Yet I don’t think it’s too late to consider buying the Magnificent 7 stock at current levels. In my view, it still offers value today.

An attractive valuation

Microsoft’s financial year (FY26) ends on 30 June. So, FY27 isn’t far off.

Now, for FY27, analysts expect the tech powerhouse to generate earnings per share of $19.40. So, we have a forward-looking price-to-earnings (P/E) ratio of about 22 today (the ratio was in the 30s not so long ago).

Plenty of growth potential

To my mind, that’s a very reasonable valuation for this business, because Microsoft could still generate a lot of growth in the coming years.

The key growth driver is its cloud computing division. Last quarter, cloud revenue amounted to $54.5bn, up 29% year on year.

Looking ahead, I expect this division to get significantly bigger over time as the world becomes more digital. Note that Goldman Sachs expects global cloud computing industry revenues to grow at an annualised rate of 22% between 2024 and 2030.

One growth wildcard for Microsoft could be its AI chips. Recently, there have been some reports that Anthropic is talking to the company about a chip deal (I speculated that Microsoft could focus more on AI chips last month here).

Quality financials

This stock isn’t just about growth though. It’s also about quality, which is one thing I always look for when investing in individual companies.

This is a business with a fortress balance sheet and a very high return on capital employed. ROCE as it’s known is a key measure of profitability.

It’s also a reliable dividend payer and consistently increases its payout, as well as doing share buybacks. So, there’s a lot to like from an investment perspective.

This quality is another reason I can justify the valuation. Generally speaking, high-quality stocks warrant higher valuations because they tend to be good performers over the long run.

What are the risks?

Of course, there are no guarantees that Microsoft will turn out to be a good investment from here. AI is a risk for the business if a ton of white collar workers get laid off in the years ahead, Microsoft’s software revenues could struggle.

Competition from the likes of Amazon and Alphabet in the cloud computing space is another risk to be aware of. This is a very competitive industry.

An attractive set-up

Overall though, I like the risk/reward proposition on offer at the moment. In my view, the shares are worth considering.

II’ll point out that the average analyst price target is $565 – about 30% above the current share price. It’s also worth noting that legendary value investor Bill Ackman has been buying the stock recently.

Should you invest £5,000 in Microsoft right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Microsoft made the list?

Edward Sheldon owns shares in Microsoft, Amazon, and Alphabet

The post Microsoft’s share price is storming back and it’s not too late to consider buying appeared first on The Twelfth Magpie.

Exactly when it will happen is impossible to predict. But that doesn’t mean it’s something to be afraid of.

What causes the next crash?

Investors looking for signs of the next crash have a lot to pay attention to. To start with, valuations are pretty high at the moment.

Source: Longtermtrends

That doesn’t mean stocks are expensive. But it does mean investor sentiment about future earnings growth is pretty positive.

At the same time, bond yields have been moving higher. Ordinarily, that also puts downward pressure on equity valuations.

Source: Trading Economics

Higher bond yields often mean investors demand better returns from stocks. That means share prices have to go lower.

So far, however, this hasn’t really happened. And when you look at the stock market, there’s a pretty clear reason why. 

Who cares about bond yields?

The current theme of the stock market is – of course – artificial intelligence (AI). Microsoft (NASADAQ:MSFT) and others have huge plans to build data centres.

As a result, earnings are surging across the supply chain. That’s leading to higher share prices and a rising stock market.

The question is what stops it. And while I don’t know the answer to this, I don’t think it’s a rise in bond yields. 

Microsoft’s credit rating is AAA. So I don’t think a rise in borrowing costs is going to cause it to stop building data centres.

The thing to look for is a sign of slowing demand. And some indications of this might be starting to come into view.

What could crash the market?

Data centre spending is driving the market higher. But that continuing depends on companies seeing a return on their investments.

Part of that involves AI creating more value than it costs. Recently, however, there are signs that this isn’t obviously the case.

Microsoft is reported to have started cancelling its Claude Code subscriptions. The reason is that they’re too expensive.

If others feel the same way, AI spending could fall. And that’s a risk for the stock market and Microsoft’s data centre investments.

The big warning sign I’m looking for is that backlogs are starting to clear. So I’ll be watching closely when Microsoft reports in July.

What’s your strategy?

Knowing what’s coming is one thing, preparing for it is another. But what can investors do to be as ready as possible?

Hedging is one strategy. But it’s a complicated approach that often depends on getting the timing right, which is much easier said than done.

