‘It’s a Real Threat,’ Says Investor About Microsoft Stock (MSFT)

Microsoft (NASDAQ:MSFT) stock has been staging a comeback, climbing 18% since bottoming out toward the end of March, coming off its weakest Q1 since 2008.

While sentiment around the tech giant has been improving after a period defined by growing investor skepticism over heavy AI spending and concerns about cloud growth, investor Dilantha De Silva points to a recent development that could signal real trouble for Microsoft. 

Earlier this month, Anthropic introduced the beta version of Claude for Word, a native sidebar add-in built specifically for Microsoft Word. Claude has been rapidly expanding its feature set, including Claude Cowork general availability, persistent memory, managed agents, and multi-agent review, with this release marking its latest product launch. De Silva believes Claude for Word poses a direct competitive threat to Copilot, Microsoft’s AI suite developed in partnership with OpenAI’s ChatGPT, in which Microsoft holds a significant stake, and argues that it may require a shift in how investors think about Microsoft’s AI positioning.

“Amid the growing risk of Copilot revenue displacement,” says the 5-star investor, “I am taking a more cautious stance on Microsoft.”

Apart from the worries noted above, part of the bear case for Microsoft rests on the assumption AI labs are coming for its dinner. And, according to De Silva, this latest product shows that such fears are not misplaced.

Claude for Word, currently in beta for Team and Enterprise users, integrates AI directly into Word with features like tracked changes, formatting preservation, and in-context drafting. While Microsoft Copilot has deeper native integration, Claude stands out in practice by handling edits more granularly, showing individual changes within tracked changes rather than replacing entire sections. Based on hands-on testing, De Silva says this approach provides users with greater control and results in a more effective overall experience.

Moreover, De Silva believes Anthropic’s rollout of Claude add-ins across Word, Excel, and PowerPoint introduces a cross-platform AI ecosystem that could challenge Microsoft’s monetization strategy for Copilot. With Microsoft already commanding a large share of enterprise seats, future growth is expected to rely heavily on ARPU expansion, largely through the $30 per seat Copilot add-on. However, that pricing represents a significant increase relative to existing license costs, and if Copilot does not clearly outperform alternatives, enterprise customers might resist adoption. Given that Claude’s tools are already gaining traction within organizations and are bundled into lower-cost subscriptions, the investor thinks Microsoft could face difficulty justifying Copilot’s premium, potentially limiting its ability to drive meaningful ARPU growth.

De Silva has long been bullish on Microsoft, but in light of these developments, the investor believes the company’s value proposition may no longer be as clear-cut as it once appeared.

“I don’t feel comfortable adding to my position today because of the threat faced by Copilot adoption at a time when ARPU growth is expected to drive future revenue growth for the company,” De Silva said. “Given this risk and growing CapEx, I have decided to take a more cautious stance on MSFT. I have no plans to book my gains just yet, but I will not be adding to my position before I have more clarity on Copilot growth as well.”

To this end, De Silva rates MSFT shares a Hold (i.e., Neutral). (To watch De Silva’s track record, click here)

Wall Street, however, is leaning far more constructive. While 3 analysts remain cautious, 35 others recommend buying the stock, supporting a Strong Buy consensus. Based on the $571.29 average price target, MSFT shares could climb 35% over the next year. (See MSFT stock forecast)

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