As 2025 began, King Lip, chief strategist and partner at BakerAvenue Wealth Management expressed his bullish outlook for tech stocks in 2025 during a CNBC interview. He underscored a strong belief in the continued outperformance of tech stocks in 2025, driven by robust earnings growth and ongoing investments in AI infrastructure. Here’s a short excerpt from our article on the 12 Best Technology Stocks to Invest In for the Long Term that covered this:
“…Lip was against the prevailing sentiment among investors that big tech has peaked and that funds should rotate into smaller stocks or other themes. He argued that the recent weakness in the tech sector is largely due to technical rebalancing rather than a fundamental downturn. He emphasized that cash is likely to flow back into leading tech stocks, as they are projected to deliver the highest earnings growth in 2025, with an anticipated earnings increase of over 20%.”
While acknowledging the high valuations of many tech stocks, he argued that they remain within acceptable historical norms. On January 9, Mark Avallone, president at Potomac Wealth Advisors, joined ‘The Exchange’ on CNBC to discuss why technology is the best sector to invest in right now. He asserts that above-target inflation will prevent the Fed from implementing further easing measures, countering the notion that higher rates are detrimental. He noted that market rates have surged to all-time highs, with a significant increase of 1,800 points since October 2023. Avallone emphasizes that tech stocks, particularly cash-flowing mega-cap and large-cap companies, have shown resilience against rising rates, attributing this to improved operational efficiencies and ongoing technology spending even in a slowing economy.
Avallone highlighted recent deal chatter in the tech sector, including Shutter Stock’s potential acquisition in the uniform space, reflecting growing interest in technology-driven solutions. He is optimistic about the incoming administration’s impact on economic efficiencies and stock performance, particularly for large-cap tech firms and mid-cap companies focused on innovation. He views Hilton favorably for its technological advancements in office management and cost efficiency. In the defense sector, he expressed confidence in Boeing’s growth potential, emphasizing that significant cuts to defense spending are unlikely and that advancements in tech will enhance military capabilities.
Considering the current optimistic sentiment towards tech stocks, we’re here with a list of the 12 best NASDAQ stocks to buy in 2025.
Methodology
We first sifted through the Finviz stock screener to compile a list of the top 20 NASDAQ for 2025. We then selected the 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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).
12 Best NASDAQ Stocks To Buy in 2025
12. ASML Holding (NASDAQ:ASML)
Number of Hedge Fund Holders: 64
ASML Holding (NASDAQ:ASML) is a semiconductor equipment manufacturer that uses nanotechnology through its lithography systems. These systems employ light to imprint intricate patterns onto silicon wafers, which is a crucial stage in chip production.
The company maintains a near-monopoly status in EUV technology, which helps create tiny features on silicon chips. These features are required for advanced applications in AI, 5G, and high-performance computing. EUV machines are costly, often exceeding $300 million per unit, and contribute significantly to the company’s revenue and profitability. In Q3 2024, ASML Holding (NASDAQ:ASML) made €5.9 billion in total revenue, of which €2.1 billion came from EUV sales.
It struggles with US export controls stemming from the US-China rivalry. While ASML Holding (NASDAQ:ASML) has historically sold its DUV lithography machines to China, the sale of its EUV machines remains restricted. In 2023, China accounted for 29% of its total sales, but this is projected to drop to ~20% by 2025 due to restrictions. Globally, the company anticipates shipping fewer than 50 EUV tools in 2025, which is a decrease from the previous estimates made in 2022.
The company remains relevant in 2025 due to the US government investments, particularly under the CHIPS and Science Act. This act allocates ~$52 billion for semiconductor manufacturing and research in the US. In December 2024, BNP Paribas Exane initiated coverage of ASML Holding (NASDAQ:ASML) with an Outperform rating and an €817 price target. They cited its market dominance and the expected 6% increase in revenue by 2030 for the optimistic outlook.
