Michael Burry, the hedge fund manager immortalised in “The Big Short” for his prescient bet against the US mortgage market ahead of the 2008 financial crisis, disclosed on April 23 via his Substack publication that he has opened a new long position in Microsoft Corporation (NASDAQ: MSFT), describing the trade as part of a broader thesis around what he calls “bombed out software and payment stocks” whose price declines have created compelling value opportunities that the market is mispricing due to AI-related anxiety.
The Microsoft position arrives alongside increased holdings in PayPal, MSCI, and Adobe, all of which share the common characteristic of being established, cash-generating software and financial technology businesses trading at meaningful discounts to both their recent highs and the historical valuation multiples that their earnings quality and competitive positioning would conventionally support.
The timing is deliberately contrarian in the most straightforward sense: Microsoft’s stock fell 23 percent in Q1 2026, its worst quarterly performance since the Great Recession of 2008 to 2009, driven by a combination of macro uncertainty from the Iran war, concerns about AI capital expenditure returns, and the specific OpenAI backlog revision that raised questions about whether Microsoft’s revenue visibility was as strong as its $625 billion contract backlog implied.
MSFT is down approximately 13 percent year-to-date and roughly 25 percent below its July 2025 all-time high of $555.45, a correction that has brought the stock’s forward price-to-earnings ratio to approximately 26 times against a five-year median of 34 times, the kind of multiple compression that value-oriented investors like Burry typically identify as the signal that a high-quality business has been repriced by sentiment rather than by any deterioration in its fundamental earnings power.
Burry said he has “forensically” analysed Microsoft and concluded it has the competitive moat to thrive despite AI-related concerns, according to Motley Fool’s coverage of his Substack post, a description that suggests he is specifically addressing and dismissing the bear case that Microsoft’s dominant position in enterprise software is vulnerable to disruption from AI tools that could reduce the demand for its legacy productivity products.
The “forensic” framing is interesting coming from a man who made his reputation on exactly the opposite kind of analysis: where his mortgage market bet involved uncovering hidden fragility beneath apparent strength, the Microsoft trade involves finding hidden strength beneath apparent concern, suggesting Burry believes the market has inverted the analytical exercise in this case.
Simultaneously with the Microsoft long, Burry purchased put options on the Invesco QQQ Trust ETF, NVIDIA (NASDAQ: NVDA), and the iShares Semiconductor ETF (SOXX), creating a position structure in which he is long established software while hedging short the chip rally that has been the primary driver of the Nasdaq’s performance over the past 18 months, a combination that reflects a specific view that value within technology is rotating from hardware enablers toward software beneficiaries.
TD Cowen maintained its buy rating on Microsoft with a $540 price target following Burry’s disclosure, implying approximately 30 percent upside from current levels and representing a view that aligns directionally if not tactically with Burry’s new long, while Motley Fool noted that Microsoft’s earnings scheduled for April 29 will provide the market’s next major test of whether the fundamental trajectory can overcome the residual AI expenditure concerns that have suppressed the stock through Q1.
The irony of Burry’s most recent track record is instructive: he has been publicly bearish on AI infrastructure spending and on Palantir (NYSE: PLTR) and Nvidia in particular, with his thesis being that capital expenditure on AI is running ahead of demonstrable returns, and this position structure is the expression of that thesis in portfolio form rather than simply a negative macro bet, since the long Microsoft position suggests he sees the beneficiary layer of AI as mispriced even if the infrastructure layer has run ahead of itself.
