A prominent hedge fund, TCI, has executed a major sell-off of its Microsoft holdings, nearly liquidating a core position held for close to a decade. The rationale cited points to structural threats posed by artificial intelligence to Microsoft's core software business.
According to an investor letter obtained on May 8th, TCI founder Sir Christopher Hohn slashed the fund's stake in Microsoft from 10% of its portfolio at the end of last year to a mere 1% by the end of the first quarter. This move involved approximately $8 billion.
Hohn explicitly stated in the letter, "We reduced Microsoft because the rapid advance of AI introduces uncertainty over Microsoft's future competitive positioning." He specifically highlighted the potential impact on Microsoft's Office productivity software business and also expressed some concern regarding the outlook for its Azure cloud platform.
This liquidation occurred against a backdrop where Microsoft's stock price has declined over 12% year-to-date, reflecting broader market skepticism about the company's ability to translate its massive AI investments into commercial returns. Concurrently, TCI increased its stake in Alphabet, raising the holding from 3% to 5% of its portfolio, making it the fund's largest technology position.
**AI Poses Challenges to Office and Azure, Raising Questions About Microsoft's Moat**
Hohn's concerns in the investor letter focused on two primary areas.
The first is the Office productivity software business. He believes the rapid evolution of AI could reshape existing workflows and give rise to entirely new productivity platforms, potentially undermining Microsoft Office's long-standing dominance. The second is the Azure cloud business, where Hohn also expressed a judgment of "some degree of risk."
Microsoft, through its stake in OpenAI, benefited from the recent Wall Street AI fervor, seeing its stock price surge significantly. However, as 2026 progressed, market sentiment has shifted noticeably—investors are beginning to question whether Microsoft can convert its expanding AI capital expenditures into substantial commercial returns, with the stock down over 12% for the year.
While reducing Microsoft, TCI took the opposite action with Alphabet, increasing its stake. This rebalancing reveals a structural realignment within TCI's technology exposure—shifting from waning confidence in Microsoft toward a relatively more favorable view of Alphabet's competitive prospects.
It is worth noting that TCI is not primarily a technology-focused fund; tech stocks constitute a relatively limited portion of its overall portfolio.
**World's Most Profitable Hedge Fund Concentrates on Infrastructure and Aerospace**
TCI had held Microsoft shares almost continuously since the fourth quarter of 2017 (briefly disappearing from regulatory filings in 2023). During this period, Microsoft's stock price surged nearly 400%, yielding substantial gains for TCI.
This reduction effectively marks the end of this nearly decade-long investment relationship. Hohn is known for his long holding periods, with an average investment horizon of around nine years, far exceeding most hedge fund peers.
His investment philosophy centers on concentrated bets on a small number of companies with strong competitive moats—TCI's current portfolio spans only 15 stocks, whereas most funds of comparable size hold dozens or even hundreds.
TCI topped the list as the world's most profitable hedge fund last year, generating $18.9 billion in investor profits, surpassing Ken Griffin's Citadel and Izzy Englander's Millennium.
In terms of overall portfolio composition, TCI's core allocations are concentrated in infrastructure and aerospace, not technology. Its largest holding is GE Aerospace, constituting a significant 18% of the portfolio. The fund also holds substantial positions in Visa, Moody's, and the infrastructure company Ferrovial.
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