In this article, we will take a look at the 10 Best Augmented Reality Stocks To Buy Now.
Augmented reality (AR) is a technology that enhances our perception of the real world by overlaying digital elements through devices, adding to your existing environment. There are various ways to describe AR, from spatial computing to holographic projection, but its practical applications define its true value. A notable example of an AR device is the HoloLens, a holographic computer that enables users to interact with digital content within the real world, leading to its growing adoption across various industries such as education, manufacturing, and healthcare.
AR/VR Startups
Despite its applications and prospective growth, the AR space seems to have lost favor with venture capitalists, with investments declining due to disappointing adoption rates for the gear and leading metaverse platforms. Even the launch of the Vision Pro headset earlier this year, promoted as a “spatial computing” device, didn’t significantly shift the mood. Reports suggest that demand for the $3,500 device is cooling, prompting the maker to lower its shipment forecast.
Similarly, the investment climate in the startup sector remains cold, with only about $464 million invested this year in seed through growth-stage funding for AR, VR, and metaverse-related companies. This sets 2024 on course to reach the lowest funding total in years. Most startups that raised large financings during the peak in 2021 haven’t secured new rounds since. However, despite the slowdown, some notable deals have still occurred, with the largest AR-related round this year going to Rokid, a maker of augmented reality glasses, which raised $70 million in January. Another notable investment was in Beijing-based Xreal, a mixed-reality glasses maker that positions itself as a more affordable alternative to the Quest and Vision Pro, which raised $60 million in January at a $1 billion valuation.
Most notably, Google recently partnered with augmented reality startup Magic Leap in a strategic technology deal, hinting that the tech giant may be preparing to re-enter the AR and VR market, a space it has mostly left to rivals. Over a decade ago, the search engine giant was a trailblazer in AR. This enthusiasm peaked during a 2012 demo where skydivers used the glasses to live stream a jump onto a building in San Francisco. However, the product faced significant consumer pushback due to its awkward design and privacy concerns.
Augmented Reality Market & Outlook
The global augmented reality market, valued at $32.1 billion in 2022, is projected to grow from $42.85 billion in 2023 to $432.35 billion by 2031, with a compound annual growth rate (CAGR) of 33.5% over the forecast period, according to industry data from SkyQuest.
A significant portion of the market is mobile AR, leveraging the widespread ownership of smartphones, tablets, and other mobile devices. As of this year, it’s projected that there will be 1.7 billion devices capable of supporting mobile AR. Notably, a key advantage mobile AR enjoys is the massive existing smartphone user base. Unlike the steep challenges AR glasses face, mobile AR benefits from “zero-cost” hardware, making its path to adoption relatively smoother. Growth is expected across both enterprise and consumer segments, including digital AR experiences. A well-known example is the 2016 video game Pokémon GO, where players explore their surroundings to find virtual characters on their phones. Additionally, collaborations between key market players and 5G providers to address latency issues are expected to fuel market growth.
A technician wearing a head-mounted augmented reality headset examining a MEMS device.
Our Methodology
In this article, we reviewed online rankings and ETFs to determine 20 companies operating in the AR space. We then selected the 10 stocks that were the most popular among elite hedge funds. We sourced the hedge fund data from Insider Monkey’s database of 912 hedge funds, as of Q2 2024. Our focus was on companies that produce AR-related hardware, software, or technologies used in developing augmented reality products. However, we also included companies that offer services essential to the AR industry, like semiconductor chips.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Augmented Reality Stocks To Buy Now
10. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 44
Snap Inc. (NYSE:SNAP), a key player in the Internet content and information industry, stands out among augmented reality stocks. The company is best known for its filters and lenses, which highlight the entertainment aspect of AR. Additionally, Snap Inc. (NYSE:SNAP)’s subscription service, Snapchat+, has been growing rapidly, reaching 9 million subscribers in the first quarter of 2024. The company aims to increase this number to 14 million subscribers by the end of the year.
