8 Best Machine Learning Stocks to Buy According to Hedge Funds

2. Microsoft Corp. (NASDAQ:MSFT)

Number of Hedge Fund Holders: 279

Microsoft Corp. (NASDAQ:MSFT) is a technology company that develops and supports a range of software, services, and devices. Its key offerings include the Windows operating system, Office productivity suite, Azure cloud computing platform, and Xbox gaming consoles.

Loop Capital analyst Yun Kim raised the stock’s price target from $500 to $550, maintaining a Buy rating. The revised estimates for some software companies, along with Microsoft Corp.’s (NASDAQ:MSFT) investments in AI, suggest that the current market expectations may be too low. Loop Capital believes that Microsoft Corp. (NASDAQ:MSFT) deserves a higher valuation due to its strong market position and promising future growth.

The company is diversifying its AI model ecosystem within Microsoft 365 through Copilot, which is an AI-powered assistant integrated into Microsoft 365. It uses a mix of internal models (like Phi-4) and third-party options alongside OpenAI. This multi-model approach allows for customized AI features (like improved editing in Word) while also managing costs and performance. While initial adoption faced some hurdles, Copilot is gaining popularity, with 70% of Fortune 500 companies already using it.

Creative Strategies’ Ben Bajarin believes that the company’s enterprise AI traction, particularly with Copilot, will take time to materialize. Although many companies plan to use Copilot, it’s uncertain how much money Microsoft Corp. (NASDAQ:MSFT) will make from it. The company also plans to invest ~$80 billion in AI-enabled data centers by FY2025, with over half of this investment allocated within the US. This shows its commitment to developing and deploying AI and ML applications.