Impax Global Environmental Markets Fund believes concerns about the company’s stock price due to potential US export restrictions to China are overstated given its market dominance in EUV lithography. Here’s what it had to say regarding ASML Holding (NASDAQ:ASML) in its Q3 2024 investor letter:
“ASML Holding N.V. (NASDAQ:ASML) (Efficient IT, Netherlands) similarly to other semiconductor production-equipment makers, the share price has been under pressure on speculation the US may impose additional restrictions on China’s access to semiconductors and equipment. In addition, Intel’s results raised investors’ concerns that ASML would be disproportionately affected by a cutback on capex at Intel, which is a significant customer. The investment team believes these concerns are largely overblown given ASML’s dominant position in extreme ultraviolet (EUV ) lithography for advanced chips, which is where current investment is focused.”
11. PayPal Holdings Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 90
PayPal Holdings Inc. (NASDAQ:PYPL) is a payment services provider that makes it easy to send and receive money across borders. Its platform can be used to shop online, transfer funds to friends and family, and pay bills across approximately 200 markets.
One of the company’s subsidiaries, Braintree, is a global payment processing solution that provides end-to-end checkout experiences for businesses. It offers single-touch payments, mobile SDKs, and global currency acceptance for transactions. Recently, Braintree hiked its prices which may impact near-term revenue for the company. But analysts see this as a strategy to improve long-term value. Morgan Stanley analyst, James Faucette, raised his price target on PYPL from $76 to $90 recently. This was driven by improved investor sentiment, younger consumer preferences, investment calls, increased M&A, and less regulatory scrutiny overall.
Instead of chasing market share with low prices, the company is prioritizing profitability. This includes renegotiating contracts with clients, and potentially handling fewer transactions. But now it charges more for enhanced services like advanced fraud protection and customized solutions. This aligns with the CEO’s vision of focusing on customer value. Resultantly, PayPal Holdings Inc.’s (NASDAQ:PYPL) active accounts climbed 1% to 432 million in Q3 2024, marking the first year-over-year increase since Q2 2023. Wall Street remains bullish on the company, despite recent revenue weakness.
As Braintree returned to providing positive transaction margin in the second quarter, here’s what Artisan Value Fund said about PayPal Holdings Inc. (NASDAQ:PYPL) in its Q3 2024 investor letter:
“Our top contributor was PayPal Holdings, Inc. (NASDAQ:PYPL), a financial technology company that enables digital and mobile payments between consumers and merchants. PayPal was a recent new purchase added to the portfolio in Q2. Better growth in payment volumes and transaction margins during PayPal’s latest quarter offered evidence that the new management team’s efforts are gaining traction. Notably, payment service provider Braintree returned to providing positive transaction margin, branded checkout contributed strongly to payment volume growth, and monetization at Venmo showed progress. Post-COVID, PayPal’s shares had been pressured by intensifying competition, the threat of which was seemingly exacerbated by prior management missteps. Shares traded for under 14X next year’s expected earnings at the time of our initial purchase. This was an attractive entry point to purchase a stake in a business with above-average—and improving—unit economics, a strong balance sheet and consistent free cash flow. Competent new management is already leaning on the company’s strong financial position to maximize the value of these assets.”
10. Tesla Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 99
Tesla Inc. (NASDAQ:TSLA) manufactures electric vehicles, energy storage systems, and solar panels. Some of its popular electric cars include the Model 3, Model Y, Model S, Model X, and the Cyber Truck. Investor optimism in the company is growing due to advancements in AI, particularly in autonomous driving and robotics.
The company has achieved significant milestones, including a 1000x improvement in miles driven without human intervention for its Full Self-Driving (FSD) software since January 2024. Furthermore, there have been successful autonomous driving demonstrations involving 20 Cybercabs that operated without human intervention.
Its Optimus robot has also captured significant investor attention. Optimus is a humanoid robot under development by Tesla Inc. (NASDAQ:TSLA), which is designed to perform tasks that are dangerous, repetitive, or boring. It will come out in late 2025/early 2026. The company’s robotaxi, however, will be launched in mid-2025. It’s a fully autonomous vehicle designed to operate as part of a ride-hailing service. Bank of America’s John Murphy downgraded Tesla Inc. (NASDAQ:TSLA) to Neutral from Buy on January 7th, raising its price target to $490 from $400. While acknowledging potential catalysts like the robotaxi launch and Optimus updates, he cited high execution risk given its current valuation.