Alternatively, investors might just do nothing. The stock market has always found ways to recover sooner or later.

More importantly, the best days to buy shares are often immediately after a crash. And investors don’t want to miss these.

The key is being able to hold on. And the main thing that means is avoiding using debt when it comes to buying stocks. 

Crash protection

My plan for dealing with a stock market crash is simple. I can cope with the worst days as long as I don’t miss the best ones.

I see slowing data centre growth as the biggest risk to share prices right now. But Microsoft is one of the names on my long-term buy list.

Should you invest £5,000 in Microsoft right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Microsoft made the list?

Stephen Wright owns shares in Microsoft.

The post What’s your plan for a stock market crash? appeared first on The Twelfth Magpie.

Basically, if a stock isn’t related to semiconductors, space or energy, investors aren’t really interested. As such, top-class companies with long runways of growth are being shunned.

Here are two out-of-favour S&P 500 shares that Wall Street analysts reckon are undervalued. I think each one is worth considering today.

Down 23%

Let’s start with Microsoft (NASDAQ:MSFT), which has slumped 23% since October.

As the biggest software company in the world (Windows, Office, Teams, etc), investors fear its revenue streams could be vulnerable to rapid advances in AI.

Boiled down, this fear has three parts:

• New AI tools from Anthropic could limit pricing power.
• Microsoft 365 (M365) is primarily a seat-based (per-user) subscription model. If AI efficiencies lead to fewer employees, growth could slow.
• Microsoft’s huge investments in AI might not pay off long term.

Despite these risks, the stock looks cheap at just 21 times forward earnings. This is well below Microsoft’s average over the past few years.

Hedge fund manager Bill Ackman certainly sees value. In Q1, Ackman made the stock a core holding for Pershing Square, correctly pointing out that M365 is deeply embedded across millions of enterprises and is “nearly impossible to replicate” due to its identity, security and compliance infrastructure.

The company’s Azure platform is still the number two cloud player globally, while it also owns LinkedIn (1.3bn members), Xbox, and video games creator Activision Blizzard. So there’s a lot of product diversification here, as well as a 27% stake in ChatGPT maker OpenAI.

Meanwhile, Microsoft continues to spend billions on share buybacks every quarter, albeit at a slower rate than before. And finally, Wall Street analysts currently see solid value in the stock, assigning an average price of $559, which is 35% higher.

Down 26%

Next, we have Uber Technologies (NYSE:UBER), which has fallen 26% since November. This is another S&P 500 stock that a few prominent hedge fund whales bought in Q1.

• David Tepper’s Appaloosa Management boosted its Uber position by a massive 242%.
• Egerton Capital (John Armitage) increased its holding by 73%.
• Brad Gerstner’s Altimeter upped Uber to 10% of the portfolio.

What do they like here? Well, Uber continues to grow strongly, with trips increasing 20% to 3.6bn during Q1. Monthly active customers rose 17% to a massive 199m, while its Uber One membership reached 50m people.  

Also, the firm is firmly profitable nowadays. Net profit totalled $1.5bn in the quarter, up 39%, and free cash flow came in at $2.3bn.

As more customers and drivers join the platform, Uber’s network effect is getting stronger. It’s also expanding into travel bookings and continues to build out its high-margin digital ad business (both in-app and in-car ads).

Looking ahead, rising inflation is a risk to consumer spending, as is competition from Waymo and Tesla robotaxis. However, Uber is investing aggressively in dozens of self-driving firms, aiming to become the world’s largest facilitator of driverless trips in a few years’ time.

With the stock trading at 22 times forward earnings, and 43% below brokers’ average target, I reckon Uber is worth a look at $73.

Should you invest £5,000 in Microsoft right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Microsoft made the list?

Ben McPoland has positions in Pershing Square and Uber Technologies. 

The post Prediction: these S&P 500 stocks could rise 35% or more by 2027, according to Wall Street appeared first on The Twelfth Magpie.

Last week Ackman filed a 13F form for his investment company with US regulators, revealing his latest trades. And what’s interesting is that, in the first quarter of 2026, he was aggressively buying a well-known tech stock.

Ackman’s new stock

Ackman’s 13F reveals that in Q1, the hedge fund manager bought 5.7m shares in Magnificent 7 powerhouse Microsoft (NASDAQ: MSFT). At today’s share price of $424, that position is worth about $2.4bn.

We don’t know if Ackman still owns that many shares – he may have bought more since the end of Q1 or sold some. But what we do know is that this was a new purchase for him and that at the end of the quarter the stock represented about 15% of his US equity holdings.

