Gates Foundation Dumped $3.2B in MSFT — Ackman Just Bought the Dip

Few market stories are as dramatic and clear-cut as this one: on the same day that SEC filings showed the Gates Foundation Trust had sold all of its Microsoft (MSFT) shares, which were worth 7.7 million shares and $3.2 billion, Bill Ackman's Pershing Square said it had bought a new stake worth 5.65 million shares and $2.3 billion.

One of the most well-known charitable organisations in the world shut down. The same door was used by one of Wall Street's most watched political investors.

The pattern is so striking that it needs to be read carefully, even though the two moves don't actually go against each other. They follow completely different rules, and buyers make choices based on stories instead of mechanics because they get them mixed up.

Microsoft stock has lost more than 20% of its value since its recent highs and more than 10% so far this year. It is now worth less than it did in late 2022. The two deals that happened on the same day were set apart by the fact that one was for a dominant business software and cloud company trading at close to decade-low multiples.

Why the Gates Foundation Sold — and Why It's Not a Signal About Microsoft

It began two years ago with 28.5 million shares, when the Gates Foundation Trust sold its Microsoft shares. The sale of the last 7.7 million shares in Q1 2026 ended a process that was never about Microsoft's future. It was about a foundation that had a legal and moral duty to use its entire $200 billion fund by 2045.

About $9 billion is given out in grants every year. No matter how profitable a single stock has been in the past, holding a lot of it causes liquidity risk and portfolio concentration that goes against that mission. The trust's portfolio, which is now worth about $31.7 billion, is being restructured to help with predictable capital spending over the next twenty years, not to give an opinion on how fast Azure will grow or how fast Copilot will be adopted.

At the same time, the foundation sold Berkshire Hathaway. The correct interpretation is that Microsoft's exit was part of a systematic liquidity plan rather than a stock-specific judgement. However, the timing makes this interpretation very hard to see.

The fact that they sold during MSFT's worst stretch in years adds to a story that the foundation didn't mean to send. Bill Gates hasn't been involved with running Microsoft since 2020, when he stepped down from the board. The foundation's choices about investments have nothing to do with how insiders see the company's future. This difference is important for people who want to see the sale as a smart bet against Microsoft's AI story.

Why Ackman Bought — and What His Thesis Actually Is

Bill Ackman of Pershing Square made his Microsoft position public on the same day as the reveal. His reasons were clear enough that they should be taken seriously on their own.

Ackman paid for the purchase by selling a huge stake in Alphabet. He explained this move not as a bet against Google but as a move toward what he saw as a better risk-reward scenario at the present price of Microsoft. His main argument is based on a few specific points:

Estimation. Microsoft is trading at about 21 times its expected future earnings, which Ackman said was a good price given the quality of the company's brand. The stock hasn't been this cheap in terms of cash-from-operations since 2019. This drop is mostly due to investors' worries about how AI capital spending will affect the company's margins in the near future, not to a problem with the business itself.

People are reading the capex story wrong. The main worry that has caused the price to drop is Microsoft's planned $190 billion in AI-related capital expenditures for 2026. It's seen as a margin danger by most investors.

The fact that Ackman sees it as a growth bet is a huge difference in how much you should value the company over the next three to five years. There is no question that $190 billion in capital expenditures will cut into short-term profits; they already do. The question is what those investments will bring in 2027, 2028, and after that.

Copilot isn't making enough money. At the moment, only 3% of business seats that can be addressed have paid copilot licenses. If that number goes up to 20% or 30%, which is a fair long-term guess for a product that is built into Microsoft 365's existing subscription base, the extra money made is huge without having to get any new customers. Ackman sees this as a choice that the market isn't pricing because adoption rates right now don't look as good as people had hoped.

The heart will last. About 70% of the company's income come from Microsoft 365 and Azure. Neither brand is in danger of falling apart. Azure's 39% revenue growth in the last quarter, which happened even though the company was putting a lot of money into AI infrastructure, shows that the cloud business is growing WITH the spending cycle, not AGAINST it.

What Microsoft's Valuation Actually Looks Like Right Now

If you take out the story noise, the numbers will tell you a clear story. MSFT hasn't traded at these multiples in terms of cash flow since 2019, which is before ChatGPT, the OpenAI partnership, and the growth of Azure's AI tasks.