9. Advanced Micro Devices Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 107
Advanced Micro Devices Inc. (NASDAQ:AMD) develops cutting-edge processors and graphics chips for applications like data centers, gaming, and embedded systems. This semiconductor manufacturer focuses on creating high-performance computing solutions that can power the demands of AI.
The company leads in chiplet technology, which uses smaller chips that interconnect to form a comprehensive system-on-a-chip (SoC). This approach accelerates development by allowing independent design and manufacturing. This has resulted in yield rates over 80%, compared to Intel’s 60%. Chiplet systems reduce costly manufacturing defects and can lower production costs by ~45%.
The chiplet market is expected to reach $411 billion by 2035. Advanced Micro Devices Inc.’s (NASDAQ:AMD) chiplet technology now includes a new multi-chip stacking approach that will improve efficiency in future Ryzen SoCs. These are processors that integrate a CPU, GPU, and other essential components onto a single chip. S&P Global recently upgraded Advanced Micro Devices Inc. (NASDAQ:AMD) to ‘A’ credit rating from ‘A-‘. This was because of strong x86 and AI chip sales, driven in part by the chiplet technology, projecting continued growth through 2025.
In the third quarter of 2024, the data center segment’s revenue surged 122% year-over-year to a record $3.5 billion, contributing over half of Advanced Micro Devices Inc.’s (NASDAQ:AMD) total revenue of $6.8 billion. The company’s advancements in chiplet technology are pivotal to the success of its high-performance data center products, positioning it for sustained growth. However, Goldman Sachs lowered its rating on the company to Neutral from Buy and slashed its price target on the shares to $129 from $175. This was due to a lower demand for PC and server chips, along with its weaker-than-expected revenue from data centers.
8. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 123
Adobe Inc. (NASDAQ:ADBE) is a global software company that is known for its creative, marketing, and document management solutions. Its flagship products include Photoshop, Illustrator, InDesign, Acrobat, and Premiere Pro. These are industry-standard tools utilized by millions of people worldwide.
In 2024, the company launched several AI models, including Firefly, which offers advanced tools for image, vector, design, and video generation. These features are integrated into core applications like Photoshop, Premiere Pro, and Acrobat. AI-driven creativity contributed to a record revenue of $21.51 billion in FY2024, reflecting an 11% increase year-over-year. Since its beta release in March 2023, Firefly has generated over 13 billion images. Recently, the platform enhanced its features to allow users to share custom models and generate videos from text prompts, with a new pricing model introduced for its AI capabilities.
Adobe Inc. (NASDAQ:ADBE) recently saw its stock decline following a 2025 revenue forecast of $23.3 to $23.55 billion, which fell short of analysts’ expectations of $23.77 billion. Investor concerns came from the potential delayed returns from the company’s investments in AI-powered software applications. The company did not provide a clear monetization strategy for its new AI tools. However, Constellation Research’s Ray Wang is bullish on Adobe Inc. (NASDAQ:ADBE) in 2025, citing the company’s strong position as an AI derivative. Wang believes that most companies will rely on established software providers like this one to use AI effectively.
Polen Focus Growth Strategy increased its holdings in the company, anticipating revenue growth which it expects Firefly to deliver. Here’s what it stated in its Q3 2024 investor letter:
“We added to several existing positions in the quarter including Adobe Inc. (NASDAQ:ADBE), Workday, Shopify, MSCI, and Paycom Software. We feel Adobe is poised for re-accelerating revenue and earnings growth partially due to the monetization of its Firefly GenAI product embedded in its creative software.”
7. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 128
Broadcom Inc. (NASDAQ:AVGO) is a semiconductor company that specializes in the design and development of ASICs (application-specific integrated circuits) for diverse markets, including data centers, networking, and wireless. It has secured 3nm AI ASIC chip deals with leading tech giants, which showcase its expertise in AI.
