TCI cuts Microsoft stake from 10% to 1%, citing AI uncertainty

In short: Hedge fund TCI cut its Microsoft holding sharply after warning that fast-moving AI could weaken Microsoft’s biggest products.

What happened

Sir Christopher Hohn’s hedge fund, TCI Fund Management, has sold most of its Microsoft shares. TCI said it reduced its Microsoft position from about 10% of its portfolio at the end of last year to about 1% by the end of March.

In a letter to investors seen by the Financial Times, Hohn said “rapid progress” in artificial intelligence has created uncertainty about Microsoft’s future competitive position. Artificial intelligence, or AI, is software that can write, summarize, and help people do office tasks, often by learning patterns from large amounts of text and data.

TCI said its main worry is Microsoft Office, the company’s well-known set of work apps like Word and Excel. The fund believes AI could change how people get work done and could lead to new “productivity platforms” (think of a new main workspace for documents, notes, and planning). The letter also said TCI sees some risks in Azure, Microsoft’s cloud business, which is the company’s system for renting computing power and online services to other businesses.

The letter also shows TCI increased its stake in Alphabet, Google’s parent company, from 3% to 5%. That makes Alphabet TCI’s largest tech holding.

Why it matters

Microsoft Office and cloud services are used by millions of workers and companies. If AI tools make it easier to switch away from traditional Office software, it could slowly change what businesses pay for and which tools they rely on, like choosing a new “home base” for everyday work.

Source: Financial Times