The market is getting overheated, and, with that, some new correction predictions are bound to come flowing in. But under the red-hot S&P 500 are some terrific individual “gifts” that I think ought to be on value investors’ radars.
Of course, going through the screener is bound to yield a list of intriguing names that might be trading at historical discounts. But, in my humble opinion, you don’t have to dig all too deep into the 500 names that make up the S&P to spot value that’s perhaps absurd, given the state of the AI revolution and where the market stands today.
As less-bullish market strategists crank up their 2026 price targets on the market, while others point to increased volatility after an impressive first half of the year, perhaps it’s better to be an investor of individual names rather than looking to subscribe to one pundit’s opinion on what’s to come for the broad market over the next couple of months or so.
Microsoft stock is a “big steal” for more reasons than one
When it comes to value, I think you don’t need to look further than the Magnificent Seven. And within that group of magnificent stocks, Microsoft (NASDAQ:MSFT | MSFT Price Prediction) stands out as that “big steal” as we head into the month of June. I’d argue the setup hasn’t looked this good for the fallen enterprise giant in a number of years.
Whether it’s the potential head-and-shoulders bottom technical pattern that looks to be in the works (we’re coming on the edge of that right shoulder), hopes for a relief rally in the software stocks (Snowflake (NYSE:SNOW) sparked on Thursday after its jaw-dropping quarter the day prior), the subtle changes to the AI strategy, recent smart money buys from Q1 2026 (Michael Burry from The Big Short also bought), or the multi-year discount on the shares, I think Microsoft is as timely as it is undervalued as the final trading week of May winds down.
It’s historically cheap,
At just 25.4 times trailing P/E, I believe Microsoft to be one of the most misunderstood mega-cap AI stocks out there. Sure, Azure isn’t doing it for investors anymore, but it’d be a mistake to bet against a growth surprise going into the second half as the company addresses things holding the AI cloud back. There’s a generational infrastructure buildout happening, and Microsoft is doing its best to move at full speed.
As the firm addresses hardware bottlenecks while shifting gears to agentic workloads and re-evaluating how it delivers Copilot, I think it’s a mistake to think Microsoft cannot move to the number-one spot, just because it’s had a few stumbles along the way. Microsoft isn’t the only tech titan to have the odd fumble in AI. But the important thing is that CEO Satya Nadella is learning from the fumbles.
So, why give Microsoft your patience as we move into the second half?
The backlog is packed, and Microsoft is in a position to get the supply where it needs to be to hit all that unprecedented demand. Yes, there’s execution risk here, but if any firm can execute on a tough challenge, it’s Microsoft, especially under Nadella’s lead.
In my view, Microsoft’s custom silicon, led by the Maia 200, could make Microsoft a big margin-growth story the market might be missing. Yes, so many people are talking about Google TPUs when it comes to custom silicon disruption. The benchmarks for the eighth generation of TPUs were remarkable. But Microsoft’s Maia chips are no slouch, either.
When it comes to custom silicon, Maia is a relative underdog, but I would not want to bet against a closing of the gap as Microsoft looks to floor it. Google has been in the custom silicon game for quite a while. It’s had a huge lead, but Microsoft has made good progress under its own timeline. And, in due time, it will be exciting to hear of the innovations and research in the chip division that help Microsoft’s Maia become a new kind of force.
Any way you look at it, Microsoft has a lot of negativity priced in already. When its tailwinds arrive, the big question is how fierce the comeback could be.
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