The $4 trillion club is a lonely place. Currently, only Nvidia (NVDA 1.53%) is a member. Former members Apple (AAPL 1.93%) and Alphabet (GOOG 1.69%) (GOOGL 1.66%) are knocking at the door again, though, and I see them as highly likely to rejoin it over the next few months. However, I've got my eye on a company that's worth less than $3 trillion as a potential entrant: Microsoft (MSFT 0.73%).
At its peak valuation, Microsoft was briefly a member of the $4 trillion club. Now, it's worth about $2.9 trillion. That's a 27% pullback for a strong and dominant company, and I think it could be a prime buying opportunity for investors (like me) who missed out on Microsoft's monster run-up in recent years.
Microsoft is selling off for no good reason
Normally, when a megacap company sells off by such a large percentage, it's because something major has changed about its investment thesis, or its results weren't as good as expected. Neither of those things has occurred with Microsoft.
Image source: Getty Images.
The results for its fiscal 2026 second quarter (which ended Dec. 31, 2025) were strong, with revenue rising 17% year over year to $81.3 billion. During its fiscal Q1 conference call, Microsoft told investors to expect between $79.5 billion and $80.6 billion in Q2 revenue, so the actual top line was a positive surprise.
NASDAQ: MSFT
Key Data Points
Microsoft also didn't drop any bombshells suggesting that it was changing its AI strategy or that demand for its cloud infrastructure offerings was weakening. In fact, it let investors know that it has a $625 billion backlog related to its Azure cloud computing platform. AI is still a huge part of the Microsoft investing thesis, and it's doing everything that it has said it would do.
This is what makes the stock's recent steep sell-off such a surprise.
My preferred metric to assess Microsoft's valuation is its operating price-to-earnings (P/E) ratio. This strips out the effects of investment gains, which make up a decent chunk of Microsoft's earnings due to OpenAI's soaring valuation. Microsoft has rarely been so cheap by this metric in the past decade.
MSFT Operating PE Ratio data by YCharts.
This makes it the perfect time to scoop up shares, as it's cheap for hardly any good reason. Buying opportunities like this don't come around often, and now is the time to act on it.
