Microsoft is Being Thrown Out With the Bathwater. Here’s Why I’m Buying the Dip

Investors have fallen further out of love with shares of Microsoft (NASDAQ:MSFT | MSFT Price Prediction) this year, with the stock still down around 11% year to date or 22% from its all-time high. At its worst, the stock was down just shy of 35%. That’s a pretty vicious bear market implosion, but with the markets rocketing higher in the past week, Microsoft shares are on the mend again, and a bottom does seem to be in. And while the rest of the market starts looking pricey again, I do think that shares of the enterprise giant behind Windows and Office stand out as a great catch-up play now that shares are a major market laggard.

Of course, enterprise software was dealt a punishing blow, but as software starts coming back while Microsoft advances its own AI efforts, I do think that the name could have the most runway, especially since it has all the makings of an AI agent winner. When it comes to agentic AI, it’s hard to tell a true winner apart from the rest of the batch, especially as all firms, including shoe companies, pivot towards AI.

Microsoft has been through tough times before

Regarding Microsoft, it’s made it through technological booms and busts before. It’s reinvented itself when it seemed like it would succumb to the lower growth rates that are more typical of multi-decade-old firms. After all, you can’t defy the laws of corporate aging. That is, unless you’re one of the special few, which includes the likes of Microsoft.

In any case, the company is already going heavy on AI with its massive CapEx, its Azure growth engine (which I think is profoundly underrated after the latest quarter), its brilliant team of AI researchers, and, perhaps most importantly, the operating system and suite of software tools that might actually see increased usage once agents take off.

At the end of the day, the Office suite is still the gold standard. And as agents start doing more of the white-collar work, you can be sure it’ll be making good use of Excel spreadsheets, PowerPoint presentations, Word docs, and more. I don’t know about you, but I find the whole agents will render software obsolete is greatly overblown.

After all, such software might actually be how human-to-agent interactions are facilitated. Is the back-end more important than the front-end amid the rise of agents? Perhaps. But that doesn’t mean the user interface is going the way of the Dodo bird. Far from it, at least in my opinion, especially given how paramount it’ll likely be to keep humans in the loop.

Don’t discount the potential behind Microsoft’s agentic awakening

With so many workforces entrenched in the Microsoft ecosystem, my guess is that the enterprise giant has the red carpet rolled out ahead of it as it looks to pull open the limousine door for its newest and most capable agents. With Agent 365 getting better by the day and the ability to become better on its own AI horse (not just OpenAI’s ChatGPT), I’d say the market is completely wrong to punish Microsoft alongside the rest of the software.

At the end of the day, Microsoft has a powerful platform and an AI cloud, which, I think, can outgrow its hyperscaler rivals. Whether you’re unsure about the potential for software to get disrupted or you’re not comfortable with the CapEx numbers, it’s just too easy to find a reason to sell Microsoft stock while it’s in a rut.

As Microsoft graduates from Copilot while making a deep dive into the agentic economy, perhaps in the second half of 2026, I think it’ll be tough to keep the stock down. Combined with its AI chip prowess, it appears that investors are overlooking what could be the best bargain of the Mag Seven. It’s hard to know how much of a needle-mover Microsoft’s agents will be once enterprises are ready to put to work the many digital workers that know how to use the Office suite and Windows far better than a rival.

The bottom line

Any way you look at it, Microsoft was built to win in the era of agents. And while it may have had its fair share of fumbles with Copilot earlier on, I do think it’s getting on the right track. Once it’s moving at full speed, my bet is that Microsoft will be magnificent again.