Time for Action,' Says Top Investor as Microsoft Stock Flirts With a Bottom

A top investor is urging “time for action” as Microsoft stock trades near what he views as a potential bottom, arguing the valuation has come down sharply. The article cites sentiment concerns this year over AI-related spending and worries that Microsoft could lose relevance as AI startups grow, with shares down roughly 33% year-to-date. JR Research, ranked among the top 3% of investors on TipRanks, says Microsoft offers a “compelling entry point,” pointing to a valuation of just above 20x forward earnings, near the lowest levels seen in the past five years. It also compares Microsoft’s valuation to the S&P 500’s current average and argues Microsoft still maintains “significant profitability” and strong free cash flow margins. Free cash flow margins are projected to end at nearly 20% for the current fiscal year, but aggressive AI-driven CapEx could push spending above $170 billion in fiscal 2027 and 2028, compressing margins into the mid-teens. JR suggests investors may be underestimating hyperscaler CapEx that could reach multi-trillion levels by decade end, while acknowledging the software “moat” faces more scrutiny as AI advances.