8. Microsoft Corporation (NASDAQ:MSFT)
Street High Upside as of December 3, 2024: 39%
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) ranks eighth on our list of the AI stocks expected to skyrocket. In November alone, the company has introduced several key partnerships and products. On November 13, the company launched new and improved adapted AI models expanding its position in various industries. The new models will help organizations address their particular AI needs with greater efficacy and will readily be available through the Azure AI model catalog.
Similarly, on November 14, Microsoft Corporation (NASDAQ:MSFT) partnered with Accenture and Avanade to help businesses transform their functions using artificial intelligence and Microsoft Copilot. More recently, on November 19, Microsoft Corporation (NASDAQ:MSFT) announced that is it building three trusted platforms aimed at maximizing the benefits AI could reap for overall business functionality and efficiency.
Overall, the company is seeing strong financial outcomes from its AI-driven transformation and witnessing a significant uplift in the number of customers using its AI platforms and tools. Overall, cloud revenue in the fiscal first quarter of 2025 reached $38.9 billion, up by 22% year-over-year. Most of the revenue was driven by advances in artificial intelligence, explaining why 279 hedge funds were bullish on the stock at the close of Q3 2024, according to our Insider Monkey database.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Office products, but over the last five years it has built a $147 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. Shares gave back some gains from strong performance over the first half of this year. For the fourth quarter of fiscal year 2024, Microsoft reported a strong quarter with total revenue growing 16%, in line with the Street; Microsoft Cloud up 22%; Azure up 30%; 43% operating income margins; and 36% free cash flow margins. Core Azure growth came in one point shy of expectations, however, due to a soft European market and continued constraints on AI compute capacity. In the same vein, while Microsoft reiterated its fiscal 2025 targets of double-digit top-line and operating income growth, quarterly guidance called for Azure growth to slow a bit before accelerating in the back half of the fiscal year, as capital expenditures increase, yielding an expansion of AI compute capacity. We believe this investment is a leading indicator for growth, with more than half of the spend related to durable land and data center build outs, which should monetize over the next 15-plus years. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes, and we remain investors.”
