Cramer’s Morning Thoughts: 20 Stocks to Watch

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Investors: 279

According to the latest Morning Thoughts post, Microsoft Corporation (NASDAQ:MSFT) received a rare downgrade from DA Davidson, which shifted its rating to neutral. The analysts expressed concerns about Microsoft Corporation (NASDAQ:MSFT)’s declining lead in AI technology, which could affect its competitive edge.

“There was a rare downgrade of Microsoft as DA Davidson moves to neutral. The analysts warned about a diminishing AI lead for the Club holding.”

Microsoft Corporation (NASDAQ:MSFT)’s positive investment outlook is built on its strong performance in cloud computing, artificial intelligence (AI), and productivity tools, along with continued growth in key business areas. AI integration into products like Azure and Microsoft Corporation (NASDAQ:MSFT) 365 has been a major revenue driver, with Azure showing impressive 30% year-over-year growth, largely thanks to AI services.

In its Q2 2024 earnings report, Microsoft Corporation (NASDAQ:MSFT) delivered outstanding results, with revenues of $62 billion, an 18% increase from the previous year, and a net income of $21.9 billion, reflecting 33% growth. This growth was primarily driven by the intelligent cloud division, which posted a 20% year-over-year increase due to the rising demand for AI-powered solutions. Microsoft Corporation (NASDAQ:MSFT)’s AI innovations, including GitHub Copilot and Microsoft Fabric, boost user productivity by automating complex tasks in applications like Word, Excel, and Teams.

Additionally, Microsoft Corporation (NASDAQ:MSFT)’s investments in AI infrastructure, such as the Maia 100 AI Accelerator and new data centers, underline its commitment to staying competitive in the AI space, improving both efficiency and profitability in the long run. Beyond AI, Microsoft Corporation (NASDAQ:MSFT)’s personal computing and business processes segments also performed well, with 19% and 13% growth, respectively, driven by strong demand for Windows, Surface devices, and Office products.

While we acknowledge the potential of Microsoft Corporation (NASDAQ: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 timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.