1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 317
TD Cowen reiterated a “Buy” rating on Microsoft Corporation (NASDAQ:MSFT)’s stock, maintaining a price objective of $475.00. As per the analyst, J. Derrick Wood, there has been continued strong demand for the company’s Azure AI services. While the company’s data center buildout strategy has been entering a different phase, there has not been a significant shift in the overall approach. Microsoft Corporation (NASDAQ:MSFT) remains focused on maintaining a healthy balance between AI and non-AI workloads.
The tech giant continues to experience robust demand for its Azure AI solutions and remains optimistic about the prospects for the Copilot offering. Microsoft Corporation (NASDAQ:MSFT) is also focused on developing new routes for adoption and monetization of Copilot. Such efforts form part of its broader strategy to capitalize on the elevated demand levels for AI-powered solutions and services. The reaffirmation of the rating and price target comes amidst Microsoft Corporation (NASDAQ:MSFT)’s emphasis on expanding the cloud and AI services. The company’s focus on AI has been intensified as it continues to make strategic moves to integrate AI throughout its product portfolio.
Mairs & Power, an investment advisor, released the Q4 2024 investor letter. Here is what the fund said:
“Unlike the dot-com companies that operated at the turn-of-the-century, many of today’s technology companies are established businesses with significant cash flows. We have argued, and continue to argue, that many of these investments are perfectly aligned with our investments process in that they embody durable competitive advantages, above-average growth prospects, and excellent management teams.
A perfect example is Microsoft Corporation (NASDAQ:MSFT), which has grown to become the largest holding in the Growth Fund. Microsoft has a near monopoly on the office software productivity market with its Microsoft Office Suite. The company’s Azure platform is a leader in cloud computing and has been steadily gaining share. Thanks to its Office and Azure products, the company is deeply embedded within many enterprise IT ecosystems. Therefore, it should be well-positioned to expand its presence within its customer base, as it rolls out premium-price AI solutions. The company is not resting on its laurels and plans on spending an astounding $80 billion in 2025 to build out AI data centers.”
While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued 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: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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