2. Microsoft Corporation (NASDAQ:MSFT)
Market Cap: $3.103 Trillion
5-Year Net Income CAGR: 17.57%
TTM Net Income: $88.136 billion
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is one of the pioneers of personal computing and is one of the biggest technology companies in the world. It aims to make digital technology and AI accessible to everyone worldwide.
It offers a wide range of products and services, including cloud solutions, software applications, and hardware devices. Its research and development focus on improving productivity and business processes, building smart cloud and edge platforms, and creating more personalized computing experiences.
Moreover, Microsoft (NASDAQ:MSFT) also maintains data centers to expand capacity for growing AI service demands. Most products are manufactured by third-party contractors, which offers flexibility, though some components rely on a limited number of suppliers, which could disrupt production. Its internal research and development spans several groups, including Cloud and AI, Security, and Gaming, allowing the company to maintain competitive advantages.
Over the last few quarters, the company has taken over a huge part of the AI market and its products are being widely used by other companies. Its tools like Copilots and the Azure OpenAI Service have gained widespread adoption, with 60% of Fortune 500 companies implementing Copilots and 65% using Azure OpenAI Service.
Microsoft (NASDAQ:MSFT) is also one of the best AI datacenter stocks. In 2023, the company increased its AI data center spending by 50%, surpassing Amazon’s 3% decrease. The company partnered with BlackRock to create a $100 billion fund for AI data center growth and pledged over $4 billion for AI infrastructure in Italy. Reports show that Microsoft is set to double its data center capacity to 5 gigawatts this year. It is one of the most profitable blue chip stocks to invest in.
Generation Investment Management stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Generative AI’s hunger for power has increased disproportionately with its intelligence. According to one estimate, OpenAI’s GPT-4 required 50 gigawatt hours (GWh) of electricity to train, much more than the 1.3 GWh needed for GPT-3.3 And then AI requires even more power when it is put to use (so called ‘inference’). Some of the latest trends worry us. Microsoft Corporation (NASDAQ:MSFT) appears to be slipping in its ESG goals, with its greenhouse gas emissions rising again last year, as it invests in becoming a big player in AI. It is struggling in particular to curb its Scope 3 emissions in the capital goods category – nowhere more so than in the activity associated with the construction of data centres: both the embedded carbon in construction materials like steel and cement, as well as the emissions from the manufacturing of hardware components such as semiconductors, servers and racks. Google’s emissions have risen by close to 50% in the past five years.
We feel it is worth dwelling on Microsoft for a few moments, since we suspect you will be hearing a lot more about the relationship between AI and sustainability in the coming months. The bottom line is that we continue to see Microsoft as a sustainability leader. In the case of Scope 2 emissions, the company covers 100% of its electricity use with purchases of renewable energy. Crucially, though, the majority of this green energy is directly sourced via power purchase agreements, which bring new renewable capacity to the grid. Microsoft is also committed to operating 24/7 on renewable power by 2030, a policy that will help bring energy storage onto the grid as well…” (Click here to read the full text)