A high-quality name on sale

I’m not surprised that Ackman is buying this tech name. Because, as I said earlier this month, Microsoft today looks a lot like Alphabet mid-last year (when it was near $150).

Right now, no one’s interested in it because it’s a software company (and there’s a theory that AI is going to kill software). As a result, it has a relatively low valuation – the forward-looking price-to-earnings (P/E) ratio is only 22.

But it’s far too early to write this company off. This is a business with a history of navigating changes in the tech landscape (it has been around since 1975).

Looking ahead, we could see the company have success with generative AI (it has a major partnership with OpenAI). Alternatively, we could see it pivot and focus more on cloud computing and chips instead of software.

Is there an investment opportunity?

Should investors consider following Ackman’s move here? I think so.

At current levels (it’s down about 20% from its highs), I’m bullish on the stock. Taking a three-to-five-year view, I reckon today’s valuation will turn out to be cheap.

I’ll point out that a lot of UK investors appear to share my view. Over the last month, Microsoft has been among the top 10 most bought stocks on AJ Bell.

Of course, there are no guarantees that the stock will be a winner from here (Ackman has made mistakes in the past). There are plenty of risks.

For me, a key risk is white-collar layoffs. These could negatively impact subscription revenues.

Another risk is customer concentration. Right now, a lot of its cloud revenues are coming from OpenAI.

Weighing everything up, however, I like the long-term risk-reward set-up. I believe this Mag 7 name is worth a look.

Edward Sheldon has positions in Microsoft, Alphabet, and Amazon.

The post Legendary value investor Bill Ackman just bought 5.7m shares in this well-known tech company appeared first on The Twelfth Magpie.

Now, these stocks could keep rising; the near-term fundamentals do look strong. However, with many of these names up more than 100% this year, I’m wondering if it might be smarter to focus on some of the AI stocks that have been left for dead?

A cheap Mag 7 stock

One high-quality AI stock that’s suffered recently is Microsoft (NASDAQ: MSFT). This year, it’s actually down despite all the AI hype.

Why’s it fallen? Because it’s a software business and investors don’t want a bar of software right now.

I think there could be an opportunity to consider here while the stock’s under pressure. In my view, it’s far too early to write this company off. Recent earnings were strong. For the quarter ended 31 March, revenue was up 15% year on year at constant currency.

Notably, on the earnings call, the company said that its Copilot service now has 20m paid enterprise seats. This suggests its AI services are gaining traction.

It’s worth pointing out that Microsoft is the second largest cloud computing company in the world (it’s not just a software play). And it’s developing its own AI chips. So while there are risks around software disruption, I continue to see a lot of potential here, especially while the price-to-earnings (P/E) ratio is in the low 20s.

Consistent top-line growth

Another name that’s been lumped into the software basket is AXON Enterprise (NASDAQ: AXON). The maker of Taser guns, it’s a global leader in public safety.

This company – which is using AI heavily today – continues to grow at a rapid rate. For the first quarter of 2026, revenue was up 34% to $807m (its ninth consecutive quarter of 30%+ growth). On the back of this performance, the company raised its full-year guidance.

However, investors weren’t that excited because it’s not an AI infrastructure play.

With the stock down around 50% from its highs, I see an opportunity to consider here (I’ve been buying shares recently). A growth slowdown is a risk given the company’s high P/E ratio (40, using next year’s earnings forecast), however, taking a five-year view, I’m very bullish.

No AI slop here

Finally, Palantir‘s (NASDAQ: PLTR) another AI stock that could be worth checking out. I’ve been buying here too.

Last quarter, this company generated revenue growth of an unbelievable 85% as businesses in the US scrambled to adopt its AI solutions. However, investors didn’t care – because it’s a software company.

Is Anthropic a risk? Potentially. However, if you listen to the Q1 earnings call, the company repeatedly talks about how its Artificial Intelligence Platform (AIP) is superior to standard LLMs.

“AIP is the only platform that establishes a true AI no-slop zone, a necessary requisite to converting potential AI leverage into compounding real-world value without risking enterprise disaster.”

Palantir Chief Revenue Officer Ryan Taylor

Now, this stock’s expensive – the forward-looking P/E ratio using next year’s earnings forecast is 68. However, if the company keeps growing at a prolific rate, it’s only a matter of time until it looks cheap.

So I think it’s worth considering as a growth play.