On July 18, BMO Capital Markets has maintained its Outperform rating on Snap Inc. (NYSE:SNAP), keeping the price target steady at $20. The firm’s analysis highlighted a rise in user engagement following recent improvements in content ranking and recommendation algorithms. Additionally, Snap Inc. (NYSE:SNAP) is seen as poised to benefit from a reallocation of advertising spending, with an expected $100 million increase in revenue for the second half of 2024 as advertisers shift funds away from TikTok. The launch of Sponsored Augmented Reality Filters and enhancements in targeting and measurement tools are also anticipated to draw significant advertising investments, especially around major events like the upcoming Olympics in Paris.
Snap Inc. (NYSE:SNAP) reported strong second-quarter 2024 results, highlighted by a 16% year-over-year increase in total revenue, reaching $1.24 billion. The company demonstrated significant user engagement, with over 850 million monthly active users and 432 million daily active users. Advertising revenue, which makes up the majority of total revenue, rose 10% year-over-year to $1.13 billion. Looking ahead, Snap Inc. (NYSE:SNAP) expects third-quarter revenue growth of 12% to 16% and an estimated Adjusted EBITDA between $70 million and $100 million.
RiverPark Large Growth Fund stated the following regarding Snap Inc. (NYSE:SNAP) in its first quarter 2024 investor letter:
“Snap Inc. (NYSE:SNAP): SNAP was our top detractor in the quarter despite reporting fourth quarter results generally in line with or better than expectations. Revenue growth of 5% was roughly in line with investor estimates and at the high end of guidance, and EBITDA of $159 million was $49 million better than estimates. Daily Active Users (DAUs) were also ahead of investor expectations, ending the quarter at 414 million (about 2 million better), driven by continued innovation in Snap’s offerings. Revenue guidance for 1Q24 was also roughly in line with investor estimates, but EBITDA guidance of negative $55-95 million was well below estimates. The company pointed to increased infrastructure costs and a US focused marketing campaign for the lower-than-expected margin guidance.
Although the company continues to face near-term macro headwinds, we believe SNAP can accelerate its revenue growth over the next several years. With 2023 revenue expected to be $4.6 billion (as compared with Meta’s $134 billion), we believe SNAP has a long runway for both revenue growth and expanded profitability as it improves platform functionality, continues to grow its audience (daily active users continue to grow at a double-digit rate), and expands its monetization.”
9. Autodesk, Inc. (NASDAQ:ADSK)
Number of Hedge Fund Holders: 55
Autodesk, Inc. (NASDAQ:ADSK), known for its professional 3D software programs like the widely-used AutoCAD, serves professionals such as engineers and architects worldwide for designing industrial components, buildings, and 3D models. One notable development in this area is Autodesk, Inc. (NASDAQ:ADSK)’s CAD-to-AR for the Autodesk Inventor, which integrates Unity Software’s game engine with an augmented reality engine, positioning Autodesk, Inc. (NASDAQ:ADSK) as a potential key player for creators in the AR field.
Autodesk, Inc. (NASDAQ:ADSK) reported first-quarter fiscal 2025 non-GAAP earnings of $1.87 per share, beating estimates by 5.06% and marking a 20.6% year-over-year increase. Subscription revenues, which make up 93.9% of total revenues, grew 11.5% year-over-year to $1.33 billion. Maintenance revenues, accounting for 0.8% of total revenues, fell to $11 million from $14 million in the same quarter last year. Meanwhile, other revenues, representing 5.4% of total revenues, rose 22.6% to $76 million.
Additionally, Baird reaffirmed its Outperform rating for Autodesk, Inc. (NASDAQ:ADSK) and maintained a price target of $289. This decision came despite a significant decline in the Architectural Billings Index (ABI) for May, which is often viewed as an indicator of market sentiment and valuation for the company. Baird’s commentary suggests that Autodesk’s fundamentals may not be as negatively impacted as in previous downturns.
However, on another front, activist fund Starboard Value has continued to apply pressure on the company after purchasing a $500 million stake. The activist investor believes that management changes could improve margins and investor relations, thereby enhancing the value of Autodesk, Inc. (NASDAQ:ADSK).
