10 Best Fundamental Stocks to Buy According to Billionaires

2. Microsoft Corporation (NASDAQ:MSFT)

5-year Revenue Growth: 14.2%

5-year Net Income Growth: 15.9%

Number of Billionaire Investors: 39

Number of Hedge Fund Holders: 317

RBC Capital Markets analyst Rishi Jaluria provided a price objective of $500 on Microsoft Corporation (NASDAQ: MSFT)’s stock, giving it an “Outperform” rating. The analyst mentioned that the investors might be underestimating its strength in generative AI. Furthermore, the company’s Azure cloud business can accelerate again due to AI demand and a healthy reputation as a leader in enterprise software and cloud infrastructure, says Jaluria. The analyst also highlighted that Microsoft Corporation (NASDAQ:MSFT) has plans to enter new areas of growth, such as hyperautomation, while also continuing to enhance Office software users.

The company’s Azure platform has been gaining market share against competitors. Microsoft Corporation (NASDAQ:MSFT)’s robust position in the public cloud market, together with the integration of AI models, offers a strong competitive advantage. The company’s ability to leverage existing customer relationships as well as cross-sell AI and cloud services throughout the diverse product portfolio further bolsters its market position. Generation Investment Management, an investment management firm, released its Q4 2024 investor letter. Here is what the fund said:

“Microsoft Corporation (NASDAQ:MSFT), the world’s largest software company, has been in the portfolio for over a decade. We like the firm because its products align closely with society’s evolving needs. As the world digitises, demand for Microsoft’s tools will continue to grow. The company enjoys a wide economic moat – built on its unique market position, deep customer understanding and extensive global footprint.

Microsoft’s management team has a long-term vision. It makes bold investments in future growth, most recently in AI. We forecast that the IT intensity of the economy will double over the next 15 years. Microsoft is a rare company with USD 250 billion in revenues, projected to grow at 16% annually over the next five years.14 Earnings-per share could grow faster. Despite its near-term valuation appearing high, we believe Microsoft is well positioned to lead in the AI era, potentially doubling or tripling its market share. Additionally, we expect returns on capital (ROC) for its AI related investments to match historical levels, despite market scepticism.

There are risks. Demand for AI systems may not materialise as expected, and increasing pricing power among suppliers like Nvidia could pressure margins. Still, from our analysis we see substantial long-term value in this name.”