Matt Powers of Powers Advisory Group said investors should be selective in software stocks, highlighting Microsoft Corp. (NASDAQ:MSFT) as a standout due to its resilience, valuation, and positioning in an AI-driven market.

Software Is Not One Trade

Powers argued on CNBC on Tuesday that investors often oversimplify the software sector by treating it as a single trade.

He explained that broad ETFs include a wide mix of businesses—from cybersecurity and cloud to gaming and even crypto-related firms—making sector-wide conclusions misleading.

He said investors should instead focus on companies with strong competitive advantages, particularly those with high switching costs or products that AI cannot easily replicate.

Microsoft Stands Out on Quality and Valuation

Powers identified Microsoft as a top pick, noting it is one of only two AAA-rated companies.

He said the stock remains about 20% below its October highs despite a recent move higher and continues to carry strong analyst support, with a consensus Buy rating.

He also pointed out that Microsoft trades at around 25 times forward earnings, below its typical level closer to 30, suggesting an attractive valuation relative to its quality.

AI Resilience Drives Selective Buying

Powers emphasized that investors should focus on software companies that benefit from AI rather than risk disruption from it.

He said the current environment is not a broad “buy software” opportunity, but rather one that requires careful stock selection, with Microsoft standing out as well-positioned to navigate and benefit from the evolving AI landscape.

Cramer’s Take

CNBC’s Jim Cramer said recent market sell-offs are creating selective buying opportunities, highlighting Microsoft as a stock investors should not abandon despite volatility.

He said Microsoft’s core strengths remain intact even after its recent decline.

He added, “I am glad we didn’t dump it… Could have been a big mistake,” emphasizing confidence in the company’s long-term positioning.

Cramer also stressed that investors should focus on fundamentals rather than fear, urging them to rely on confidence in management, the business model, and financial strength during market swings, as panic selling can lead to missed recoveries.

Earnings & Analyst Outlook

The countdown is on: Microsoft is set to report earnings on April 29, 2026 (confirmed).

  • EPS Estimate: $4.07 (Up from $3.46 YoY)
  • Revenue Estimate: $81.40 Billion (Up from $70.07 Billion YoY)
  • Valuation: P/E of 27.1x (Indicates premium valuation relative to peers)

Top ETF Exposure

  • iShares S&P 500 Growth ETF (NYSE:IVW): 9.48% Weight
  • State Street SPDR Portfolio S&P 500 Growth ETF (NYSE:SPYG): 9.60% Weight
  • iShares Russell Top 200 Growth ETF (NYSE:IWY): 9.91% Weight

Significance: Because MSFT carries such a heavy weight in these funds, any significant inflows or outflows will likely trigger automatic buying or selling of the stock.

Price Action

MSFT Stock Price Activity: Microsoft shares were trading lower by 2.78% at $421.76 at the time of publication on Thursday, according to Benzinga Pro data.

Photo via Shutterstock