In this article, we will take a look at the 10 Best ESG Stocks To Buy Now.
Defining ESG can sometimes be straightforward: it’s a finance and investing approach centered on managing risks related to environmental factors, social issues, and corporate governance. Although the concept emerged about two decades ago through a collaboration between United Nations officials and the finance industry, who argued that addressing ESG risks like climate change, labor disputes, and poor corporate governance can safeguard investments, it wasn’t until the late 2010s and into the 2020s that ESG evolved into a more proactive movement, rather than a reactive one.
A report from the World Meteorological Organization (WMO) confirmed that 2023 was the warmest year on record, with the global average near-surface temperature reaching 1.45°C—closer than ever to the 1.5°C lower limit set by the Paris Agreement on climate change. Another report from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) also reveals that climate-driven disasters are already surpassing scientists’ initial predictions. This urgency has sparked increased interest in niche yet rapidly expanding sectors of ESG investing, such as climate-transition funds and catastrophe bonds. In 2024, global investment in clean energy is expected to hit a significant milestone, doubling the amount allocated to fossil fuels. The International Energy Agency’s (IEA) 2024 World Energy Investment report forecasts that total global energy investment will surpass $3 trillion this year, with $2 trillion directed toward clean technologies like renewables, electric vehicles, and nuclear power. Furthermore, Bloomberg reports that global investment in the energy transition surged by 17% last year, reaching a record $1.8 trillion, with this growth trend continuing. Former VettaFi financial futurist Dave Nadig said:
“If you solely look at climate as your window, you’ll probably not end up not owning a lot of energy companies, not owning a lot of miners [and] not owning a lot of steel companies. So, you end up with something that looks like services, healthcare, and technology, which is a very strong bet to take.”
That said, U.S. funds with ESG goals seem to be losing popularity as of late. Despite the broader stock market’s gains, assets in the sector have dropped to around $335 billion, down from a peak near $365 billion at the end of 2021. Political criticism of ESG in the country has also has led some investors to reconsider their strategies within the sector. Moreover, ESG stocks are also grappling with other significant challenges, such as a key climate regulation from the U.S. Securities and Exchange Commission that is currently under legal dispute, and the Federal Reserve’s resistance to including environmental risks in global financial regulations.
However, despite criticism labeling the ESG sector as “woke” investing, many U.S. firms remain dedicated to ESG initiatives. Investor interest also remains somewhat robust, as these funds continue to attract attention for considering both financial performance and environmental, social, and governance factors. While there have been big outflows from the sector, many institutional investors are approaching climate risks and opportunities in their portfolios with a heightened sense of urgency, with an August analysis published in the Harvard Business Review showing that nearly three-quarters of the corporate climate commitments announced in 2021 had been fully or partially achieved. JPMorgan Chase & Co. and Citigroup Inc. are among the top global underwriters of green bonds this year, while Bank of America, alongside other prominent investment banking firms, recently sponsored ESG-focused conferences in New York and Chicago.
With that in mind, ESG funds saw strong performance in the first half of the year, largely driven by their substantial investments in technology stocks. Most ESG funds that aren’t focused on renewable energy tend to allocate more to tech stocks while maintaining a lower exposure to oil and gas stocks. In the first six months of the year, the S&P 500 rose by approximately 15%, and nearly 60% of this gain was driven by the majority of the ‘Magnificent Seven’, which are often among the largest holdings in ESG funds.
Chinnapong/Shutterstock.com
Our Methodology
To create the list of top ESG stocks to buy now, we chose companies from the Vanguard ESG U.S. Stock ETF and ranked them by their percentage weight in the fund, listed in ascending order. In addition, we used hedge fund sentiments regarding each stock to illustrate how well these stocks hold up in the eyes of hedge fund investors. These were taken from Insider Monkey’s Q2 2024 database.
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. Tesla, Inc. (NASDAQ:TSLA)
Percentage of holdings in the fund: 1.28%
Number of Hedge Fund Holders: 85
Tesla, Inc. (NASDAQ:TSLA) is the global leader in the electric vehicle (EV) industry. In the past year, Tesla, Inc. (NASDAQ:TSLA) continued to showcase this leadership in the electric vehicle market by significantly bolstering its revenue through carbon credit sales. In 2023 alone, Tesla, Inc. (NASDAQ:TSLA) generated $1.79 billion from these sales, adding to the nearly $9 billion amassed since 2009. Even with a slight year over year dip in quarterly carbon credit income, the automaker’s annual revenue from these credits reached a record high that year. This outcome defies earlier predictions that regulatory credit income would decline as more competitors enter the EV market.
