Ackman's Big Bet on Beaten-Down Tech Stocks

Billionaire Bill Ackman's hedge fund Pershing Square Capital Management has made significant moves in the second quarter, including closing its position in Alphabet and doubling down on tech companies that have declined over the past year.

One of these beaten-down stocks is Microsoft (MSFT), which has seen its shares decline by 3% over the past 12 months. Investors had concerns about the company's investments in AI-related ambitions, fearing that AI could replace many of its services. However, Microsoft's strong performance in its fourth quarter of fiscal year 2026, with revenue up 18% and adjusted earnings per share rising 23%, suggests that AI is improving its services rather than replacing them.

The company has over 100,000 customers using Foundry, a platform that helps enterprises build, deploy, and manage domain-specific AI applications and agents. Revenue from this platform more than doubled year-over-year, indicating significant growth potential for Microsoft in the cloud computing market.

Ackman's decision to invest in Meta Platforms (META) is also notable, despite the company facing challenges with lawsuits over its social media platforms' addictive nature. While this risk should not be dismissed, Meta's vast user ecosystem and AI-powered algorithms have improved engagement across its platforms and led to increased ad revenue.

The company is betting on launching highly personalized AI agents for a large number of users, which could see significantly greater engagement as people interact with these agents. Additionally, Meta may rent out excess AI computing capacity at a significant premium over what it paid for it.