Ackman's Bet on Microsoft Raises Questions About Cloud Computing Leadership
Billionaire investor Bill Ackman's hedge fund Pershing Square Capital Management has made significant changes to its portfolio in recent months, including selling off a substantial portion of its Amazon holdings and increasing its stake in Microsoft. According to a Form 13F filing with the SEC, Pershing decreased its Amazon (AMZN) stake by over 25% in Q2, while simultaneously increasing its Microsoft (MSFT) stake by nearly 10%. The change comes as both companies continue to invest heavily in data center computing capacity.
While Ackman's move may have been seen as a vote of confidence for Microsoft at the time, recent earnings reports suggest that Amazon's cloud computing segment, Amazon Web Services (AWS), is experiencing explosive growth. In Q2, AWS' operating income rose 64% year-over-year, and Amazon's overall growth rate was 20%. This trend is expected to continue as Amazon pours $220 billion into data center capital expenditures in 2026.
From a valuation perspective, both companies have seen their price-to-earnings (P/E) ratios influenced by one-time gains on investments. However, when considering trailing earnings and growth rates, Amazon's stock appears to be cheaper than Microsoft's due to its faster operating income growth.