Tesla, Inc. (NASDAQ:TSLA)’s earnings for the second quarter fell short of expectations, driven by a decline in automotive sales for the second consecutive period. Despite a 2% revenue increase to $25.43 billion compared to the same quarter last year, automotive revenue dropped by 7% to $19.9 billion from $21.27 billion. This figure includes $890 million in regulatory credits, more than triple what it was a year ago.
Despite Tesla, Inc. (NASDAQ:TSLA)’s recent challenges, Truist Securities analyst William Stein remains optimistic about the company’s shift from traditional car manufacturing to AI, which he believes could unlock significant value. On August 14, he reaffirmed his ‘hold’ rating on Tesla, Inc. (NASDAQ:TSLA) with a price target of $215, representing a 6.76% potential upside. Stein highlighted that only about a third of the company’s current revenue and profit comes from its automotive and energy storage products, with the remainder driven by its advanced driver-assistance systems, including self-driving software, robotics, and AI training services. He stated, “Based on our current estimates, which we do not consider particularly conservative, we value these [car and energy-storage] businesses at $267 billion, or $75 per share.”
Baron Partners Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) manufactures electric vehicles, related software and components, and solar and energy storage products. The stock contributed as Tesla continued to drive vehicle manufacturing costs lower, accelerate the launch of new models, and invest heavily in its lucrative AI initiatives. Shareholders reaffirmed the CEO’s compensation plan, alleviating personnel and legal uncertainties. Despite material operational complexities resulting in significant shutdowns of key manufacturing facilities and lower sales volume, Tesla presented better-than-expected margins in the quarter. It expects to launch a lower cost model as soon as late 2024, which should result in accelerated revenue growth, reduced manufacturing costs, and increased factory utilization. The company continued to advance its autonomous driving capabilities, expanding its already significant data centers and developing its humanoid robot Optimus. These investments increased confidence in the attractive growth opportunities that remain ahead.”
9. JPMorgan Chase & Co. (NYSE:JPM)
Percentage of holdings in the fund: 1.39%
Number of Hedge Fund Holders: 111
JPMorgan Chase & Co. (NYSE:JPM) operates globally across sectors like Consumer & Community Banking, Corporate & Investment Banking, Commercial Banking, and Asset & Wealth Management. In 2023, the firm achieved a 15% reduction in Scope 1 and Scope 2 greenhouse gas emissions from 2019 levels, advancing toward its goal of carbon neutrality by 2030. JPMorgan Chase & Co. (NYSE:JPM) also facilitated over $200 billion in green financing, including renewable energy projects and green bonds, contributing to its $2.5 trillion sustainable development financing target by 2030. Additionally, the bank invested over $500 million in community development programs, focusing on affordable housing and small business support in underserved communities.
On the financial front, JPMorgan Chase & Co. (NYSE:JPM) delivered a robust financial performance in Q2 2024, reporting net income of $18.1 billion and earnings per share of $6.12 on $51 billion in revenue. After adjusting for one-time items, net income was $13.1 billion, with an EPS of $4.40 and revenue of $43.1 billion. The quarter highlighted the bank’s strengths across various segments, including investment banking, asset and wealth management, and Cards. Additionally, JPMorgan Chase & Co. (NYSE:JPM) repurchased $4.9 billion of its shares, contributing to a 30 basis point increase in its Common Equity Tier 1 (CET1) ratio.
Following the earnings release, Citi raised its price target for JPMorgan Chase & Co. (NYSE:JPM) from $205.00 to $215.00, while maintaining a Neutral rating. BMO Capital also reaffirmed its Market Perform rating with an unchanged price target of $205.00.
Carillon Tower Advisers said the following about JPMorgan Chase & Co. (NYSE:JPM) in its fourth-quarter 2023 investor letter:
“PNC Financial and JPMorgan Chase & Co. (NYSE:JPM) performed well due to more benign inflation data, which the market likely interpreted as a sign that a recession is now less likely to occur. Recall that historically speaking, banks are hyper-cyclical stocks and typically will trade lower if investors foresee a recession, because recessions tend to trigger loan losses.”
