Microsoft (MSFT) Stock Is Pushing Higher – Here’s Why

Looks like Microsoft (NASDAQ:MSFT) is turning into a contrarian’s play right now. On a down day for the markets with bond yields rising over inflation worries, unlike most of its high-flying peers, shares of the tech giant are bucking the trend and pushing higher. The stock has fallen out of favor with investors, dropping 14% year-to-date, but it is now getting the thumbs up from one very prominent Wall Street name.

That is billionaire investor Bill Ackman, who believes the selloff has created an opportunity that is too attractive to ignore. In a new X post published Friday morning, Ackman revealed that his hedge fund, Pershing Square, will disclose a new stake in Microsoft in a 13F filing later in the day. He also said Microsoft is “a company we have followed for many years now offered at a highly compelling valuation.”

Ackman thinks Microsoft’s recent stock decline has been largely driven by investor concerns over two main issues: first, the competitive standing of M365 against increasingly advanced AI offerings from labs such as Anthropic’s Claude Cowork, and second, the sustainability of Azure’s growth amid Microsoft’s changing relationship with OpenAI.

Yet Ackman argued that investors are underestimating the strength of Microsoft’s M365 business, citing its deep integration across enterprise workflows and the broader infrastructure supporting it, including identity, security, compliance, and data governance. He added that, unlike standalone software tools that could be displaced by stronger AI competitors, M365’s role within large organizations would be extremely difficult to replicate.

Cowen analyst Derrick Wood would likely agree with that thesis. In his latest research note, Wood shared key takeaways from virtual investor meetings with IR team member Mary Grekstas.

Wood noted that the company continues to see strong AI-driven demand across its business, with Azure growth expected to accelerate in the second half of 2026 as efficiency improvements and faster deployment of new capacity free up additional compute resources. The company also highlighted growing momentum for Copilot, driven by product improvements and stronger enterprise sales execution, with new offerings such as the E7 bundle and Copilot Cowork expected to support further adoption.

AI workloads are also increasing usage of its broader software ecosystem, while Dynamics customers are increasingly shifting toward agent-based offerings. On CapEx, a topic widely discussed among investors, the company is aggressively expanding AI infrastructure to address its large backlog and expects to double AI capacity within two years. Microsoft also outlined changes to its relationship with OpenAI, including the end of reciprocal revenue sharing and continued access to OpenAI models through 2032, while emphasizing that its long-term strategy remains focused on a multi-model AI approach rather than developing a standalone frontier model in the near term.

All told, Wood thinks the trends “bode well for the stock.” “We are encouraged by more favorable directional trends developing, incl. 1) a higher rate of capacity allocation for Azure, 2) new accretive consumption pricing for GitHub Copilot, 3) inflecting adoption of M365 Copilot, and 4) capex a high investment priority given demand signals,” the analyst summed up.

Bottom line, Wood maintained a Buy rating on the shares along with a $540 price target, suggesting the stock will gain 28% in the months ahead. (To watch Wood’s track record, click here)

Elsewhere on the Street, MSFT claims an additional 32 Buys and 2 Holds, all coalescing to a Strong Buy consensus view. The forecast calls for one-year returns of 33%, considering the average target clocks in at $559.98. (See MSFT stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.