The company that exists now is structurally more valuable than the company that existed in 2019 because it has a bigger backlog for cloud work, more AI income, a deeper reach into enterprises, and commercial remaining performance obligations of $625 billion that don't go away just because the stock has dropped.

The sell-off itself is mostly caused by two worries. At first glance, the $190 billion capital expenditure number looks scary on a quarterly income statement, and it has already caused short-term drops in profits. Second, the fact that only 3% of businesses use Copilot has let down investors who were hoping for a faster adoption rate.

These investors are now wondering if Microsoft will be able to make money off of its AI helper on a large scale, given the competition from Google, OpenAI's own business products, and Anthropic.

Both concerns are legitimate. Neither is obviously fatal to the long-term thesis, which is the tension that makes the stock interesting at current prices rather than an easy call in either direction.

One of the most vocal bulls on Wall Street, Gil Luria of DA Davidson, has said that the difference between Microsoft's actual success and its stock price is the largest it's been in decades.

Revenue is rising at a rate of almost 17% per year. It is expected that earnings growth will be faster than market growth. Windows and Office are still the most popular business software programs out there. This gives Microsoft price power that most software companies would pay a lot of money to get.

Tal Liani of Bank of America resumed coverage with a Buy rating and a $500 price target. He did this by pointing out that the current stock price doesn't properly reflect long-term growth drivers in cloud and AI. UBS kept its Buy rating but lowered its 12-month goal from $600 to $510, recognising that the near term is uncertain without giving up on the structural case.

Two Futures, One Stock

This case analysis is very simple, which is one reason why MSFT is such a controversial name right now.

If Ackman's theory comes true, Azure will keep growing at rates in the high 30s. As business customers move from trial licenses to full deployment, the number of people using Copilot changes.

The $190 billion capital expenditure cycle is paying off, and by 2027–2028, Microsoft's AI infrastructure will look less like a cost and more like an asset that makes money. Values move back toward past multiples. The stock goes back up to and maybe even through the $500 range that experts are aiming for.

If the bears are right, AI demand will drop before the investments in infrastructure pay off. Copilot's product doesn't fit the market well enough compared to its faster-moving competitors.

The capex cycle's effect on margins lasts longer than most people think it will, and the 21x forward earnings multiple that seems cheap now is actually reasonable because the company will be structurally less profitable. In that case, the Gates Foundation's exit, even if it was just for financial reasons, seems like a smart move, even if it wasn't their intention.

One interesting thing about these two scenarios is that the same set of facts—the capex, the rate of Copilot adoption, and the growth of Azure—supports both stories, depending on the time frame and factors you use. Because of this lack of clarity, smart investors like Ackman are buying while most institutions are still being careful. When there is a lot of uncertainty around truly strong franchises, that's when the best entry points and value traps happen.

What Investors Should Actually Take From the Dueling Moves

The Gates Foundation sold Microsoft because it has to get rid of everything by 2045 and needs cash to give away $9 billion every year in grants. There is no market signal for that; it is a duty that must be met on a certain date, which has nothing to do with where MSFT trades in the next twelve months.

Ackman bought Microsoft after doing a valuation study and comparing it to his existing Alphabet position. He decided that the risk-reward ratio was better for a 21x forward earnings franchise that made 70% of its profits from two of the most durable enterprise software products. That is a warning to the market from someone who has been right before and is willing to back a $2.3 billion bet.

The fact that both films come out on the same day is just an accident. One was based on a foundation's spending rules. The other one was based on an investor's return theory. If you see them as different points of view on the same issue, you're not seeing what both sides were really doing.

For investors trying to figure out what to do with MSFT at these prices, the truth is that both the bull case and the bear case can be defended.

What happens depends on Copilot adoption curves and capex return timelines that won't be seen for 12–18 months, and the stock's valuation—which is the lowest it has been since 2019 on a cash flow basis—at the very least suggests that investors aren't pricing in optimism. Whichever of those two futures you think is more likely will determine whether it's pricing in enough pessimism to be a real chance.

He has put his money on it, Ackman. The Gates Foundation has paid its debt of cash. It will be up to the market to decide which frame was best.