8. Broadcom Inc. (NASDAQ:AVGO)
Percentage of holdings in the fund: 1.62%
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO), a global leader in technology, specializes in designing, developing, and supplying a wide range of semiconductor, enterprise software, and security solutions. Following its significant acquisition of VMware in November 2023, the company plans to reassess its baseline and set new Scope 1, Scope 2, and Scope 3 greenhouse gas emission reduction targets. According to the company’s ESG report, these new targets will align with the UN Paris Agreement and the Science Based Targets initiative (SBTi) goal to limit global warming to 1.5° Celsius above pre-industrial levels.
In a recent note, TD Cowen identified Broadcom Inc. (NASDAQ:AVGO) as a stock poised to benefit from the surge in AI spending. Analysts at the firm noted there are “no signs” of slowing demand for generative AI and emphasized that Broadcom recently raised its full-year AI revenue outlook. The company now expects AI-related revenue to reach $11 billion in 2024.
Broadcom Inc. (NASDAQ:AVGO) exceeded expectations in the second quarter, reporting $12.49 billion in sales and earnings per share of $10.96. Additionally, the company raised its AI-related revenue forecast to over $11 billion for the current year. These developments follow Broadcom’s recent 10-for-1 stock split, leading several analyst firms to adjust their price targets. Cantor Fitzgerald maintained an Overweight rating and set a new price target of $200. Oppenheimer also lowered its price target to $200 but kept an Outperform rating, while TD Cowen increased its target to $210 and maintained a Buy rating.
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. The company strategically focuses its research and development resources to address niche opportunities in target markets and leverage its extensive portfolio of U.S. and other patents and other intellectual property to integrate multiple technologies and create system-on-chip component and software solutions that target growth opportunities. Broadcom designs products and software that deliver high performance and provide mission-critical functionality. The company has a history of innovation in the semiconductor industry and offers thousands of products that are used in end products such as enterprise and data center networking, home connectivity, “set-top boxes broadband access”, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom differentiates itself through its high-performance design and integration capabilities and focuses on developing products for target markets where it believes it can earn attractive margins.
We view Broadcom’s semiconductor business as being very well positioned to benefit from secular growth in data center networking, which is being driven by AI and cloud computing. The company continues to invest in research and development, and we see this as a competitive advantage for the company. Broadcom’s infrastructure software business is a recurring revenue business model that provides mission-critical mainframe support software to its customer base. The recent VMware acquisition will enhance this business strategy and accelerate the growth rate of this business unit, as VMware’s product suite includes key tools for AI server upgrades. Our long-term investment thesis is supported by Broadcom’s success in its strategy of maintaining technology and market share leadership in mission-critical markets with high switching costs and deep profit pools.”
7. Eli Lilly And Company (NYSE:LLY)
Percentage of holdings in the fund: 1.79%
Number of Hedge Fund Holders: 100
Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical firm renowned for its innovative medications. This past year, the company released its 2023 ESG report, highlighting significant strides toward its sustainability goals. The company has reduced greenhouse gas emissions by more than 20% between 2020 and 2022, despite notable business growth. The report also showcases Eli Lilly’s commitment to diversity, with minority group members now holding 25% of U.S. management positions and women occupying 49% of management roles globally. Additionally, the Lilly 30×30 initiative has nearly doubled patient outreach in resource-limited settings, reaching 13 million people in 2022, up from 7.3 million in 2020.
Investor sentiment toward Eli Lilly and Company (NYSE:LLY) surged after the company’s second earnings upgrade this fiscal year. Second-quarter revenue grew 36% to $11.3 billion, driven by strong sales of diabetes and obesity treatments Mounjaro and Zepbound, along with breast cancer therapy Verzenio. The company expressed increased confidence in overcoming manufacturing challenges and raised its full-year revenue guidance midpoint by $3 billion to $46 billion.
In a recent update to its large-cap rankings, Wells Fargo analysts highlighted Eli Lilly and Company (NYSE:LLY)’s robust pipeline and potential to surpass market expectations in the coming years. The firm named Eli Lilly & Co. (NYSE:LLY) as its new top pick among large-cap pharmaceutical stocks, anticipating the company will outperform 2025 consensus estimates. Key drivers include upcoming events like the Surpass-CVOT trial in 2025 and pivotal results for Orforglipron and Retatrutide in 2025 and 2026.
The LLY stock recently hit an all-time high of $967, marking a 75.35% increase over the past year. Additionally, Eli Lilly and Company (NYSE:LLY) completed its acquisition of Morphic Holding, Inc., bolstering its immunology portfolio with MORF-057, a therapy for inflammatory bowel disease. The company also raised approximately $4.96 billion through a note sale, with plans to use the proceeds for general corporate purposes, including debt repayment and potential acquisitions.