Polen Focus Growth Strategy stated the following regarding Autodesk, Inc. (NASDAQ:ADSK) in its Q2 2024 investor letter:
“Autodesk, Inc. (NASDAQ:ADSK) and Accenture were also notable absolute detractors in the quarter. With Autodesk, most of the stock’s price weakness came in April. The company announced that it would delay the release of its earnings and 10-K filing as it launches an internal investigation regarding its practices on some non-GAAP financial metrics. Upon further analysis, we were encouraged to hear that they were taking this very seriously and being very comprehensive in their investigation. Ultimately, Accenture announced it was closing the investigation and that no re-statements would be required. As discussed in the following section, we chose to exit the position in favor of a more attractive investment.
We sold our small position in Autodesk to help fund our purchase of Shopify. We still think Autodesk is an advantaged business, with 95%+ recurring revenue, dominant in its end market, and nice tailwinds behind digitization in that end market. It should be a durable grower over time, perhaps with continued fits and starts, but we found the risk-reward around Shopify to be more compelling.”
8. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 75
One of the world’s leading semiconductor chip manufacturers by revenue, Intel Corporation (NASDAQ:INTC) plays a significant role in advancing the x86 series of instruction sets, widely utilized in personal computers. The company’s foray into augmented reality focuses on leveraging its chips to power AR devices. Recently, it introduced its new Xeon 6 artificial intelligence chips designed to compete with industry competitors NVIDIA and AMD.
One potential factor influencing INTC’s stock performance is media speculation regarding the company’s possible decision to halt its plans for a $25 billion factory in Israel, although the company has not provided any confirmation regarding these rumors. On a more positive note, Intel Corporation (NASDAQ:INTC)’s Japanese division has partnered with 14 domestic firms to establish a research body aimed at automating “back-end chipmaking processes,” such as packaging. This collaboration comes as Japan and the United States intensify efforts to bolster chip supply chains.
In the first quarter of 2024, Intel Corporation (NASDAQ:INTC) exceeded analyst expectations, reporting an EPS of $0.18 per share, surpassing the forecast of $0.13. This performance was driven by strong sales of previously held inventory and disciplined operating spending. Additionally, the company’s CTO Greg Lavender stated that Intel Corporation (NASDAQ:INTC)’s software initiative is making significant progress, with the company potentially reaching a cumulative software revenue of $1 billion by the end of 2027.
According to Insider Monkey’s second-quarter database, 75 hedge funds held long positions in Intel Corporation (NASDAQ:INTC), down from 77 in the preceding quarter. D. E. Shaw is the largest stakeholder in the company, with 13.99 million shares valued at $433.3 million
Clearbridge Investments mentioned Intel Corporation (NASDAQ:INTC) in its Q2 2024 investor letter. Here is what the fund said:
“One example of a perceived AI loser temporarily cast aside was the Strategy’s top detractor for the quarter, Intel, whose shares declined as it put out financial targets for 2027 that were below Wall Street expectations, and also noted that demand for its core PC and server chips remained depressed. We take a contrarian view of Intel and do not think it will be an AI loser, but rather see underappreciated opportunity as AI PCs ramp over the next few quarters in enterprises, where Intel has a stronghold. We also believe that the company’s technology roadmap remains intact, which we believe will lead to a stabilization in market share in its core PC and server markets. Both markets remain depressed, but we believe that aging infrastructure and the ongoing growth of IT workloads will lead to a cyclical recovery in both markets, which should benefit shares.”
7. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 100
QUALCOMM Incorporated (NASDAQ:QCOM) is a leading American telecom equipment and semiconductor company based in California. The company operates across various high-growth markets, including smartphones and autonomous vehicles, supplying chips to major companies like Samsung, Huawei, and BMW. QUALCOMM’s Snapdragon augmented reality technology is a key player in powering extended reality, augmented reality, virtual reality, and immersive experiences.
Additionally, QUALCOMM Incorporated (NASDAQ:QCOM)’s handset business remains robust, driven by the strong performance of its third-generation Snapdragon platforms designed for high-end smartphones. Revenues from Chinese OEMs surged by over 40% in the first half of fiscal 2024, indicating strong demand beyond major customers.
