Billionaire David Tepper’s Top 10 Stock Picks Heading into 2025

4. Microsoft Corporation (NASDAQ:MSFT)

Appaloosa Management LP’s Stake Value: $417.39 Million

Number of Hedge Fund Holders: 279

Microsoft Corporation (NASDAQ:MSFT) is a technology giant best known for its software offerings, including Office, Exchange, SharePoint, Microsoft Teams, and Office 365 Security and Compliance. The stock is up by about 19.60% for the year, bolstered by the company’s efforts to lead in artificial intelligence.

MSFT remains the top player in cloud computing, second to Amazon Web Services. The cloud business provides tremendous opportunities for growth as more enterprises migrate their operations to the cloud. In the third quarter, cloud revenue was up by 33% year-over-year, above the 29% growth recorded in the second quarter.

Microsoft Corporation (NASDAQ:MSFT) has demonstrated its ability to innovate and adapt in several areas outside of cloud computing. With the launch of Microsoft 365 in 2011, the company shifted its suite of productivity tools to a software-as-a-service (SaaS) model, which aided in growth. In the meantime, this presents the business with yet another significant AI opportunity.

Its investment of about $14 billion in OpenAI is helping strengthen growth prospects on the cloud. Customers have been demanding Azure’s services, which enable them to develop their own AI agents and copilots due to its pay-as-you-go consumption model. Additionally, this has led to a rise in the use of Microsoft Corporation’s (NASDAQ:MSFT) analytics and data services. CEO Satya Nadella has already reiterated that the AI business will surpass an annual revenue run rate of $10 billion in the next quarter.

Alger Spectra Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 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 detracted from performance after Microsoft reported weaker-than-expected fiscal fourth-quarter revenue growth in its Azure cloud segment. Additionally, management’s fiscal first[1]quarter 2025 Azure revenue guidance came in slightly below estimates. Despite this shortfall, management highlighted that AI contributed 7% to cloud growth, up from 6% last quarter and 3% a year ago. We continue to believe that Microsoft is well-positioned to maintain a leadership role in AI, given its innovative approach and significant growth potential.”