1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a well-known technology company behind the commonly used Microsoft Suite. The company also develops cloud products and personal computing products.
Microsoft Corporation (NASDAQ:MSFT) is pouring capital into artificial intelligence. Over the past few months, the company has closed deals with startups and technology companies to run their workloads on Microsoft Azure, its cloud platform. A few days ago, the company made an addition to its list of partnerships by signing an agreement with Rezolve AI, a startup revolutionizing the online retail landscape.
In addition to that, Microsoft Corporation (NASDAQ:MSFT) along with other crucial stakeholders made a $100 billion deal to improve the functioning of data centers and artificial intelligence. The company has also been making strategic investments in AI and data in other countries.
Chad Morganlander, Washington Crossing Advisors’ Senior Portfolio Manager and Co-Founder, appeared on Yahoo Finance on April 27, emphasizing the importance of MSFT. He shares that MSFT is one of the highest-quality stocks an investor can own. He adds that with its dividend-paying history and investments in AI, the company is likely to experience lower earnings volatility.
Microsoft Corporation (NASDAQ:MSFT) is a long-standing company with immensely strong fundamentals. This coupled with its investments in AI and data make it one of the most promising stocks according to hedge funds.
Fred Alger Management’s Alger Spectra Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. The company operates through three segments: Productivity and Business Processes (Office, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). During the quarter, shares contributed to performance after the company reported strong fiscal third quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of AI adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 31% in constant currency of which 7% was AI related versus 3% two quarters ago. Further, management noted most of the AI revenue continues to stem from inference rather than training indicating high quality AI applications by Microsoft’s clients. Management also indicated that the significant cost-cutting programs in corporate America are done, suggesting that the cost optimization headwinds previously impacting Azure’s growth are over. Separately, management provided color on their new AI-productivity tool, Copilot, noting that approximately 60% of Fortune 500 companies are already using Copilot, and that the quarter witnessed a 50% increase in Copilot assistance integration within Teams. We continue to believe that Microsoft has the potential to hold a leading position in AI, given its innovative approach and demonstrated high unit volume growth opportunity.”
Overall, MSFT ranks first among the 10 promising tech stocks according to hedge funds. While we acknowledge the potential of cloud and technology companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT 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.