In the fiscal year 2024, the company made a record revenue of $51.6 billion, with AI contributing $12.2 billion. This marked a 220% year-over-year increase in AI-related revenue, due to the demand for custom AI accelerators (XPUs) and AI networking solutions. BakerAvenue Wealth Management’s Chief Strategist, King Lip, favors Broadcom Inc. (NASDAQ:AVGO) due to its strong growth in custom AI chips. It mirrors NVIDIA’s growth while trading at a lower valuation. In FQ4 2024 alone, AI revenue grew 150%, which was fueled by a doubling of AI XPU shipments to 3 hyperscale customers and a 4x increase in AI connectivity revenue.
The company’s AI semiconductor revenue is projected to surpass non-AI semiconductor revenue in the coming years. It’s projecting a 65% revenue growth in AI-related sales for Q1 FY25 and is set for volume shipments of its next-generation 3-nanometer XPUs to hyperscale customers in H2 FY2025.
Broadcom Inc.’s (NASDAQ:AVGO) strong earnings and strategic positioning in the AI revolution make it a compelling long-term investment, according to Columbia Threadneedle Global Technology Growth Strategy. It stated the following in its Q3 2024 investor letter:
“Similar to the earnings results for Nvidia, shares of Broadcom Inc. (NASDAQ:AVGO) initially sold off after the company reported solid earnings that fell light of elevated market expectations, but the stock did recover from its drawdown in the matter of a few weeks. With an enticing combination of custom chip offerings as well as networking assets, Broadcom remains one of the best positioned companies as part of the AI revolution. Broadcom outlined a path to derive a majority of its revenue from the AI end market within a couple of years, and the non-AI part of the business has stabilized after a deep correction. The company’s dominant market position in its end markets, along with durable growth, strong margins and best-in-class capital allocation, presents an opportunity to compound capital over time.”
6. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a global technology company that is known for its innovative consumer electronics, such as iPhones, iPads, and Macs. With a loyal customer base and a rapidly growing portfolio of subscription services like Apple Music and Apple TV+, the company continues to shape the technology landscape.
The company faced a 7.7% year-over-year sales decline in FY24 in China, which is one of its major markets. This resulted in the total revenues dropping from $72.5 billion in FY23 to $66.9 billion in FY24. This is attributed to the competition from domestic brands like Huawei and a sluggish economy. To deal with this decline, the company is reducing its reliance on hardware sales. This includes a focus on Services revenue, largely driven by the App Store.
The Services revenue reached a record $25 billion in FQ4 2024, marking a 12% year-over-year increase. However, Wedbush analysts, including Dan Ives, predict that the AI-powered iPhone 16 sales could hit 240 million units in 2025. Analysts believe that the company’s focus on AI could increase its value, potentially reaching $4 trillion by early 2025. At the same time, MoffettNathanson, an investment firm, downgraded Apple Inc. (NASDAQ:AAPL) to Sell on January 7, lowering the price target to $188 from $202. The main reason behind this was the decline in iPhone 16 sales and the China competition. MoffettNathanson believes that the company’s 30% 2024 rally is unjustified.
Mar Vista Strategic Growth Strategy viewed Apple Inc. (NASDAQ:AAPL) stock positively due to investor enthusiasm for its AI roadmap and iPhone 16 launch. Here’s what it is said regarding the company in its Q3 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) stock was strong in the quarter as investors viewed the company’s generative AI roadmap and iPhone 16 product cycle positively. The market was reminded of the strength of the Apple ecosystem as management demonstrated how generative AI solutions would be integrated into its iOS 18 operating system, which was broadly released in the iPhone 16 late in calendar Q3. We believe Apple’s generative AI-enabled products should spur a meaningful iPhone upgrade cycle and create new avenues of monetization through its app store and advertising offerings. We believe this will support intrinsic value growth that will range between high single digits and low double-digits over our investment horizon.”
5. NVIDIA Corp. (NASDAQ:NVDA)
Number of Hedge Fund Holders: 193
NVIDIA Corp. (NASDAQ:NVDA) specializes in high-performance graphics processing units (GPUs). While its GPUs are well-known for gaming, they have become the driving force behind the AI revolution, as they power data centers, robotics, and autonomous vehicles.