Baron Health Care Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its first quarter 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical company that discovers, develops, manufactures, and sells medicines in the categories of diabetes, oncology, neuroscience, and immunology, among other areas. Stock performance was strong due to robust fourth quarter sales of Mounjaro/ Zepbound, better-than-anticipated initial guidance for fiscal year 2024, and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises. We continue to think Lilly is well positioned to grow revenue and earnings at attractive rates through the end of the decade and beyond.”
6. Alphabet Inc. (NASDAQ:GOOGL)
Percentage of holdings in the fund: 2.06%
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL), the parent company of Google, has introduced the Google Renewable Energy Addendum, a new initiative asking its largest hardware manufacturing suppliers to commit to matching 100% of their energy use with renewable sources by 2029. This program is part of Google’s broader effort to reduce its carbon footprint. The company has set ambitious environmental goals for 2030, including achieving net-zero emissions across its operations and value chain, and reducing its combined Scope 1, 2, and 3 emissions by 50% from 2019 levels. To achieve this, Google plans to invest in both nature-based and technology-based carbon removal solutions to offset any remaining emissions.
Alphabet Inc. (NASDAQ:GOOGL) delivered strong Q2 2024 results, with revenue increasing 15% year-over-year and diluted EPS rising 31%. The Google Cloud Platform (GCP) saw nearly 29% year-over-year growth, strengthening its position in the cloud market. Analysts have set a price target of $203.74, indicating a potential upside of 25.03% as of August 20.
Additionally, a recent UBS report highlights Alphabet Inc. (NASDAQ:GOOGL) as a key player across all three layers of the AI value chain: enabling, intelligence, and application. The company’s Tensor Processing Units (TPUs) and Google Cloud Platform position it as an AI enabler, while its Gemini project strengthens its role in the intelligence layer. These factors suggest the company could significantly benefit from the projected $1.2 trillion AI market opportunity by 2027.
Patient Capital Opportunity Equity Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
5. Meta Platforms, Inc. (NASDAQ:META)
Percentage of holdings in the fund: 2.51%
Number of Hedge Fund Holders: 219
Meta Platforms, Inc. (NASDAQ:META) ranks among the top five on our list of the best ESG stocks to buy now. The social media giant achieved net-zero emissions across its global operations in 2020 and is now focused on reaching net-zero emissions across its entire value chain by 2030. As part of this effort, Meta is actively engaging with its suppliers to decarbonize its supply chain, aiming for at least two-thirds of them to set Science-Based Targets initiative (SBTi)-aligned reduction goals by 2026.
On August 8, Loop Capital raised its price target for Meta Platforms Inc. (NASDAQ:META) from $550 to $575, while maintaining a Buy rating on the stock. This upgrade follows Meta’s strong financial performance, which showed impressive growth and outpaced other major advertising platforms, including Amazon Ads, for the second consecutive quarter.
Meta Platforms Inc. (NASDAQ:META) also exceeded analyst expectations with its latest quarterly results, suggesting that its significant investments in AI are likely to yield further benefits. Following the results, Citi expressed increased optimism about Meta’s prospects, citing gains in user engagement, monetization, and expanding margins. Citi subsequently raised its price target for Meta from $550 to $580.
Polen Capital, an investment management company, released its second-quarter 2024 investor letter and mentioned Meta Platforms, Inc. (NASDAQ:META). Here is what the fund said:
“In the second quarter, the top relative contributors to the Portfolio’s performance were all names we do not hold: Home Depot, Meta Platforms, Inc. (NASDAQ:META), and AbbVie. Meta Platforms delivered robust results in the period, with revenue growth accelerating in the first quarter. However, revenue comparisons for Meta will become more difficult from here, and its guidance for 2Q revenue fell below market expectations. After the company’s “year of efficiency,” where it cut costs in its core business, management is now indicating another ramp-up in GenAI and metaverse spending, spurring concerns about future profit margins. Metaverse spending, by our calculations, is now over $20 billion per year with little to no expected return on the foreseeable horizon.”
