Microsoft Faces Hedge Fund Exodus but Analysts Stay Bullish

Microsoft ( (MSFT) ) has been popular among investors this week. Here is a recap of the key news on this stock.

Microsoft unsettled investors this week as it admitted that parts of Windows 11 still rely on Win32 code dating back to the 1990s, even as it rolls out a redesigned Xbox dashboard hinting at a fresh user experience. While the legacy code underpins core functions like right‑clicking and is seen internally as “bedrock,” the revelation added to jitters that pushed Microsoft shares fractionally lower.

Despite the wobble, Wall Street remains broadly bullish on Microsoft, with a Strong Buy consensus and an average price target of about $560, implying more than 34% upside. Yet hedge funds are growing cautious: prominent manager Chris Hohn slashed TCI’s $8 billion Microsoft stake on fears AI could erode the company’s dominance in Office and Azure, and hedge funds overall cut positions by 2 million shares, even as analysts still view Microsoft as one of the most attractive AI plays.

Ownership data show Microsoft is largely in the hands of public companies and individual investors, who control just over half the stock, leaving it sensitive to swings in sentiment. ETFs and mutual funds, led by Vanguard, hold another large chunk, while insider ownership is negligible, a structure that amplifies the influence of institutional reallocations like TCI’s. For retail investors, the tension between hedge fund caution and analyst optimism sets up a high‑stakes debate over how durable Microsoft’s AI strategy will prove.