David Tepper Cuts Microsoft 82%, Billionaire Bill Ackman Buys $2 Billion of It. Who’s Winning?

David Tepper’s Appaloosa Management cut its Microsoft position by roughly 82% in the first quarter of 2026, while Bill Ackman’s Pershing Square went the other direction, initiating a brand-new stake of roughly 5.65 million shares worth about $2.09 billion at quarter-end. Ackman started accumulating in February after Microsoft (NASDAQ:MSFT | MSFT Price Prediction) sold off following fiscal Q2 earnings, calling the stock a “highly compelling valuation” on the strength of Azure and AI. It was his only new buy of the quarter, and the name is also a core holding in Pershing Square USA, giving Ackman dual-vehicle conviction here.

So far, Tepper looks like the one positioned correctly.

What Ackman Actually Bought, And Why

Ackman’s thesis rests on the same engine that has powered Microsoft for three years: cloud and AI. In the most recent quarter, Azure grew 40%, the Intelligent Cloud segment hit $34.68 billion (+30% YoY), and the AI business surpassed a $37 billion annualized run rate, up 123% year over year. The forward visibility is the part value investors fixate on: commercial remaining performance obligations reached $627 billion, a contracted backlog that stretches multi-year demand into clear sight.

The valuation case is also real. Microsoft trades at a forward P/E of 21 with a return on equity of 34% and analyst target price of $560.95. The Q3 earnings report at $4.27 EPS vs. $4.07 expected marked a fourth straight quarterly beat. For an investor buying $2 billion of a single name, that combination of beat history, backlog, and a meaningfully lower entry price clears the bar.

Why Tepper Is Winning The Trade So Far

The scoreboard is unambiguous. Microsoft is down more than 8% since Feb. 2, falling from $421.49 to $387.95 and is down nearly 18% year to date. Tepper trimmed at higher prices. Ackman bought into the slide and is currently underwater on his entry.

The bear case Tepper appears to be respecting is the spending side of the AI story. Q3 CapEx jumped 84% to $30.88 billion, on top of $29.88 billion the prior quarter. Full-year FY25 free cash flow fell 3% as capex surged 45%. OpenAI-related investment losses climbed to $3.1 billion in Q1 FY26 from $523 million a year earlier. Insiders are not stepping up to defend the price either: Seven insider transactions in the March-June window were all disposals, with no purchases.

The Take For Retirement Investors

Following Ackman blindly into Microsoft right now is following a thesis that still has to be vindicated by free cash flow turning back up as the capex cycle peaks. The franchise is exceptional, the backlog is real, and the price is materially below last summer’s 52-week high of $551.05. But Tepper trimmed for a reason, and so far the tape agrees with him. For a retirement-focused investor, the disciplined path is to scale in like Ackman did, not to chase, and to demand evidence that capex intensity is peaking before sizing up. Pay attention to the next earnings report and any signal that free cash flow is inflecting. Until then, this remains a contrarian bet that still needs to be vindicated.