In this article, we will examine the 10 Best Cloud Stocks To Buy According to Hedge Funds.
Based on a report by MarketsandMarkets, the global cloud industry in 2025 is projected to grow by 15.1% to $1,256.8 billion. While 2024 was marked by high adoption by the BFSI sector, the year ahead should see applications being developed that meet the unique specifications of each industry. North America and Europe should capture the bulk of the market size but APAC is expected to register the fastest growth. The integration of AI with cloud platforms accompanied by new service models is another key development expected to shape this industry.
Cloud ETFs have generated generous returns of 2.74%, 28.54% and 11.00% for 1-month, 6-month and 1-year tenors. One would assume that the underlying stocks would continue to perform well, propelled by strong industrial tailwinds.
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For this article we picked 10 cloud stocks trending on latest news. With each stock we have mentioned the number of hedge fund investors. Why are we interested in 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).
A technical analyst using a cloud-based analytics dashboard for financial services.
10. Hubspot Inc (NYSE:HUBS)
Number of Hedge Fund Investors: 63
Bank of America considers HubSpot (NYSE:HUBS) as one of the top software picks for 2025, backed up by strong demand for its cloud-based infrastructure from small and medium enterprises. Not only is it leveraging inorganic growth by acquiring AI-based companies like Frame AI, but the partnership with firms offering cloud services is also paying dividends. Firms like Cloud Technology Solutions (CTS) have used the Hubspot platform to transform a large volume of data into meaningful insights and increased leads by 33%.
Revenue has grown 20% y-o-y in Q3-2024 backed up by a 23% y-o-y growth in the number of customers. The scalability and adaptability to different systems across its cloud interface is what makes the product versatile and customer-friendly. In its latest earning call, there was a clear focus on embedding innovative AI technology across its entire platform. It showcased more than 200 new innovations in its latest annual conference, INBOUND, most of which come at a reasonable cost due to availability on the cloud. The guidance for next quarter is strong and may exceed expectations if it goes on improvising its product to attract new clients.
9. Snowflake Inc (NYSE:SNOW)
Number of Hedge Fund Investors: 71
Snowflake (NYSE:SNOW) offers data analytics and management software that runs on cloud computing platforms of Google, Microsoft and Amazon. It has been proactively investing in its cloud capabilities and is looking to invest $20 million for training more than 100,000 users on Snowflake AI Data Cloud by 2027. It has also teamed up with Anthropic, a research and security company in the AI domain, to enhance analytics and visualization.
The company registered a 23% y-o-y growth in Q3 earnings but it incurred an operating loss amidst shrinking margins and escalating marketing and R&D expenses. It caters to 10,618 clients with 542 customers generating more than $1 million in revenue. It has shown interest in high-growth markets like ASEAN, LATAM and the Middle East, spending significant amounts in training and developing cloud capabilities. The next fiscal should see SNOW deliver better performance by bringing in new clients with a lesser cost burden.
8. ServiceNow Inc (NYSE:NOW)
Number of Hedge Fund Investors: 78
JMP Securities has raised the target price for ServiceNow Inc (NYSE:NOW) from $1,000 to $1,300. They are set to benefit from increased government spending and robust demand for its product suites that include an end-to-end workflow automation cloud platform. New deal wins and the strong performance of its core businesses have been a constant feature of the company in recent quarters.
NOW expects a 21% y-o-y increase in its Q4 earnings, driven by new client winnings and larger ticket sizes. The latest update, Xanadu is expected to be a game changer, providing industry-specific solutions across sectors like telecom, finance, media and technology. Its Agentic AI, a customer service application, has reduced the time to resolve an issue and is a big move to improve customer relationships. While its portfolio of products and client base has increased, the rollout of 150 innovations to secure governance and compliance will ensure a safer platform for its customers. The company also enjoys a gross margin close to 80% with profitability moving in line with expectations.
7. Workday Inc (NASDAQ:WDAY)
Number of Hedge Fund Investors: 84
Workday Inc (NASDAQ:WDAY) offers enterprise cloud solutions that cater to areas like Finance and HR. Guggenheim has upgraded its rating on the stock from Sell to Neutral, as the company adopts a new strategy of targeting smaller businesses. It also continues to focus on innovation by working closely with its partners and service providers.
The recent quarterly performance has been robust, with revenue growing 15.8% compared to the same period last year. Operating margin increased from 4.7% to 7.6%, with diluted net income per share at $0.72, 67% higher than the previous year. It is not surprising that it was named a leader at the Gartner Magic Quadrant for Cloud ERP for Service-Centric Enterprises. WDAY continues to capture new clients amidst a strong culture of innovation. A number of its customers have subscribed to the full suite of products offered in Workday Financial Management and Workday Human Capital Management (HCM). A newer version of Workday Assistant is set to streamline the Finance and HR process.
6. Oracle Corp (NYSE:ORCL)
Number of Hedge Fund Investors: 91
Oracle Corp (NYSE:ORCL) recently announced a $100 billion JV with SoftBank and OpenAI to fund the expansion of data centers in a bid to emerge as a big cloud player. ORCL currently has only a 5% share in this space, falling far behind AWS (40%) and Microsoft (16%). The expected capex should enable ORCL to generate $30-40 billion in revenue from cloud infrastructure sales, a 3-4 fold increase from its current sales of $10 billion.
