"IBM-ServiceNow shock is an overreaction" pushback... Forward P/E at 26x vs 5-year median of 34x shows undervaluation
Big Short's Michael Burry disclosed a new long position in Microsoft (MSFT) through his Substack on April 23 (local time). This came immediately after the software sector plunged following disappointing earnings from IBM and ServiceNow on the same day.
"Software stocks crashed on IBM-ServiceNow earnings that were interpreted as signaling AI threats. I see opportunity in the beaten-down software and payments stocks."
Michael Burry, Substack April 23, 2026
Burry added that he conducted a 'forensic-level analysis' of Microsoft and did not sell any of his existing software holdings.
Microsoft: A Cash Flow Machine Down 25% from Highs
Burry's rationale for targeting Microsoft is clear. The stock is down approximately 25% from its July 2025 all-time high and about 13% year-to-date. However, he believes the underlying business remains intact.
- Azure, Office365, Dynamics — subscription-based recurring revenue model
- Forward P/E ~26x — undervalued vs 5-year median of 34x
- Annual free cash flow — sufficient to fund share buybacks + dividends
- TD Cowen maintains Buy rating with $540 price target
Microsoft's earnings report on April 29 will be the first test of this thesis.
Long Software, Hedge Semiconductors
The key aspect of this portfolio move is Burry's dual positioning. Alongside the Microsoft long, he bought put options on QQQ (Nasdaq-100 ETF), NVDA, and iShares Semiconductor ETF (SOXX).
The message from buying software while shorting semiconductors is clear. Burry believes the market has over-interpreted the IBM-ServiceNow issues as sector-wide problems for software. Meanwhile, he's cautious about correction risks in semiconductors, the most crowded position riding the AI infrastructure wave.
"Buy the right tech, be careful with the rest"
Message from Burry's current positioning
Beyond Microsoft, he also expanded positions in MSCI, PayPal (PYPL), and Adobe (ADBE). PayPal is down approximately 37% from highs, while Adobe is down about 54%.
Data Sources
Michael Burry Substack (as of April 23, 2026), TD Cowen Research, InteliView Editorial analysis.