4. Amazon.com, Inc. (NASDAQ:AMZN)
Percentage of holdings in the fund: 3.55%
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) initially aimed to reach net-zero carbon emissions by 2030 and power its operations with 100% renewable energy, a goal it claims to have achieved seven years ahead of schedule. In July 2020, Amazon.com, Inc. (NASDAQ:AMZN) launched The Climate Pledge Fund to accelerate the development of sustainable technologies and services in line with The Climate Pledge. Additionally, Amazon.com, Inc. (NASDAQ:AMZN) is backing nearly 1.7 GW of capacity across six offshore wind farms in Europe, which, when fully operational, are expected to generate enough energy to power 1.8 million average European homes. These initiatives make Amazon.com, Inc. (NASDAQ:AMZN) the world’s leading corporate buyer of offshore wind energy.
In the first half of 2024, Amazon.com, Inc. (NASDAQ:AMZN) saw its operating income surge 141% year-over-year, reaching a record high. Amazon Web Services (AWS) was the primary driver of this profit, contributing 84% of the company’s second-quarter operating income. As a leading cloud platform, AWS is projected to grow annually by 15% to 21% through 2028, making Amazon’s performance a crucial factor in future profit forecasts.
Amazon.com, Inc. (NASDAQ:AMZN) is also a dominant force in digital advertising, surpassing a $50 billion annual run rate with 20% growth. The company generated $53 billion in free cash flow over the past year and remains appealing at its current share price, bolstered by strong cash flow yields.
Morgan Stanley recently reiterated its positive outlook on Amazon.com, Inc. (NASDAQ:AMZN), maintaining an Overweight rating and a $210 price target. The firm remains optimistic about AMZN’s financial prospects, noting that the stock is currently trading at 21 times Morgan Stanley’s projected 2026 free cash flow. This valuation suggests a 30% growth rate in free cash flow per share CAGR from 2024 to 2026, representing a roughly 30% discount compared to the median growth-adjusted multiple of Amazon’s mega-cap tech peers.
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.”
3. NVIDIA Corporation (NASDAQ:NVDA)
Percentage of holdings in the fund: 6.73%
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) leads the market in designing and selling Graphics Processing Units (GPUs), a sector that has surged due to the growing demand for artificial intelligence models. The company’s Blackwell GPUs are up to 20 times more energy-efficient than traditional CPUs for specific AI and high-performance computing (HPC) tasks. Additionally, by the end of FY25 and each year after, NVIDIA Corporation (NASDAQ:NVDA) aims to achieve and maintain 100% renewable electricity for its offices and data centers under operational control.
NVIDIA Corporation (NASDAQ:NVDA) recently announced plans to increase production of its Blackwell chips in the second half of 2024. Experts predict that its current-generation Hopper chips will continue to see strong sales through the end of the year, with Blackwell chips likely becoming a significant sales driver by then. Despite a reported delay in the release of NVIDIA Corporation (NASDAQ:NVDA)’s GPU architecture, Goldman Sachs remains optimistic that management commentary and upcoming supply-chain data could boost NVIDIA’s earnings outlook.
Stifel also maintained its Buy rating on NVIDIA Corporation (NASDAQ:NVDA) shares with a price target of $165.00 ahead of the company’s second-quarter fiscal 2025 results. The firm is optimistic about the demand for NVIDIA’s H-Series SKUs and expects that the company’s July results and October guidance could exceed expectations.
Patient Capital Opportunity Equity Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) continued to lead both the market and the portfolio, remaining a top performer in the period gaining 36.7%. Nvidia is the market leader in designing and selling Graphics Processing Units (GPU), which has recently benefited from the insatiable demand of artificial intelligence (AI) models. The company currently captures 92% market share of data center GPUs and grew revenue, earnings and free cash flow (“FCF”) an astounding 126%, 392%, and 610%, respectively, over the last year. While we expect competition to increase, we think NVDA can continue to maintain top market share. While many are concerned with backlog times shortening, we think the rollout of the B100, which promises 2.5x better performance for only 25% more cost, later this year will create more shortages. With leading edge technology, an increasing innovation cycle and strong cash generation, the company is well positioned for the increased adoption of artificial intelligence (AI).”
2. Microsoft Corporation (NASDAQ:MSFT)
Percentage of holdings in the fund: 6.79%
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) stands out as a leading ESG stock, much in part due to its strategic investment in OpenAI, the creator of ChatGPT, which has strengthened its position across hardware, software, and global cloud services. The company is committed to sourcing 100% renewable energy by 2025, becoming carbon negative by 2030, and offsetting all historical carbon emissions since its founding in 1975 by 2050.
