Analyst Says These 10 AI Stocks Have More Upside Potential

2. Microsoft Corp (NASDAQ:MSFT)

Number of Hedge Fund Investors: 293

MSFT is one of the top names in King Lip’s portfolio.

Dan Ives of Wedbush believes MSFT is one of the leaders in the AI enterprise segment.

New Street Research started covering the stock with a Buy rating. The firm said that Microsoft Corp (NASDAQ:MSFT) is well positioned to grow profit in the “low teens for years to come” even if the AI revolution fails to pan out. New Street Research has a $570 price target on Microsoft Corp (NASDAQ:MSFT).

Analysts believe Microsoft Corp’s (NASDAQ:MSFT) AI ecosystem around its products would strengthen its Cloud division thanks to Microsoft Corp’s (NASDAQ:MSFT) integration of AI into its Cloud products. Microsoft Corp’s (NASDAQ:MSFT) Intelligent Cloud segment’s profit in the latest quarter totaled $12.51 billion, a whopping 32% growth on a YoY basis.

Microsoft Corp’s (NASDAQ:MSFT) huge investments to revive its Search business are also working. Bing’s market share has jumped to 3.64% as of April 2024, a 0.88 points gain on a YoY basis.

Wall Street expects Microsoft Corp’s (NASDAQ:MSFT) earnings to grow 12.50% next year. The  stock’s forward P/E of 31 based on 2025 EPS makes it look attractive at the current levels. Average analyst estimate for Microsoft Corp (NASDAQ:MSFT) is $483, which presents a 14% upside potential from the current levels.

Alger Focus Equity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q1 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 second quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of Al adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 28% in constant currency of which 6% was Al related versus 3% last quarter. Further, management noted most of the Al revenue was from inference rather than training indicating high quality Al applications by Microsoft’s clients. Management also indicated that significant cost-cutting programs in corporate America have begun to trail off. suggesting that the cost optimization headwinds previously impacting Azure’s growth are abating. We continue to believe that Microsoft has the potential to hold a leading position in Al. given its innovative approach and demonstrated high unit volume growth opportunity.”