The post While everyone’s piling into AI infrastructure stocks like Micron and SanDisk, consider these out-of-favour Nasdaq 100 names appeared first on The Twelfth Magpie.

Looking at the stock today however, I see similarities to Alphabet (NASDAQ: GOOG) (Google) back in mid-2025 when it was out of favour and trading near $150 (it has since soared to near $400). Here’s why I think Microsoft could be set to surge at some point just like Alphabet has.

Examining Alphabet’s rebound

In mid-2025, a lot of investors were completely writing Alphabet off. The theory was that ChatGPT was going to disrupt Google search and destroy Alphabet’s business model.

Alphabet didn’t sit around doing nothing as people started to use ChatGPT for search. Instead, it used its financial resources and tech expertise to build an AI product equally as good (Gemini), and then integrated it into its ecosystem, winning back market share.

Additionally, it worked on developing its own powerful AI chips, tensor processing units (TPUs). It’s now selling these to other tech companies, meaning that it has a whole new revenue stream.

Ultimately, it was able to adapt to the changing business landscape and continue thriving (its latest earnings showed revenue growth of 19% at constant currency). As a result, its share price has rebounded, soaring to new all-time highs.

Could Microsoft do the same thing?

Now, I reckon Microsoft is capable of a similar turnaround. Today, it’s out of favour because people are expecting its software sales to fall due to AI disruption and automation. This is a risk. But here’s the thing – Microsoft’s finding new ways to generate revenue.

For example, in its recent earnings it told investors that its AI-powered digital assistant service Copilot now has 20m paid enterprise seats. This service costs around £15 a month per user, so that’s a fair bit of revenue.

Meanwhile, like Alphabet, Microsoft’s also developing its own chips. Earlier this year, it announced the launch of Maia 200 – an inference chip designed to improve the economics of AI token generation.

These chips are not being sold to other companies today. But if the company was to sell them to other businesses, there could be a whole new source of revenue.

Ultimately, there are many ways that Microsoft could reinvent itself for the AI era. I expect it to do just that – this is a company with a history of evolution.

The stock’s cheap today

Zooming in on the valuation, Microsoft looks quite cheap. Looking at the earnings forecast for the year starting 1 July, the forward-looking price-to-earnings (P/E) ratio’s only 21. At that multiple, I see the potential for an upward valuation rerating if the company can show that it’s having success in the AI era. In the past, it has often traded on P/E ratios in the 30s.

Of course, there are no guarantees the stock will perform well from here. AI automation is a risk and sentiment towards the stock could remain weak.

At current levels however, I like the risk/reward set-up and believe the stock’s worth considering. It’s worth noting that the average analyst price target is $564 – about 35% above the current share price.

The post Could buying Microsoft stock now be like buying Alphabet in mid-2025 at a share price of $150? appeared first on The Twelfth Magpie.

The question is – which is the better option to consider buying for an ISA today? Is it smarter to go for the high-flying Alphabet or the beaten-up Microsoft?

Which tech company’s performing better?

Both companies produced strong earnings reports earlier this week. However, Alphabet’s was the stronger of the two.

For the quarter, it posted:

• Total revenue of $109.9bn, up 22% (19% at constant currency).
• Cloud revenue of $20bn, up 63%.
• Earnings per share (EPS) of $5.11, up 82%.

One highlight of its results was that Gemini Enterprise saw 40% quarter-on-quarter growth in paid monthly active users. This shows institutions are increasingly using Alphabet’s AI services.

Turning to Microsoft, it posted:

• Revenue of $82.9bn, up 18% (15% in constant currency).
• Cloud revenue of $54.4bn, up 29%.
• EPS of $4.27, up 21%.

On the earnings call, CEO Satya Nadella said that Microsoft Copilot now has 20m paid enterprise seats. This suggests its AI services are gaining traction in the business world too.

Looking at the numbers, both companies are performing well. But it’s hard to ignore Alphabet’s cloud growth – it’s very impressive.

What do analysts like more?

After the earnings, Wall Street analysts have been scrambling to update their price targets for Alphabet. I counted increases from 23 different firms. The average price target of those firms is $427. That’s about 17% above the current share price.

Turning to Microsoft, the broker activity wasn’t as bullish. While some analysts raised their price targets, others reduced them. That said, the average price target here is still well above the current share price at $569 (about 40% above). So analysts remain very bullish in general.

Which stock’s cheaper?

Focusing on valuations, Microsoft is the clear winner here. After Alphabet’s recent rise, it’s now quite expensive – its forward-looking price-to-earnings (P/E) ratio is about 29.