JPMorgan Chase & Co. recently updated its outlook on QCOM, raising its price target to $235 from $185 and maintaining an Overweight rating on the stock. The forecast anticipates low double-digit revenue growth in handsets (excluding Apple), an approximately 30% compound annual growth rate (CAGR) in the automotive sector, and over 26% CAGR in the Internet of Things (IoT) sector. Additionally, PC-related revenue is expected to grow from $300 million in FY24E to $3.7 billion in FY27E.
As of the second quarter, 100 hedge funds held positions in the company, with stakes totaling $8.82 billion. Matrix Capital Management is the largest shareholder as of the quarter, with a position valued at $1.99 billion.
O’keefe Stevens Advisory stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2024 investor letter:
“During the quarter, the A.I. rally broadened beyond the obvious players of Nvidia, AMD, and hyperscalers. QUALCOMM Incorporated (NASDAQ:QCOM), a long-standing investment, is gaining recognition for integrating artificial intelligence into mobile phones. Qualcomm’s A.I. on-device capabilities enable real-time language translation, improved voice recognition, and sophisticated imaging techniques as A.I. becomes more integral to mobile experiences. Qualcomm benefits by leading the market in providing robust, efficient, and versatile A.I. solutions. A.I. could be the first technology advancement in several years to accelerate the smartphone replacement cycle as users desire these advanced capabilities.”
6. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 107
Adobe Inc. (NASDAQ:ADBE)’s approach to augmented reality is seamlessly integrated into its Creative Cloud platform, utilizing tools like Adobe Aero. Aero enables users to create interactive AR experiences without needing advanced coding skills, making it accessible and user-friendly. This approach taps into the vast community of creative professionals already familiar with Adobe’s software interfaces.
Adobe Inc. (NASDAQ:ADBE)’s revenue increased by 10% year-over-year in the quarter ending May 31. For the fiscal third quarter, the company expects adjusted earnings per share between $4.50 and $4.55, with revenue ranging from $5.33 billion to $5.38 billion. Analysts had predicted $4.48 in adjusted earnings per share and $5.4 billion in revenue. In addition, the company’s Digital Media segment, which includes Creative Cloud subscriptions, reported net-new annualized recurring revenue of $487 million, surpassing the consensus estimate of $437.4 million.
Analysts at Deutsche Bank were particularly optimistic about Adobe Inc. (NASDAQ:ADBE), adding the stock to their Fresh Money list, which highlights top investment ideas. They believe that Adobe’s Creative Cloud division will continue to grow, especially with the incorporation of generative AI products. The firm raised its price target for Adobe Inc. (NASDAQ:ADBE) to $650. Additionally, Mizuho analyst Gregg Moskowitz noted that the potential for AI monetization at Adobe Inc. (NASDAQ: ADBE) is being “underappreciated” by the market.
Alger Focus Equity Fund stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q1 2024 investor letter:
“Adobe Inc. (NASDAQ:ADBE) is a diversified software company that provides document and creative software to a wide audience, including creative professionals and enterprises. Its flagship products, such as Photoshop, Acrobat, and Creative Suite, set industry standards like PDF and Flash, supporting a broad range of Adobe applications. As such, we believe Adobe is a primary beneficiary of the digitization (i.e., converting analog information into digital format) spending theme. Recently, the company announced a generative Al (Gen Al) tool called Firefly which is a family of creative GenAl models which will be incorporated into Adobe’s product suite, which can be utilized by consumers and enterprises to potentially save time and effort by automating tasks like image and text generation. We believe Adobe has the potential to leverage Al by integrating software programs into its existing products and enhancing developer Application Programming Interfaces (APIs) to facilitate Al-driven workflows. While the company delivered strong fiscal first quarter operating results, shares detracted from performance after management lowered their fiscal second quarter guidance with Al related growth acceleration being pushed out into the second half of 2024 due to difficult year-over-year pricing comparison. particularly within their creative vertical segment.”
5. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 108
Based in Santa Clara, California, Advanced Micro Devices, Inc. (NASDAQ:NASDAQ) is a leading global semiconductor company known for developing computer processors and related technologies for both business and consumer markets. AMD plays a crucial role in the AR industry by providing chips that power immersive experiences in various AR and VR devices.
AMD’s market share in discrete graphics continues to grow, and the company’s share of the server processor market is expected to surpass the current 25%. With the upcoming release of the next-generation Instinct GPU product line, including the MI325X expected in Q4 2024, and the Zen 5 architecture promising significant IPC improvements, AMD is well-positioned to maintain its competitive advantage. Additionally, on July 10, the company’s shares rose over 3% following the announcement of an agreement to acquire Silo AI, the largest private AI lab in Europe, in an all-cash transaction valued at approximately $665 million. This acquisition aligns with AMD’s strategy to offer comprehensive AI solutions based on open standards.
Moreover, Advanced Micro Devices, Inc. (NASDAQ:AMD) remains a formidable player in the semiconductor industry, with New Street Research maintaining a Buy rating on the stock, setting a one-year target price at $235 and a long-term target for 2026 at $345. The optimistic outlook is supported by AMD’s consistent revenue growth and market share expansion in the datacenter GPU segment. Additionally, Citi Research raised its price target from $176 to $210, reflecting a positive view of AMD’s AI sales and PC CPU business.
In the second quarter of 2024, 108 hedge funds tracked by Insider Monkey held stakes in Advanced Micro Devices, Inc. (NASDAQ:AMD), with the largest stake held by Ken Fisher’s Fisher Asset Management, valued at $3.75 billion.
Meridian Contrarian Fund stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth quarter 2023 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global semiconductor chip maker specializing in central processing units (CPUs), which are considered the core component of most computing devices, and graphics processing units (GPUs), which accelerate operations running on CPUs. We invested in 2018 when it was a mid-cap value stock plagued by many years of underperformance due to lagging technology and lost market hi share versus competitors Intel and Nvidia. Our research identified that changes and investments made by current management under CEO Lisa Su had, over several years, finally resulted in compelling technology that positioned AMD as a stronger competitor to Nvidia and that its latest products were superior to Intel’s. We invested on the the belief that AMD’s valuation at that that time did not reflect the potential for its technology leadership to generate significant market share gains and improved profits. This thesis has been playing out for several years. During the quarter, AMD unveiled more details about its upcoming GPU products for the AI market. The stock reacted positively to expectations that AMD’s GPU servers will be a viable alternative to Nvidia. Although we pared back our exposure to AMD into strength as part of our risk-management practice, we maintained a position in the stock. We believe AMD will continue to gain share in large and growing markets and is reasonably valued relative to the potential for significantly higher earnings.”
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) powers some of the leading AR and VR devices globally. For instance, NVIDIA Cloud RX delivers VR and AR experiences over 5G and Wi-Fi networks, enabling users to stream AR content wirelessly. NVIDIA Corporation (NASDAQ:NVDA) is also advancing technology to integrate AR into vehicles, with its NVIDIA Drive AR processor collecting data and displaying it to drivers through augmented reality.
Citi reaffirmed its Buy rating and $150 price target for NVIDIA Corporation (NASDAQ:NVDA) after the company announced a new service designed to enhance generative AI capabilities for enterprises. The new offering, NVIDIA AI Foundry, in collaboration with NVIDIA NIM inference microservices, leverages Meta’s openly available Llama 3.1 models. Additionally, analysts at Fundstrat Global Advisors predicted that NVIDIA Corporation (NASDAQ:NVDA)’s revenue could increase tenfold, potentially reaching $1 trillion by the end of the decade.
In Q1 2025, NVIDIA Corporation (NASDAQ:NVDA) reported a remarkable revenue of $26.0 billion, reflecting a 262% increase year-over-year. The company’s non-GAAP earnings per diluted share were $6.12, up 461% year-over-year. This impressive performance was largely driven by the Data Center segment, which achieved record revenue of $22.6 billion, representing a 23% increase quarter-over-quarter and a 427% increase year-over-year.