Strong demand for the company’s Blackwell and Hopper platforms has driven data center growth, with H200 GPU sales reaching double-digit billions. In Q3 2024, the company reported a record revenue of $35.1 billion, marking a 94% year-over-year increase. The data center segment alone surged 112% to $30.8 billion. The company’s GPU revenue has surged 67% annually over the past three years, driven by the demand for computing power due to AI advancements.
NVIDIA Corp. (NASDAQ:NVDA) holds a dominant 90% market share as a supplier of computing power. It recently introduced its GeForce RTX 50 series graphics cards (including RTX 5090 and RTX 5080) which use the Blackwell architecture. These GPUs offer ~2x the performance of the previous generation and feature advanced AI technologies.
Analysts believe that its stock surge is justified by many factors. Wedbush’s Dan Ives expects continued tech dominance driven by AI investments. Bank of America highlights the company’s popularity among both institutional and retail investors. It maintains a $190 price target, which suggests a 27% upside. The release of Blackwell GPUs, with 12 months of orders already secured, is a key driver of this optimism.
Manole Capital Management highlighted that NVIDIA Corporation (NASDAQ:NVDA) more than tripled in value over the past year, driven by strong AI-related demand and continued revenue growth that exceeds market expectations. It stated the following in its Q3 2024 investor letter:
“As of this publication, Nvidia is up roughly 150% year-to-date. NVIDIA Corporation (NASDAQ:NVDA) was the largest gainer in the S&P 500 last year and has more than tripled in value over the last year. It hit an eye-opening market capitalization of $3 trillion in June, less than four months after it eclipsed the $2 trillion mark. Enthusiasm for everything AI-related, especially for the primary chip maker whose products are essential to powering AI technology, continues to fuel the market. Last quarter, and for the fifth consecutive quarter, Nvidia reported sales and profits that blew past Wall Street expectations. The stock rose +37% in the second quarter alone.”
4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 202
Alphabet Inc. (NASDAQ:GOOGL) is a technology conglomerate with a diverse portfolio of businesses, including Google Search, YouTube, and Google Cloud. In Q3 2024, the company demonstrated an increased demand for its search and cloud services, due to the advancements in AI.
Google Search maintains a 90% global market share and generated ~74% of the company’s total revenue in Q3 2024. Its ongoing investments in AI, which can be highlighted by the Gemini models integrated across its products, position it for long-term growth. By the third quarter, all products with over 2 billion monthly users utilized Gemini models.
The CEO Sundar Pichai noted that AI solutions are enhancing product adoption among existing customers, attracting new clients, and securing larger contracts. He outlined plans to accelerate AI product launches in 2025 and emphasized the potential of the Gemini AI model to reach 500 million users. Gemini 2.0 Flash is now widely available to developers. With AI expected to drive a projected $200 billion market by 2026, the company’s focus on AI innovation solidifies its competitive edge.
Citi’s Ronald Josey has a Buy rating and a $232 price target on Alphabet Inc. (NASDAQ:GOOGL). Google is facing legal challenges from the government over its dominance in online search. While Google disagrees with the court’s decision and plans to appeal, it has proposed a solution to address the concerns. Investments in new technologies, such as Gemini 2, showcase that the company is still focused on innovating and improving its products.
Here’s what Qualivian Investment Partners said regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q3 2024 investor letter, highlighting the company’s strong second-quarter results:
“Alphabet Inc. (NASDAQ:GOOGL): Q2 2024 revenues and EPS beat expectations, with total revenues growing 14%, Search ad revenues growing 14%, YouTube ads growing 13%, and Google Cloud revenues growing 29%. Revenue growth in the quarter constituted a continued sequential improvement from earlier quarters in the year, suggesting a continued rebound in Alphabet’s core business except for YouTube ad revenues, which missed expectations and showed deceleration in the growth rate as compared to Q1 when it grew 21%. Operating margins improved by 310 bps vs. the same quarter last year.