Looking at Microsoft, it’s trading on a forward-looking P/E ratio of about 21 when we take the earnings forecast for the financial year ending 30 June 2027. So it’s far cheaper than its Mag 7 rival.

Which is riskier?

As for risks, both companies face them. For Alphabet, a major risk is a slowdown in advertising spending. From an investment perspective, the valuation’s also a risk – this doesn’t leave any room for a slowdown.

As for Microsoft, a key risk is white collar job losses – this could lead to less software license revenue. Another is the company’s exposure to OpenAI – ChatGPT’s losing market share to Gemini and Claude.

My call

Weighing all this up, it’s actually really hard to pick a winner. Alphabet has more momentum right now, both operationally and from a trading perspective, but Microsoft’s far cheaper.

Ultimately, I think the best stock to consider comes down to an individual’s investment approach. If more focused on momentum, Alphabet is in a strong uptrend. However, when more focused on value, Microsoft looks cheap.

The post Alphabet could rise to $427 say analysts, but is Microsoft the better Mag 7 stock to consider buying for an ISA? appeared first on The Twelfth Magpie.

Investors naturally focused on Azure – the cloud computing division. But I’m also interested in another part of the business. 

Headline numbers

Microsoft’s overall sales grew 15% in the three months leading up to 31 March. And earnings per share increased 18%. 

As expected, Azure was very impressive. It achieved 39.8% growth, which is faster than Amazon but slower than Alphabet. 

That, however, is a function of size. Azure’s $7.8bn revenue increase is roughly similar to AWS or Google Cloud.

The outlook is still strong in terms of demand. But that means the firm has increased its spending plans by $25bn to keep up.

This is due to memory and storage costs going up. And paying higher prices for the same products isn’t a good thing for Microsoft.

Investors who were worried about overspending should pay close attention. But I’m interested in another part of the company.

Enterprise software

Cloud computing is where the growth is right now. But the company’s software businesses are also interesting to me at the moment.

Microsoft’s enterprise and productivity software are horizontal software products. They’re not specialised to any one industry.

I think this makes them more vulnerable to artificial intelligence (AI) disruption. Customers might try to create more bespoke products.

Sales in this part of the company, however, were pretty strong. Dynamics 365 grew 17% and Microsoft 365 Commercial grew 15%.

Microsoft isn’t the only horizontal software company to report strong growth. But I think the latest results are encouraging. 

The situation with AI competitors is one to keep watching closely. For the time being, though, things seem to be going well. 

OpenAI

A couple of days before its earnings update, Microsoft reported a change in its agreement with OpenAI. And the market initially viewed it negatively.

The major changes are as follows:

• OpenAI will be able to work with other cloud companies.
• Microsoft will be able to work with other AI labs.
• OpenAI will pay 20% of revenues (up to a certain level) to Microsoft until 2030.
• Microsoft still stop paying revenues to OpenAI.
• Microsoft has a license to use OpenAI’s intellectual property until 2032.

Is that a bad deal for Microsoft? I’m not convinced it is.

It’s certainly good for OpenAI in terms of opening up a wider addressable market. But Microsoft stands to benefit from this. 

In the short term, the firm gets 20% of revenues. And in the longer term, it’s the largest shareholder with around 20% of the business. 

I’m not sure there’s much to dislike here from Microsoft’s perspective. And the stock is still on my buy list at the moment. 

Wider implications

In my view, the real implications of Microsoft’s latest update go beyond the company. They affect the wider stock market. 

An increase in spending – especially driven by high demand – is a very positive sign for semiconductor companies. I expect them to keep doing well.

Strong growth in the software division is also encouraging. Stocks in that industry have been hit hard recently, but maybe there’s room for optimism.

The post How Microsoft’s strong earnings affect the wider stock market appeared first on The Twelfth Magpie.

Yet looking at data from investment platform AJ Bell, another Magnificent 7 stock is seeing more interest from UK investors right now. This growth stock’s well off its highs and investors are buying the dip.

A legendary tech stock

The stock I’m talking about is Microsoft (NASDAQ: MSFT). It’s a global leader in business productivity software, cloud computing and artificial intelligence (AI), and video gaming.

Over the last month, it has been the fourth most bought stock on AJ Bell’s platform. The only three stocks more popular have been BP, Legal & General and Rolls-Royce – more traditional picks for UK investors.

Personally, I’m not surprised Britons are attracted to this Magnificent 7 name. Because right now, it looks a lot like Alphabet (Google) stock 18 months ago.