In the second quarter of this year, Insider Monkey’s research indicated that 179 out of 912 hedge funds held investments in NVIDIA Corporation (NASDAQ:NVDA). Among these, Rajiv Jain’s GQG Partners was one of the largest shareholders, with a $9.34 billion investment in the company.
Polen Focus Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“In the second quarter, the dominant narrative in markets continued to be generative AI (GenAI). If it wasn’t immediately evident from NVIDIA Corporation’s (NASDAQ:NVDA) meteoric rise to among the largest companies in the world, one need only look so far as the Semiconductor and Technology Hardware industries as a gauge of sentiment, collectively accounting for greater than 70% of the Russell 1000 Growth (“the Index”) and 85% of the S&P 500 headline return quarter to date.
Our Portfolio has no exposure to NVIDIA or other Semiconductor companies currently benefiting from demand for foundational AI Hardware. The largest relative detractors in the quarter were NVIDIA, Apple, and Salesforce.
For the second quarter in a row, NVIDIA represented the top detractor to relative performance as the stock climbed another 37%, bringing the year-to-date return to +150%. As of this writing, NVIDIA is the third largest company in the world, but for a brief moment, it surpassed Microsoft to become the largest company in the world. Yet again, the company delivered blowout results that surpassed already lofty expectations, reinforcing the narrative that NVIDIA is the only obvious “AI winner” due to the amount of revenue it is currently generating.”
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 219
Meta Platforms, Inc. (NASDAQ:META) has made a significant shift towards the metaverse, VR, and AR technologies in recent years. The company has ambitious plans in these areas, including the development of smart glasses, Quest headsets, and smartwatches. However, Reality Labs, Meta’s division dedicated to VR and augmented reality innovations, has faced scrutiny due to its substantial financial investment in these emerging consumer platforms.
Despite these concerns, BofA Securities has maintained a Buy rating for Meta Platforms Inc. (NASDAQ:META), with an unchanged price target of $550. This comes after reports suggested that Meta plans to reduce its investment in Reality Labs’ hardware by about 20% through 2026. While Meta has not officially confirmed these budget adjustments, the potential cuts are viewed as a strategic response to the lukewarm reception of VR devices in the market, though there is a renewed interest in AR glasses.
Meta Platforms Inc. (NASDAQ:META) reported a stronger-than-expected profit of $13.5 billion for the most recent quarter, boosting its shares by nearly 7%. Revenue for the April-June period reached $39 billion, surpassing market expectations and marking a 22% increase year-over-year. The California-based tech giant forecasts third-quarter revenue between $38.5 billion and $41 billion.
At the end of Q2 2024, 219 investors reported holding positions in META, with total stakes valued at $42.5 billion, a notable decrease from $46.9 billion in the previous quarter.
Alger Focus Equity Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q1 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) operates the world’s largest social network, with over 3 billion monthly active users across its platform. The company generates revenue predominantly from advertising. which accounts for over 95% of its total revenue, evenly split between North America and international markets. During the quarter, shares contributed to performance following the release of strong fiscal fourth quarter operating results, with revenues and earnings surpassing analyst estimates. The better-than- expected revenues were attributed to strong advertiser demand and Al-driven ad improvements. Moreover, the company materially raised its fiscal first quarter sales and earnings guidance above analysts’ estimates, buoyed by continued strong advertiser demand trends and enhancements to Reels. Advantage+. Click-to-message, and Shop Ads. Further, management noted that ongoing investment in Al is enhancing user engagement and advertiser returns through improved targeting and measurement. Separately, Meta authorized a new share repurchase plan representing approximately 5% of its market capitalization and announced the initiation of its first dividend, implying an approximate 0.4% yield.”
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a tech giant poised to continue advancing its augmented reality offerings and integrating them with its AI technologies. Notably, the company’s HoloLens 2 has significant applications in academia and various professional industries. Microsoft Corporation (NASDAQ:MSFT)’s rapidly expanding cloud business also provides it with a substantial advantage in scaling the metaverse network. With the recent completion of its acquisition of video game giant Activision Blizzard, Microsoft Corporation (NASDAQ:MSFT) may also aggressively expand into the social metaverse space.