Microsoft Corporation (NASDAQ:MSFT) shares recently dipped after the company’s latest quarterly results revealed slower-than-expected growth in its Cloud business. For the current quarter, Microsoft Corporation (NASDAQ:MSFT) projects revenue between $63.8 billion and $64.8 billion, slightly below the $65.07 billion estimate, with Azure revenue anticipated to grow by 28% to 29% year over year. Additionally, the company’s Office commercial customer sales surged to $48 billion, marking a significant increase from last year’s 10% growth, likely fueled by the adoption of Copilot Pro subscriptions.
BMO Capital Markets maintained its positive outlook on Microsoft Corporation (NASDAQ:MSFT), keeping an Outperform rating and a $500 price target. The firm emphasized Microsoft Corporation (NASDAQ:MSFT)’s strong position in artificial intelligence and its diverse product portfolio as key reasons for its top pick status. Although BMO acknowledged a less-than-stellar June quarter report and guidance for about 29% year-over-year growth in Azure for the September quarter, Microsoft’s management projected an acceleration in Azure growth in the second half of fiscal 2025 during the last earnings call. BMO’s analysis suggests that while Azure’s growth has been limited by capacity constraints in recent quarters, these challenges are expected to ease in the latter half of FY25, supported by a strong demand pipeline.
Polen Focus Growth Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“The top absolute contributors were Alphabet, Microsoft Corporation (NASDAQ:MSFT), and Amazon. Microsoft was another top absolute contributor in the quarter, speaking to a growing appreciation for all the ways the company has an opportunity to monetize GenAI, be it in its Office suite or Azure cloud business. In the latter case, it contributed 7% to Azure’s revenue growth in the most recent quarter. We believe Microsoft remains a highly advantaged business with many secular tailwinds driving durable growth for the foreseeable future, even at its immense scale.”
1. Apple Inc. (NASDAQ:AAPL)
Percentage of holdings in the fund: 7.32%
Number of Hedge Fund Holders: 184
Apple Inc. (NASDAQ:AAPL) is an obvious choice for ESG investors, given its strong commitment to labor rights, environmental responsibility, and ethical business practices across its supply chain. The tech giant has reduced its overall greenhouse gas emissions by over 55% since 2015, marking significant progress toward its ambitious Apple 2030 goal of achieving carbon neutrality across its entire value chain by the decade’s end.
On the business front, Apple Inc. (NASDAQ:AAPL) continues to demonstrate robust financial performance and growth potential, solidifying its leading position in the technology market. For fiscal Q3, the company reported revenue of $85.8 billion, a 5% increase year-over-year, surpassing analyst expectations of $84.5 billion. Earnings per share also rose by 11% to $1.40, exceeding the anticipated $1.35.
On August 2, Goldman Sachs raised its price target for Apple Inc. (NASDAQ:AAPL) from $265 to $275 while maintaining a Buy rating. The firm highlighted Apple’s strong performance in the iPhone segment and sustained momentum in its services business. Goldman Sachs anticipates a significant multi-year iPhone replacement cycle, bolstering its confidence in Apple’s future growth.
On the other hand, MoffettNathanson initiated coverage of Apple Inc. (NASDAQ:AAPL) with a Neutral rating and a $211 price target. Although the firm acknowledged Apple’s strong AI strategy, the analysts also noted that the market has already priced in these developments. MoffettNathanson emphasized that while Apple Inc. (NASDAQ:AAPL) is well-positioned to lead in AI, its advantage lies in the trust of over one billion users, particularly concerning personal data like contacts and emails, which Apple Inc. (NASDAQ:AAPL) keeps securely under its control.
Polen Focus Growth Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“The largest relative detractors in the quarter were NVIDIA, Apple Inc. (NASDAQ:AAPL), and Salesforce. In a reversal from some of the concerns driving the stock down in the first quarter, Apple re-emerged as a top performer in the second quarter. The company reported better-than-feared results in its iPhone segment that quelled concerns over weakness in China. Additionally, the company forecast a return to sales growth and announced a $110 billion stock buyback plan, the largest in U.S. history. Later in the period, at its Worldwide Developers Conference, Apple introduced long-awaited new AI features that spurred some optimism around an upgrade cycle for the iPhone and, more generally, the important role Apple may be able to play in the emerging AI landscape. We continue to study Apple closely, which we previously owned the company for many years during its growth phase, to determine if it is poised for another significant revenue and earnings growth period.”
While we acknowledge the potential of AAPL, 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 ones mentioned on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
