Harvard University Stock Portfolio 2026: Top 10 Stocks

Microsoft (NASDAQ:MSFT) is positioned at No. 2 on Harvard’s list, which highlights key stock picks for 2026.

Harvard University’s investments total $189,921,271.

However, Microsoft has encountered some challenges, experiencing a roughly 15% decline since the start of the year. A significant concern revolves around the effect of AI on traditional software use.

The prevailing worry seems to be this: Why do companies continue to pay for Microsoft software when AI tools like Claude and ChatGPT could potentially handle similar tasks? It’s a pressing question that influences stock valuation.

Then there’s another layer of concern. Microsoft might have to weave in external AI models into its existing software. Each interaction with AI tools, like Copilot, could entail costs for tokens from AI providers, possibly squeezing profit margins as usage rises.

Nonetheless, there’s reason to believe that Microsoft can counter these challenges effectively. The company’s software has become deeply embedded in large enterprises. Most global corporations rely on Microsoft products—Word, Excel, Teams—making a sudden shift away from them unlikely.

Additionally, the management is working on developing its AI models, aiming for an in-house solution by 2027. If this plan comes to fruition, it could significantly cut AI operation costs, safeguarding profits.

Microsoft’s Azure platform also plays a vital role. In the last quarter, Azure demonstrated impressive growth of 40%. Even if Microsoft faces some setbacks with software sales, businesses will still need its cloud infrastructure for AI deployment, leaving Azure in a strong position.

Given these concerns, Microsoft’s stock price has seen notable reductions. Currently, its PEG ratio is about 1.53, which is around 16% lower than the decade-long median of 1.82. This metric reflects how much is being paid for growth, and a lower figure can suggest the stock may be undervalued compared to earnings growth rates. For a company reporting a 15% revenue increase and 18% EPS growth, this valuation is indeed attractive. Some observers even describe it as the best valuation seen in ten years, although the negative sentiment seems to have already influenced the pricing.

Impax Global Environmental Markets Fund shared insights regarding Microsoft: “Microsoft Corp. (NASDAQ:MSFT) faced a sell-off in response to investor unease about infrastructure spending tied to AI and the capacity for companies to monetize these efforts. Even after a robust quarter with revenue growth, the market’s reaction was less than favorable.”