Microsoft Corporation (NASDAQ:MSFT)’s revenue grew 15% year-over-year in the fiscal fourth quarter, while net income rose to $22.04 billion, up from $20.08 billion, or $2.69 per share, in the same quarter last year. For the fiscal first quarter, Microsoft Corporation (NASDAQ:MSFT) expects revenue between $63.8 billion and $64.8 billion, indicating a 13.8% growth at the midpoint. Notably, revenue from Azure and other cloud services increased by 29% during the quarter.
Ahead of Microsoft Corporation’s (NASDAQ:MSFT) Q4 earnings report, UBS analysts had identified three key discussion points: Azure’s potential upside from AI and core demand, capital expenditure trends, and the growth trajectory of Office 365. The analysts reiterated a Buy rating and set a $520 price target for MSFT, highlighting the company’s significant involvement in AI as a major driver of future growth.
“CoreWeave’s revs and backlog growth trajectory is outstanding and with Microsoft as a major customer, we view this as a positive for AI infrastructure demand. We’re definitely in a tight IT budget backdrop, but the Azure demand signals are bullish.”
Additionally, Piper Sandler raised its price target for Microsoft Corporation (NASDAQ:MSFT) to $485 from $465, maintaining an Overweight rating. This adjustment reflects optimism about Microsoft’s cloud revenue growth prospects, with the firm’s analysis suggesting that the company’s cloud revenue could potentially double to over $200 billion by the end of fiscal year 2026.
ClearBridge Sustainability Leaders Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“The Strategy trailed the Russell 3000 Index benchmark largely due to our diversified positioning, although we maintain a considerable portfolio allocation to large cap AI-related companies. These positions were indeed among our top contributors in the quarter, such as Microsoft Corporation (NASDAQ:MSFT). The company is finding more ways to deploy AI for sustainability objectives such as its ability to better measure, predict and optimize complex systems, which can help its partner communities reduce wildfire risk.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) offers advanced tools for AR and VR developers through its Amazon Web Services (AWS) platform. The company also provides AR/VR platforms such as Room Decorator, which allows users to visualize various furniture pieces in their space, and Virtual Try-On, which lets users see how clothing might look on them.
Amazon.com, Inc. (NASDAQ:AMZN)’s AWS business is rapidly becoming a powerhouse in artificial intelligence, with operating margins exceeding 37% in the first quarter, 8 percentage points higher than the fourth quarter of the past year and around 10 percentage points above the annual average margin since 2018.
In the first half of 2024, Amazon.com, Inc. (NASDAQ:AMZN)’s operating income soared 141% year-over-year, reaching a record high. The bulk of this profit came from Amazon Web Services, which accounted for 84% of the company’s second-quarter operating profit. Given AWS’s position as a top cloud platform, industry projections indicate annual growth of 15% to 21% through 2028, making Amazon’s performance a key factor in profit forecasts.
Insider Monkey’s research for the March quarter of 2024 showed that 308 out of the 912 hedge funds tracked held stakes in Amazon.com, Inc. (NASDAQ:AMZN). The largest hedge fund investor was Ken Fisher’s Fisher Asset Management, with a stake valued at $8.46 billion.
Patient Capital Opportunity Equity Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) moved higher throughout the second quarter as AI demand helped to reaccelerate growth in their AWS business. It looks as though the cloud business is finally past the customer cost optimization period with customers restarting their cloud migrations as well as expanding spend on AI projects. Despite the top and bottom-line improvement seen in the first quarter, the company is significantly underearning its long-term potential as it continues to reinvest aggressively in the business. With 80% of global retail sales still being done in physical stores and 85% of global IT spending still on-premises, we see a long-run way for the dominant player in the cloud, retail, and increasingly logistics and advertising space.”
While we acknowledge the potential of AMZN, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the stocks mentioned on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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