It went through a period where its share price was depressed due to the fact that investors thought its days as a tech powerhouse were numbered. However, since then, it’s come roaring back – more than doubling in price – as shown it’s still a major player in the tech world.

Why’s it down?

As for why Microsoft shares are depressed today, there are a few reasons. One is that it’s been dragged into the software sell-off (some investors believe that demand for its software products will decline).

Another is that its AI products, such as Copilot, haven’t been life-changing. A third reason is that a lot of its cloud business seems to be coming from ChatGPT owner OpenAI (which it owns a large chunk of) so there’s some customer concentration risk.

Finally, it’s spending a lot of money on AI infrastructure. And there’s no guarantee this spending will generate a strong return on invested capital.

Now, these are all issues to think about from a risk management perspective. However, to my mind, the risk/reward set-up is attractive at current levels.

Is there an opportunity here?

Despite being a very large company (it has a market-cap of approx. $3.2trn today), Microsoft is still growing at a very impressive rate. This financial year (ending 30 June), revenue’s expected to grow about 16%.

Driving this growth is the company’s cloud computing division. This is growing at 20%-30% annually, fuelled by the growth of the AI industry.

Looking beyond the growth, Microsoft’s also extremely strong financially. This is a company with a rock solid balance sheet that pays regular dividends (the yield is quite low) and buys back its own shares. It also has a great record in terms of shareholder returns. Anyone who has owned this stock over the long run has done incredibly well.

As for the valuation, it looks attractive relative to the level of growth. At present, the forward-looking price-to-earnings (P/E) ratio is 22.

Given these attractions, I believe the stock’s worth considering for an ISA or SIPP. But it’s not the only tech stock I like the look of right now.

The post UK investors are piling into a Magnificent 7 stock and it isn’t Nvidia appeared first on The Twelfth Magpie.

A wave of high-profile companies are about to hit the stock market. And they could have serious implications for existing stocks. 

IPOs

SpaceX, OpenAI, and Anthropic are gearing up for initial public offerings (IPOs). And these could be some of the largest in history.

SpaceX is looking for a valuation of $1.75trn. OpenAI is looking for $1trn, and Anthropic is aiming for $500bn. Those are big numbers. And they come with correspondingly big implications for the stock market. 

Ordinarily, none of these stocks would be eligible to join an index straight away. But Nasdaq is changing its entry requirements. Under the new rules, the new stocks could join the Nasdaq 100 within 15 days. And that could have big implications.

Their inclusion would shake up the index in a big way. Importantly, it could cause some big names to fall sharply.

Index inclusion

SpaceX, OpenAI, and Anthropic are targeting $3.25trn in total market value. This will make them a big part of the Nasdaq 100.

As a result, funds that track the index are going to have to buy a lot of shares. That should be good for their share prices.

The new names joining, however, means existing ones will make up less of the overall index. So they’ll get sold as a result. A lot of these are also the biggest names in the S&P 500. And to balance their portfolios, funds will need to sell these.

That’s will create downward pressure on their share prices. But it won’t be because of anything going wrong with the businesses. It’s just the supply and demand dynamics of the stock market. For long-term investors, though, this could be a huge opportunity.

Microsoft

Microsoft (NASDAQ:MSFT) shares are down 22% this year. The firm is dealing with a threat on two fronts from artificial intelligence (AI).

The first is the threat of software disruption. The concern is that its enterprise software might be less valuable in a world of AI agents.

The second is the risk of overinvesting. The company has announced big spending plans for 2026 and those aren’t guaranteed to pay off. 

My own view is that the falling share price is an opportunity. And I’ve been buying the stock for my portfolio as a result. 

Microsoft shares are already at some unusually low multiples. But for those who aren’t convinced, a better opportunity might be on the way. The share price falling due to index rebalancing has nothing to do with disruption. And it’s going to be hard for investors to ignore.

Once-in-a-lifetime opportunity

Falling share prices can present buying opportunities. But there are usually associated business risks to think about. Sometimes, though, that isn’t the case. It’s extremely unusual, but this might be exactly what’s on the way later this year.

SpaceX, OpenAI, and Anthropic joining the stock market is a once-in-a-lifetime event. And it could result in a major Nasdaq reshuffle.

In that situation, investors will want to be ready. I’ll certaintly be paying close attention as the situation develops.

The post Get ready for a once-in-a-lifetime S&P 500 buying opportunity appeared first on The Twelfth Magpie.