By Mackenzie Tatananni
Microsoft stock has lagged the broader market this year but its reputation as a top-tier tech player shouldn't tempt investors to rush in.
Rather, Renaissance Macro Research analyst Kevin Dempter recommends the opposite: Existing shareholders should look for the next opportunity to exit the stock.
In an email to clients, Dempter argued that the response to the overbought condition in software stocks "has been abysmal." Although the sector seems back in favor following a beating brought on by fears of artificial-intelligence disruption, Dempter believes "a massive topping pattern is clearly taking shape," signaling an uptrend is losing momentum and a reversal of fortune is imminent.
Within the vast software category, Dempter flagged Microsoft and Palantir Technologies as two names that "have recently been battered at resistance," or hit a price ceiling and dropped. He believes investors should look to sell the next time shares rally.
Because Microsoft, Palantir, and their ilk are currently caught in a downtrend, Dempter recommends investors wait for the next temporary price jump to sell and move their money into better investments.
Microsoft has been favored among institutional and long-term investors as a steady, long-term growth compounder. However, the shares have been battered in recent months as shareholders demand proof that immense AI spending will translate into sustainable revenue.
While Microsoft is technically classified as a software company, investor anxiety stems less from AI disruption and more on the spending concerns. The problem isn't a unique one; as premier hyperscalers, Microsoft, Meta Platforms, and Alphabet-owned Google are all facing intense scrutiny over the unprecedented capital expenditures required to fund their massive data center build-outs.
But the potential trouble brewing in the market extends far beyond hyperscalers. Elsewhere within the technology, media, and telecommunications industry group, Dempter spies "big tops forming" in Netflix, Disney, and AT&T, in addition to Meta. "As with Software, we recommend using strength to rotate out of these increasingly vulnerable trends," he wrote.
For investors accustomed to blindly buying every tech dip, Dempter's outlook serves as a stark warning: The next market rally shouldn't be viewed as a buying opportunity, but rather as a chance to get out before the floor drops.
Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com
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June 17, 2026 10:15 ET (14:15 GMT)
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