1 Magnificent Growth Stock Down 32% That Smart Money Is Quietly Accumulating

Increased market turmoil is hitting the Magnificent Seven, with Microsoft (NASDAQ: MSFT) taking the hardest hit out of all of them. It has fallen 33.5% from its 52-week high. A general sell-off in artificial intelligence (AI) stocks impacted the company amid massive capital expenditures (capex) spending. Investors also harbor doubts about its partnership with OpenAI.

However, amid these conditions, some institutional investors have quietly begun to accumulate more shares of the cloud stock, and some of the purchases may come as a surprise.

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Microsoft as a contrarian buy

Given the stock's recent decline, Microsoft stock looks like more of a contrarian buy.

In the first six months of fiscal 2026 (ended Dec. 31), Microsoft spent $49 billion in capex, putting it on track for around $100 billion during the fiscal year. With that, its intelligent cloud revenue was up 29% year over year, well above the 18% revenue growth rate for the company. Such increases indicate its capex spending could bear fruit over time.

Moreover, many investors are nervous that OpenAI, which faces potential financial troubles, accounts for $281 billion of Microsoft's $625 billion backlog. Still, that also means it has a $344 billion backlog under a worst-case scenario, which still appears to position Microsoft for further AI-driven prosperity.

Institutional holding of Microsoft

Nonetheless, in evaluating institutional purchases, investors need to take the time lag into account. The filings released in the last few weeks were purchases in the calendar fourth quarter of 2025. That came before the massive drop in the stock following Microsoft's Jan. 28 earnings fiscal 2026 Q2 announcement. Thus, we do not yet know how institutions reacted to that.

What we do know is that as of the last three months of 2025, over 8,000 institutions collectively own 76% of Microsoft's shares. Vanguard, BlackRock, and State Street remain the largest holders with 9.7%, 8.1%, and 4.1% of all Microsoft shares, respectively. Still, in calendar Q4, some of the more meaningful increases came from lesser-known institutions.

The most notable purchase was from Cardano Risk Management. It added over 21.2 million shares, increasing its Microsoft holding by 909%. With that, its almost 23.6 million shares are worth approximately $1.1 billion. Also, Corient Private Wealth added nearly 12.5 million shares. Thanks to that acquisition, its holdings rose by 234% to over 17.8 million shares.

Additionally, the top two Microsoft shareholders increased their positions. Vanguard added about 15.9 million shares in calendar Q4. That increased its position size by 2%, bringing its total to nearly 718 million shares.

It is a similar story for BlackRock, which purchased almost 10 million shares. That was also a 2% increase, bringing its total share count to around 602 million shares. Such purchases should serve as a vote of confidence, indicating that Microsoft's pullback is likely temporary.

Making sense of Microsoft purchases

Despite a falling stock price, institutions continue to buy and hold large blocks of Microsoft stock.

Indeed, Microsoft has experienced a 23% drop in its stock price since the beginning of 2026, and the most recent filings deal with purchases made in calendar Q4.

However, this shows that a lower stock price has stoked interest in Microsoft. This should prompt investors to wait anxiously for the filings from the first three months of 2026 later this spring to see if more institutional investors perceive Microsoft as a drop-dead bargain.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends BlackRock. The Motley Fool has a disclosure policy.