Your pension is likely invested in some of the largest companies in the world - including Microsoft, a key global player in the technology and software industries. Current geopolitical events are influencing Microsoft’s performance, which in turn affects your pension. Let’s take a look at why this is.
How does Microsoft’s performance affect my pension?
Shares represent a unit of ownership in a company. When you buy shares, you become a part owner of that company, and your ownership is proportional to the number of shares you hold.
The value of a share is worked out by taking the company’s value and dividing it by the number of shares in issue. This then forms the individual share price. It’s this share price that goes up and down in value over time. The price can move according to current market conditions, historic performance and potential growth opportunities.
If you were to look closely at your own pension, you’ll see that you probably own a small percentage of many of the world’s largest and most successful companies. The top holdings in your pension refer to the companies you have the largest investment in. For most pension savers, Microsoft will likely be one of the top 10 holdings in your pension fund.
What is Microsoft?
Microsoft was founded in 1975 by Bill Gates and Paul Allen in Albuquerque. The pair recognised an opportunity to create software for the Altair 8800, one of the first personal computers. Their initial product, a version of the BASIC programming language, laid the foundation for the software industry as we know it today.
Today, Microsoft is the second largest company in the world with a market capitalisation (total value) of $2.9 trillion. ‘Market capitalisation’ is calculated using the present share price multiplied by the total number of shares.
Microsoft is also one of the seven leading technology companies in the US (also known as the ‘Magnificent Seven‘) recognised for their innovation and strong performance.
How much of a typical UK pension is invested in Microsoft?
Pensions typically put a large portion of your funds into company shares (equities) through the stock market. This strategy aims to grow your wealth over the long term, as company shares are typically one of the best performing asset types.
As Microsoft is currently one of the largest companies in the world, it’s a common holding in many investments.
While the exact percentage of Microsoft in a typical UK pension fund varies, Microsoft makes up around 4% of the MSCI World Index, a widely followed global stock market index which tracks the performance of many established companies across 23 developed countries worldwide.
As such Microsoft can represent a small percentage of the typical UK pension plan. Current geopolitical events are influencing Microsoft’s share price performance, which in turn could affect your pension balance.
How is Microsoft affected by President Trump’s tariffs in 2025?
The return of US President Donald Trump has brought renewed attention on tariffs - which are taxes on imported goods. Tariffs on imported materials like aluminum and steel increase hardware costs for companies like Microsoft. These hardware supply chains are concentrated in Asia - where many countries have been hit with tariffs.
Microsoft relies on these materials for its cloud and artificial intelligence (AI) infrastructure - the latter of which is a critical area of investment for the company. The tariffs and rising costs have directly impacted its plans to build AI data centres in Ohio - a project reported to be worth $1 billion.
In the table below you can see how short-term uncertainty from US tariffs have shaken the value of Microsoft’s shares. However, the long-term trajectory shows strong growth.
| Company | 3-month performance | 1-year performance | 5-year performance |
|---|---|---|---|
| Microsoft | -11% | -11% | +138% |
Source: Market Watch. Data as of 31 March 2025.
The Trump Administration later exempted smartphones, computers, and certain other electronic devices from ‘reciprocal tariffs’ - although these exemptions could be temporary. These tariffs are part of Trump’s broader strategy designed to reduce the trade deficit and boost domestic manufacturing.
What could make the Microsoft share price go up and positively impact your pension balance?
Over the next three months, the share price could rise if:
- Microsoft exceeds expectations in its next quarterly earnings report (this looks at the profits and losses for the prior three months). This could lead to a short-term spike in the share price;
- Microsoft continues to innovate and announce new products in the AI space, attracting investors and increasing the share price; and/or
- the Federal Reserve, the Central Bank in the US, decreases interest rates. This could boost consumer spending power and encourage businesses to borrow at a lower interest rate and allow them to consume more goods.
Over the next year, the share price could rise if:
- Microsoft announces company acquisitions (like its recent purchase of Activision Blizzard) enhancing its growth and attracting investors; and/or
- Microsoft sees continued growth in AI, particularly through its partnership with OpenAI.
Over the next five years, the share price could rise if:
- Microsoft continues to integrate AI into core products such as Microsoft 365 and Azure. This would drive substantial revenue growth, increasing the share price;
- Microsoft remains at the forefront of technological innovation by investing in research and development; and/or
- strong cash flow means Microsoft can buy back its own shares and pay dividends, which could help its stock price go up over time.
What could make the Microsoft share price go down and negatively impact your pension balance?
Over the next three months, the share price could fall if:
- Microsoft misses revenue or profit targets in its quarterly earnings report. This could lead to a ‘short-term sell-off’, as investors react quickly by selling their shares, leading to a short-term decline in the share price;
- supply chain disruptions continue to occur impacting manufacturing or shipping; and/or
- rising interest rates or fears of a global economic slowdown negatively impact tech stocks.
Over the next year, the share price could fall if:
- the costs associated with scaling AI continue to rise. This could weigh on profitability for Microsoft in the short term;
- increased or new regulations limit Microsoft’s ability to expand or innovate; and/or
- an economic downturn reduces consumer demand for products and services like enterprise software and cloud computing.
Over the next five years, the share price could fall if:
- Microsoft fails to execute AI integrations and expansions in cloud services risking its reputation as an industry leader;
- challenges in the gaming market (particularly with Microsoft’s acquisition of Activision Blizzard) impact its overall revenue; and/or
- increased competition in cloud computing from Amazon Web Services and Google Cloud harm Microsoft’s market share.
Conclusion
- Your pension likely has a small investment in Microsoft - most pensions invest a portion of your retirement money in Microsoft because it’s one of the largest and most successful companies in the world.
- When you invest, you own a portion of the company - the value of these company shares will fluctuate based on market conditions, affecting the value of your pension on a given day.
- Current events can impact your investments - geopolitical events, such as tariffs imposed by the Trump Administration, can affect Microsoft’s costs and share price. This in turn impacts your pension balance.
- Politics is short-term and investing is long-term - while current events can cause short-term volatility in share prices, successful investing typically focuses on long-term growth.
Staying informed about current events, and their impact on your pension, can help you invest with confidence - even in a changing market.
Have a question? Get in touch!
Do you want to know more about your pension plan with PensionBee? You can check out our Plans page to learn how your money is invested in different assets and locations, or log in to your BeeHive to see your specific plan. You can always send comments and questions to our team via engagement@pensionbee.com.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