Management continued to highlight developments with their generative AI program, which is seen as a foundational platform with opportunities across their businesses but particularly in search and cloud. However, this comes with material capex investment well ahead of the expected economic benefits from Gen AI, and the level of spending is leading investors to worry about the ROI on that spend for Alphabet, as well as the other hyperscalers (Microsoft and Amazon). We continue to have confidence in Alphabet’s ability to generate strong revenue, earnings, and cash flow growth well above the S&P 500’s in the years to come and view it as a core holding for the long term.”
3. Meta Platforms Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 235
Meta Platforms Inc. (NASDAQ:META) is a social media company that encompasses platforms like Facebook, Instagram, and WhatsApp. With over 3 billion daily active users, it is integrating AI across its platforms to enhance user experiences and drive growth.
In 2024, the company’s stock surged by 72%, due to advancements in AI. Its Llama AI model makes it a leader in GenAI. It has reached nearly 600 million monthly active users. Llama is a smart assistant that can understand and generate human-like text. The company plans to release multiple versions of the Llama 4 model throughout 2025, which will enhance reasoning capabilities and voice interaction. OptionsPlay’s Tony Zhang favors Meta Platforms Inc. (NASDAQ:META) over Apple for AI and AR investment. He thinks that its leadership in AI models (including Llama), strong focus on AR, and recent advancements in both hardware and software are key advantages.
Additionally, the Andromeda ML model and the Advantage+ platform are together enhancing ad targeting capabilities and improving advertising revenue. Andromeda selects ads tailored to individual users, while Advantage+ automates ad campaign management. Meta Platforms Inc.’s (NASDAQ:META) ad revenue reached ~$39.9 billion in Q3 2024, which marked a 19% year-over-year increase. Citi analysts, led by Ronald Josey, are optimistic about the company due to its AI-driven growth strategies.
Hardman Johnston Global Equity recently initiated a new position in Meta Platforms, Inc. (NASDAQ:META) due to its strong AI-driven growth prospects. It stated the following regarding the company in its Q3 2024 investor letter:
“During the quarter, we initiated one new position in Meta Platforms, Inc. (NASDAQ:META) and had no liquidations. Management at Meta has effectively addressed concerns about investment efficiency by shifting resources from Reality Labs towards broader AI initiatives with a clearer path to profitability. We believe management has successfully articulated the benefits of this strategy, highlighting how AI is driving user engagement and advertiser productivity. This, in turn, fuels continued revenue momentum and increases the likelihood of positive earnings surprises in the future. Additionally, the parent company of the social media platform, Facebook, has recently taken positive steps to enhance safety, which suggests to us a shift towards a more proactive and responsive approach to addressing important potential challenges and concerns. Weak oversight over data privacy protection was a key reason why we sold the position in the portfolio back in 2021. Removing this governance overhang allows us to feel comfortable to enter back into the stock at a time when we believe it is poised for strong earnings growth going forward.”
2. Microsoft Corp. (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corp. (NASDAQ:MSFT) is a technology company that has been expanding its AI capabilities. This is fueled by the launch of advanced AI models in its Azure AI catalog. Azure integrates on-premises and cloud-based systems for enterprise clients.
In FQ1 2025, the company reported a 16% year-over-year revenue growth, reaching $65.6 billion. Notably, cloud revenue soared by 22%, exceeding $38.9 billion. This was driven by a 23% increase in Azure-led server products and cloud services. Azure Arc’s customer base has increased by 80% year-over-year. Azure Arc is a hybrid cloud management platform that extends Azure’s capabilities to non-Azure environments. This allows businesses to manage resources across various platforms seamlessly.
The company is updating its Azure partner program, making it more difficult to qualify for certain specializations, particularly in the AI space. The Azure Partner Program is a network of companies that collaborate with Microsoft to deliver and support Azure cloud solutions to customers. Starting in early 2025, partners specializing in AI on Azure must now demonstrate at least $5,000 in revenue from Azure AI services.
Creative Strategies’ Ben Bajarin believes that Microsoft Corp.’s (NASDAQ:MSFT) enterprise AI traction, particularly with Copilot, will take time to materialize. Microsoft Copilot is an AI-powered assistant integrated into Microsoft 365. It uses Azure’s cloud computing power for its functionality. Although many companies are planning to use the Copilot AI tool, it’s uncertain how much money Microsoft Corp. (NASDAQ:MSFT) will make from it.