Bloomberg Consensus estimates that the cloud business will outpace ORCL’s overall growth, with the earnings expectation already up by 0.2%. The firm has already made inroads in enabling countries like the UAE and Saudi Arabia to enhance their cloud adoption. There is also a plan to train 350,000 people in the Middle East that would enable governments and businesses to leverage cloud systems with AI capabilities. The investment in this region is expected to be 5 times higher in the next few years.
5. Alibaba Group (NYSE:BABA)
Number of Hedge Fund Investors: 115
Alibaba Group (NYSE:BABA) has forayed into the cloud computing space through Alibaba Cloud, a platform that offers services that include databases, networking and analytics to businesses, developers and government. It offers an open ecosystem that is constantly upgraded to offer an enhanced experience to its stakeholders.
BABA offers free training and co-marketing opportunities, making it a widely accepted cloud platform. The platform has found diverse applications that include supporting TNG eWallet in Malaysia, ZA digital bank in Hong Kong and the MiniMax AI platform in China. This cloud business has around 12,000 partners with a revenue of $4.1 billion in the quarter ending September, growing 7% y-o-y. The business supports more than 12,000 partners and is looking to make inroads in the South Eastern market with collaborations in the pipeline that include Telkom from Indonesia and Yell Group from Thailand. In a bid to incentivize the adoption of cloud products, BABA had earlier reduced the price of its Large Language Models by 85%.
4. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 116
Salesforce Inc (NYSE:CRM) is a company that has leveraged cloud technology to improve customer relationship management. Sales Cloud by CRM is a cloud-based solution that can be used by large enterprises and smaller businesses.
CRM expects total sales of $10 billion, implying a 7-9% y-o-y growth, driven by strong demand for its cloud services like Sales Cloud. The launch of Agent Force, an autonomous AI agent has been instrumental in CRM closing more details. There have been more than 200 Agent Force deals in Q3 and major players like FedEx, Accenture and IBM already use the digital labor system. A raised full-year revenue guidance bodes well as the company gears up for a global expansion. It has pledged to upskill 30,000 individuals in Saudi Arabia and plans to invest $500 million in Argentina. By partnering with HCL, CRM is also looking to modernize its cloud infrastructure, particularly in the finance industry.
3. Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 202
Google Cloud is the cloud platform of Alphabet Inc (NASDAQ:GOOG) that has a 13% market share in Q3-24, up by 200 basis points from a year ago. This segment has been growing at a rapid rate of 35%, generating a quarterly revenue of $11.4 billion. With deep pockets and an inclination to venture into untapped markets, there have been a number of key developments that suggest that the cloud business will continue to thrive.
GOOG has invested $1 billion in the cloud infra of Dammam, Saudi Arabia and $2 billion in data centers across Malaysia. It has pumped an additional $1 billion into funding to Anthropic, an AI safety and research company that had already received $2 billion earlier. GOOG has been actively developing the cloud infrastructure across the globe and at the same time building partnerships with big firms like Walmart, Ford, CVS and Verizon. The investment in the cloud infrastructure of emerging countries also provides an opportunity to absorb smaller players into the cloud platform.
2. Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Microsoft Corp (NASDAQ:MSFT) has the second largest market share in the cloud computing niche with Azure having a market share of 23-25%. This segment has been growing by over 20%, driven by the increasing acceptance of AI services on the cloud platform. The revenue should reach $200 billion by 2028 and serves 85% of the Fortune 500 companies.
MSFT has entered into a revenue-sharing deal with OpenAI that would enable Azure to access OpenAI till 2030. This deal should benefit the Azure customers by providing them access to leading models. The estimated capex for supporting cloud systems and AI workload is $80 billion for the next fiscal. Half of this will be done in the US. Other key investments include a $3 billion investment in India to expand Azure cloud and AI capacity and major capacity expansion in the Middle East. While earnings in the next quarters are expected to slow, the investment in cloud and AI business should bear results from 2025.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Investors: 286
Amazon.com, Inc. (NASDAQ:AMZN) is the leader with AWS commanding almost a third of the cloud market share. This business grew by 19% y-o-y with the Q3 revenue reaching $27.5 billion. AMZN has leveraged the government spending on tech infra and has been a key provider of services to the US government. In a recent development, AWS has partnered with Booz Allen to ensure a seamless digital transformation for federal agencies. The solutions include cloud deployment, high-performance computing and cybersecurity.
AWS is also looking to make inroads in key growth markets like India, Mexico and the Middle East. The majority of AMZN’s capex of $74 billion in 2024 was directed towards AWS. This number is expected to rise in 2025. Investments for Saudi Arabia, Japan, the US, Europe and India have already been planned out for the next fiscal. The capacity expansion would enhance reliability and at the same time broaden the client base that is currently heavily concentrated towards large enterprises.
While we acknowledge the potential of AMZN as an investment, 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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