1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a global technology leader known for its flagship software products, such as Windows and Office, and a significant player in cloud computing through its Microsoft Azure platform. Azure provides businesses with scalable IT solutions, facilitating seamless cloud adoption.
The Azure cloud platform remains a focal point for investors and analysts. Despite recent capacity constraints affecting growth, there is optimism for a rebound in the latter half of 2024. D.A. Davidson highlighted Microsoft’s substantial investments in AI computing infrastructure, specifically in building GPU clusters to meet the increasing demand for AI applications. BMO Capital Markets also reiterated an Outperform rating on Microsoft Corporation (NASDAQ:MSFT) with a $500 price target, emphasizing the company’s leadership in AI and its comprehensive portfolio. The firm anticipates Azure’s growth to accelerate in the second half of FY25, following the September quarter’s approximately 29% year-over-year growth guidance.
In fiscal Q4 2024, Microsoft Corporation (NASDAQ:MSFT) reported revenue of $64.7 billion, a 15% increase year-over-year, with net income rising 10% to $22 billion. This growth is largely driven by Microsoft Azure, which continues to benefit from AI integrations. With a 31% market share, Azure is well-positioned to capitalize on the strong demand for cloud solutions.
Microsoft Corporation (NASDAQ:MSFT) ranks as the top choice among the best software infrastructure stocks to buy, with 279 hedge funds holding positions in the company as of the June 2024 quarter.
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.”
While we believe in MSFT’s potential, we believe that certain AI stocks hold 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 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.
