I've posted short ideas about MSFT before and been burned, but when at first you don't succeed, martingale that bad boy and go for round 2!
In all seriousness, MSFT is a great company but the price, at 38x PE doesn't accurately reflect the risk in the market today. I fundamentally believe that the price was kept at today's levels in order to publish articles stating that its the highest close ever, highest company value ever yada yada yada in order to draw in an influx of retail dollars. Let's not normalize how high 38x is.. that's the highest that MSFT has been since December 2021 and never before has MSFT retained a PE above 38 for any extended period of time (we're talking days, not weeks).
Yes, I believe MSFT is well positioned in AI, but the majority of the value they see will be from customers building and deploying models in Azure, not from selling Copilot to enterprises. While AI will support continued growth in AI, the overwhelming majority of companies will not have large AI budges for model training and serving and those that do will still not spend the majority of their infra costs on AI. All in all, AI will help Azure continue to grow but it won't stymie the growth curve from flattening.
The AI story has added over $800 billion since October for NASDAQ:MSFT.. Let that sync in because that is an astronomical 35+% return in just a few months.
MSFT is in a perfect position to short and to sell covered puts. Here are the reasons I see a short-term pull back.
MSFT was pushed up to record levels to create headlines that its the most valuable company ever as well as to use it's weight to get the SPY over 500. Large funds will use retail dollars to liquidate a portion of their positions.
Specifically for MSFT, I have cherry picked the triangle you see in the graph. It confirms my bias.
The market as a whole, but especially AI stocks are currently playing hot potato. The market is on an epic bull run and is over extended. One bad article about China tariffs or an EU judgement against a monopoly and MSFT and NVDA could come crashing back down.
There has not been a normalization of prices based off of the changing expectation in rates - as rates have gone up, stocks have also gone up. The base case for most is the goldilocks which means that now good news for the economy is bad news for stocks (deferred rate cuts), while bad news for the economy is also bad news for stocks (economic slowdown).
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