RiverPark Large Growth Fund noted the company’s near-term Azure growth headwinds due to infrastructure limitations but remains confident in its long-term growth prospects. It stated the following regarding Microsoft Corp. (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT): MSFT was a top detractor in the third quarter following a fiscal fourth quarter earnings report that featured inline operating metrics but mixed guidance. Positively, the company reported strong revenue (+15%) and earnings growth (+10%), powered by Azure (+30%), and operating margins of 43%. Guidance however calls for lower than expected fiscal first quarter Azure revenue as infrastructure constraints limit growth, and higher capital expenditures throughout the company’s fiscal 2025 to alleviate these constraints. The company expects growth to reaccelerate in the back half of fiscal 2025 as more AI capacity comes online.
Cloud-based services have become the company’s largest revenue and earnings producer. The company’s Azure platform alone has the potential to grow to more than $200 billion in annual revenue over the next decade. Overall, we believe that the company will continue to deliver double-digit revenue and EPS growth and generate an enormous amount of free cash flow to return to shareholders and use for acquisitions.”
1. Amazon.com Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 286
Amazon.com Inc. (NASDAQ:AMZN) is a technology conglomerate with e-commerce as its core business. It also operates Amazon Web Services (AWS), which is a cloud computing platform. The company continues to innovate and expand into streaming services, AI, advertising, and even physical retail.
In Q3 2024, AWS was the primary driver of profitability for the company, contributing $10.4 billion to its total operating income of $17.4 billion. This reflected a 49.7% rise in profits. AWS revenue increased by 19.1% year-over-year, due to customer-centric initiatives. One advancement is the introduction of the Oracle Database@AWS service, which facilitates the seamless migration of Oracle workloads to AWS infrastructure with minimal adjustments.
AWS leads the AI sector due to its unmatched computing power, which is crucial for training large models. Its AI platform and scalable infrastructure make it the preferred option for businesses over managing their own AI systems. The total cloud market is projected to expand from $700 billion in 2024 to ~$2.4 trillion by 2032, positioning AWS for growth. In 2025, AWS plans to invest at least $11 billion in Georgia to expand its data center infrastructure.
Cantor Fitzgerald’s Deepak Mathivanan raised Amazon.com Inc.’s (NASDAQ:AMZN) price target to $270 from $240 while maintaining an Overweight rating. Mathivanan expects growth in digital ads, online shopping, and mobility to drive internet stock performance in 2025. He views the company as a top pick due to its strong AI development.
Montaka Global Investments increased its holdings in Amazon.com Inc. (NASDAQ:AMZN) due to a near -20% stock price decline, believing it offers more upside potential than other holdings like AMD and KD. Here’s what the company’s Q3 2024 investor letter stated:
“Secondly, in August, we sold some of our holdings in two tactical positions in the tail of Montaka’s portfolio – Advanced Micro Devices (AMD) and Kyndryl Holdings (KD) – to take advantage of a near-20% drawdown in the stock price of Amazon.com, Inc. (NASDAQ:AMZN).
We still see plenty of upside in AMD and KD, but Amazon has more substantial and higher-probability upside that demanded we allocate even more of Montaka’s capital to the online retailer.
Investment opportunities always compete for capital. Through this lens, Montaka’s largest investments act as a kind of ‘benchmark’: Any new investment must be more attractive than these holdings to get included in our portfolio.
Because we believe Montaka’s largest investments remain so attractive, our annualized portfolio turnover has been low for many years now – typically around 25%.
We continually identify quality global businesses with upside potential – but few new investment opportunities have greater upside than Montaka’s existing portfolio investments.
While Montaka is focused on investing over the long term, and most days don’t require any action on our part, paradoxically we need to be agile on a daily basis. That is, we must be ready to act if stock price changes throw up attractive investment opportunities.”
While we acknowledge the growth potential of Amazon.com Inc. (NASDAQ:AMZN), our conviction lies in the belief that AI stocks hold great promise for delivering high 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: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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