2 Tech Stocks Down 25% That Smart Money Is Buying Hand Over Fist Right Now
Key Points
Microsoft has been caught in the SaaS sell-off but has strong growth opportunities ahead.
Uber is facing potential robotaxi headwinds but has multiple partnerships in the space to remain a ride-share leader.
- 10 stocks we like better than Microsoft ›
Following billionaire investors into top stocks can be a smart move. This is especially true when those stocks are trading well off their highs.
The first quarter of 2026 was a busy one for many of the world's leading investors as they traded in and out of stocks. Let's look at two beaten-down tech stocks where the smart money was investing last quarter.
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1. Microsoft
Microsoft (NASDAQ: MSFT) was a popular stock with hedge fund investors in Q1, with several well-known funds buying shares. This includes Bill Ackman of Pershing Square Capital and billionaire Tom Steyer of Farallon Capital, among others. Meanwhile, the stock remains down 23% from its highs.
The appeal of Microsoft is pretty straightforward. The company has been caught up in the software-as-a-service (SaaS) sell-off, but its Microsoft 365 suite of productivity tools is heavily ingrained in enterprise workflows, making it unlikely to get disrupted by artificial intelligence (AI). At the same time, the company is starting to see significant AI momentum.
Last quarter, Microsoft's productivity and business processes segment saw its revenue jump 17% to $35 billion, with Microsoft 365 Commercial revenue climbing 19%. The company said paid users for its Microsoft 365 Copilots are skyrocketing, with seat additions up 250% year over year to 20 million.
Meanwhile, within its intelligent cloud segment, it highlighted the huge growth of its GitHub Copilot due to the use of agentic coding. To help capture more upside, the company will switch GitHub Copilot to a hybrid seat-and-usage model.
At the same time, Microsoft's cloud computing unit, Azure, remains a major growth driver. The unit grew its revenue by 39% last quarter, marking its 11th straight quarter of 30% or more growth. Meanwhile, its AI business annual recurring revenue (ARR) surged 123% as customers are beginning to adopt more AI solutions. With over $600 billion in future Azure commitments, the company has a long runway of growth ahead.
Despite its strong growth, the stock is still attractively valued, trading at a forward price-to-earnings (P/E) ratio of just over 21 times based on fiscal 2027 analyst estimates (ending June 2027). Notably, the company also owns a 27% stake in OpenAI, which was recently valued at $852 billion in its March funding round.
2. Uber Technologies
Another stock drawing strong interest from hedge funds in Q1 was Uber Technologies (NYSE: UBER). While Bill Ackman slightly trimmed his large stake in the drive-share company, other big-name investors were buying, including billionaire investor David Tepper of Appaloosa Management and Anand Parekh of Alyeska Investment, who was formerly a portfolio manager at Citadel, one of the world's largest fund companies. Uber shares are about 26% off their highs, as of this writing.
Despite its recent lackluster stock performance, operationally, Uber has been doing well. In Q1, its revenue rose 14% year over year to $13.2 billion, while its gross bookings climbed 25% to $53.7 billion and its trips grew 20% year over year to 3.6 billion. Note that gross booking is the total amount customers spend on the platform, including tolls and tips, while revenue is Uber's cut.
Both its ride-share and delivery businesses saw strong gross bookings, with delivery jumping 28% to $26 billion and ride-share up 25% to $26.4 billion. Meanwhile, its adjusted EPS soared 44% to $0.72.
The stock has struggled due to the looming threat of robotaxis. However, the company has said it has not seen any impact on its business in cities where Alphabet's Waymo has entered, while it has more than 30 autonomous driving partners and plans to have autonomous services in 15 cities by the end of the year.
An investment in Uber right now is a bet that the company will remain an important part of the ride-sharing and delivery markets even as the shift toward autonomous driving unfolds. This isn't a bad bet, as the company has a strong brand, decades of routing and pricing data, and expertise in managing vehicle supply in a dynamic demand environment. It has structured several different types of autonomous-driving partnerships, so I'd wager it will find a model that keeps it an important player in the space.
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Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Microsoft, and Uber Technologies. The Motley Fool has a disclosure policy.
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