Trim your position on Microsoft, this portfolio manager says

The stock has been on fire for months and while those gains may help with your portfolio’s year-to-date returns, Microsoft (Microsoft Stock Quote, Charts, News, Analysts, Financials NASDAQ:MSFT) is now overbought, according to Brianne Gardner, wealth manager at Velocity Investment Partners with Raymond James. 

“We saw that rush into the AI boom and a lot of big tech has really been leading the S&P 500 and we’ve seen that from the NASDAQ rally as well,” said Gardner, speaking on BNN Bloomberg on Friday. 

“But right now I would say at these levels, we are looking at trimming some of our position on Microsoft. It’s a little bit overbought for us,” she said.

Microsoft was a strong climber during the 2019-2021 pandemic years but experienced a pullback with the rest of the tech sector starting in November 2021. The stock went from a high of $340 to a low of $220 by November 2022. But, incredibly, MSFT has now made it almost all the way back and is now trading around the $335 mark.

All of tech has made a comeback this year, with investor interest in artificial intelligence being a key factor. OpenAI came out with ChatGPT last fall, captivating everyone’s attention and pushing AI-related stocks higher. 

Nvidia is a prime example. The company behind the graphics processing units that power much of the AI computing sector has seen its share price triple in recent months, with the company’s valuation soaring in turn. 

For Microsoft, its partnership with OpenAI began in 2019 through a $1 billion capital investment, one which has now paid off in spades. Microsoft is now incorporating OpenAI’s technology into its various products like search engine Bing, cloud computing Azure and Microsoft 365. A Wells Fargo analyst recently estimated that the partnership with OpenAI could very well result in over $30 billion in annual revenue for Microsoft.

For Gardner, it should just be a little off the top on Microsoft, as the company’s long-term prospects are still golden.

“It’s not only a leader in [AI], but management continues to invest in the future and positions themselves in the forefront of change. OpenAI and ChatGPT give Microsoft the positioning to not only compete with but beat Google on AI monetization. And Microsoft actually and Nvidia just announced a deal as well which should be profitable too,” she said.

“We’re happy with the growth we’ve seen in Microsoft and we still like it as a long term hold for us,” she said.