We recently published a list of 10 AI Stocks on Investors’ Radar In January 2025. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other AI stocks on investors’ radar in January 2025.
Drew Pettit, U.S. equity strategist at Citi Research, said in a latest program on CNBC that he believes the AI growth story is still intact moving ahead in 2025. However, the analyst believes a lot of positive news is already “priced in.” He also mentioned the key areas that can benefit this year.
“I think the fundamental stories, at least for the pick-and-shovels names, continue. But where we think the trade is actually going to broaden out, and honestly, it has since mid-year, is into some of the users of AI. So, think about car companies that do autonomous driving or software companies putting that into their programs themselves, and even to some of the more cyclical names that, on the back end, can get some more productivity gains. So yes, the picks-and-shovels, the enablers of the trade, were attractive for the most part in 2024. We think AI continues to broaden out.”
The analyst said he has done some “reverse DCF work” and believes there are many companies that are mispriced and many that have the good news around them already priced in.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In
For this article, we picked 10 AI stocks that analysts are talking about this month. With each company, we have mentioned the number of hedge fund investors. 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).
Taina Sohlman / Shutterstock.com
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Ben Bajarin from Creative Strategies said while talking to Schwab Network in a latest program that it will take time for Microsoft Corporation (NASDAQ:MSFT) to see traction of its AI products in the enterprise space.
“Microsoft Corporation (NASDAQ:MSFT) play is really at the edge; it’s really around co-pilot. You know, you’ve got an Enterprise play for co-pilot, and you’ve got a consumer play that comes with, you know, some with Windows, some as well with a Windows subscription. It’s hard right now when we talk about software and the broader Spectrum for AI adoption. We’re not seeing Enterprises, for example, just deploy at scale yet across their Enterprises. So, you see a range of surveys from any number of CIO and CTO surveys saying that they have plans to roll out co-pilot. Those are still in just project mode. Once they start to roll these things out, we’ll really see if a big portion of that Enterprise starts to add those fees for co-pilot to their Microsoft Corporation (NASDAQ:MSFT) 365 subscriptions. You’re going to see that, right? That’s going to come out in numbers. So, I think it’s a wait-and-see but optimistic play.”
RiverPark Large Growth Fund stated the following regarding Microsoft Corporation (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.”
Overall, MSFT ranks 2nd on our list of AI stocks on investors’ radar in January 2025. While we acknowledge the potential of MSFT, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. 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: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.