Michael Burry Takes a Break from Warning on Hyperscalers to Buy Microsoft Stock, Signaling Shares Are Too Cheap to Ignore

Michael Burry, the legendary investor best known for his bet against mortgage bonds ahead of the 2008 financial crisis, disclosed that he entered a new position in Microsoft (MSFT) stock even as the software giant trades roughly 25% below its 52-week high. 

This decision is particularly striking given Burry’s well-documented skepticism toward hyperscaler spending and his persistent warnings about overvalued technology companies. Microsoft closed recently around $416, well off its peak near $555.

Despite his systemic concerns about tech valuations, Burry has simultaneously thrown cold water on the idea of a full-blown SaaS armageddon triggered by artificial intelligence. He has described the recent software selloff as a reflexive positive feedback loop driven by declining stock prices and shifting demand for software company debt, dynamics he does not believe will persist. His willingness to buy Microsoft amid a broader software rout suggests he sees the company’s entrenched enterprise position and massive cloud infrastructure as durable advantages that AI disruption cannot easily erode.

Burry’s Microsoft purchase sits alongside positions in PayPal (PYPL), Adobe (ADBE), and MSCI (MSCI), all of which share a common thread: established companies with deep competitive moats trading at significant discounts to recent highs. Burry appears to be identifying software and platform companies where the market has overcorrected on AI disruption fears.

The timing of Burry’s move intersects with extraordinary concentration risk in U.S. equity markets. AI-linked stocks now command a record 45% of the S&P 500 Index’s ($SPX) total market capitalization, up 20 percentage points since the launch of ChatGPT in late 2022. AI-linked investment-grade debt has nearly doubled to $1.4 trillion, representing 15.4% of the U.S. credit market. This dual dominance across equities and fixed income has created what analysts describe as an unprecedented single-theme concentration in modern financial history.

Hyperscaler capital expenditures are forecast to surge approximately 71% in 2026 to roughly $650 billion, with Microsoft’s own CFO acknowledging that demand continues to outstrip supply across multiple geographies. 

Yet Burry has previously warned that these same hyperscalers are artificially boosting their earnings by understating asset depreciation, a critique that directly challenges the sustainability of the profit margins underpinning their enormous market valuations. His decision to buy Microsoft despite this concern implies he views the stock’s current discount as more than compensating for the accounting risks he has flagged.

The broader market context adds complexity to Burry’s positioning. The semiconductor sector has experienced a significant rally, with the SOX ($SOX) index posting a record 17-day winning streak and surging 41%, pushing technical momentum indicators to their most overbought levels since 2017. 

Microsoft itself is navigating this environment by offering voluntary retirement buyouts to approximately 8,750 U.S. employees, roughly 7% of its domestic workforce, while Meta (META) simultaneously announced plans to cut about 8,000 positions. These workforce reductions signal that even the largest AI beneficiaries are rebalancing cost structures to fund infrastructure spending, a dynamic that Burry likely views as rational capital allocation rather than a sign of fundamental weakness. 

With five Magnificent Seven companies reporting earnings next week, including Microsoft, the market faces a critical inflection point. Analysts expect Microsoft to deliver earnings per share around $4.07 on revenue of approximately $81.3 billion, with particular focus on Azure cloud growth and AI monetization metrics. The consensus analyst price target of roughly $580 implies 39% upside from current levels, suggesting Wall Street broadly agrees that the stock is undervalued even as debate intensifies about whether AI spending is generating adequate returns. 

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On the date of publication, Sarah Holzmann did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.