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So Microsoft just had its worst month since the dot-com bubble and the bear case is they're spending TOO MUCH on AI. You're telling me Microsoft is shoveling billions into the biggest technological revolution in 25 years? Just like every other hyperscaler on the planet? Thank fuck, I would be concerned if they weren’t shoveling billions of dollars into capex right now. Every analyst has it a STRONG BUY with price targets averaging somewhere out near alpha centauri and billionaires are loading up billions in shares. And the stock is down because Copilot adoption is low?
Yes Copilot sucks, of course it sucks. Microsoft makes sucky software, and historically that has worked out fantastically for them financially. The company prints money not because it offers good software users love, it prints money because it is one of the most successful enterprise parasites ever. They're a cockroach that can survive a SaaSpocalypse. But, it's not going to penetrate every enterprise overnight, the playbook is EEE: embrace, extend, extinguish. A successful parasite doesn't kill the host on day one, it moves in quiet, and once it's latched on it starts spreading its tendrils into everything around.
Microsoft has the best software moat on the planet and they don’t care how much you think it sucks. Every person that works a white collar job uses Excel. They will use Excel until they die, and then their kids will use Excel. Outlook is their email, Teams is their chat, SharePoint is mandatory. Want to wire an agent into any of it? Congrats, that's Azure Foundry. And the data governance and security story is huge for enterprise. Every new agent spins up an Entra identity, watched by Defender, classified by Purview, governed by Intune. Once IT can inventory, audit, and brake every agent, the CISO mandates that stack since everything is already wired together. Microsoft owns the box they’re forced into.
The rent is too high and Microsoft is aware that tokenmaxing is ripping a new asshole in every CFO's wallet. Companies are used to cheap stable licenses that run fine on 10 year old hardware. They are not used to usage based LLM billing or buying an ultra premium workstation with hundreds of gigabytes of unified memory at peak RAM hysteria to run competitive models locally. Your tech illiterate boss rides the highest end model on one never ending chat thread. Your colleagues spin up fleets of subagents for every mundane thing they used to type themselves. Nobody's rationing. It only goes up, and once these integrations stick they become a critical infrastructure forever.
To fix this, Satya says don't use frontier models for non frontier tasks. He’s telling you the future is mostly cheap shitty models, and that's bullish. Most companies aren’t doing anything too hard, they are drowning in boring ass work even a shit AI can do faster than you. Satya’s pitch is you’ll chat with autopilots running 24/7 on cheap AI that answer your coworkers, record everything you make, and compound it into your company's private knowledge moat. Hosted by Microsoft. Running on Azure. And Satya didn't just tell everyone to use shitty models, he went and built a shitty chip to run them on the cheap. Maia 200 is live in production and it drags Azure AI margins toward CPU levels.
And for the local tier models, Microsoft and Nvidia’s new local AI hardware is the same Apple Silicon playbook that made Macs so good for on device AI, except fully CUDA compatible, and Microsoft has the enterprise distribution Apple will never have.
Position: I'm buying with both hands. Entered at 400/share, sold puts on margin and averaged down at 350/share. Now basically full ported with all the margin Robinhood will give me at 700 shares + calls.