In this article, we’ll explore Jim Cramer’s 10 Key Stocks to Watch.
In a recent episode of Mad Money, Jim Cramer traveled to Dreamforce, to understand the true capabilities of artificial intelligence (AI) and to separate fact from hype. After diving deep into the topic, he feels more equipped to identify which AI claims are genuine and which are simply marketing fluff. He noted that there seems to be far more misleading information than real advancements.
“All right, I had to come all the way out here to Dreamforce, the Salesforce Tech Festival, to learn what artificial intelligence is really capable of and what’s pure hype. After immersing myself in AI, I feel a lot more confident in sorting out the real from the phony. And you know what? There’s a hell of a lot more phony than there is real. That’s why I want to show you which AI claims are meaningless and which ones are legit.”
Unlocking Profit Potential with Lower Rates and AI
Jim Cramer stated that today’s market movements show it’s possible to navigate unpredictable conditions. He emphasized that we don’t need expert predictions to see that interest rates are likely to decrease, which is essential for maintaining a bull market. He advised against overthinking the situation and suggested focusing on profitable opportunities, particularly the growing importance of artificial intelligence.
“Today is proof that you can game the ungameable. But you don’t need a San Francisco weatherman to know which way the wind blows. In the end, we know rates are headed lower, not higher, and that’s what we need to sustain this bull market. Please do not overthink it. I’d rather focus on what can help us make some money, like the biggest theme in the world right now: artificial intelligence.”
Cramer pointed out that while AI is generating excitement in the stock market, its impact on the broader economy has been limited. There are some practical applications, like cost savings in corporate back offices, but nothing particularly groundbreaking. This is why many analysts are starting to label the hype around AI as a bubble.
“Specifically, what does AI actually do? We’ve heard so much about this technology and how it’s going to revolutionize everything. Right now, though, we know that while AI has taken the stock market by storm, it really hasn’t taken the actual economy by storm. There are use cases, sure, back office corporate cost savings—nothing flashy. That’s why so many commentators now come on air and call the whole thing a bubble.”
Jim Cramer explained that AI, especially when combined with advanced computing from chipmakers, significantly speeds up processes and enables machines to act intelligently, similar to capable humans. He noted that businesses aim to create quality products for consumers, but a shortage of workers has become a major issue, particularly highlighted during the COVID pandemic. This has led to sales associates being too busy to engage effectively with customers, resulting in rushed and confusing interactions.
“Let me tell you what AI really does. When coupled with accelerated computing, AI makes everything go faster. It rationalizes processes and can make machines behave like smart, good humans. Business wants to produce good products and sell them to real people, whether for enterprises or homes—that’s capitalism 101. But right now, we don’t have enough workers to do it.
That became apparent during COVID. We can’t interact effectively because our sales associates are too busy to be anything but brisk or confused. They’re harried from the moment they come in to the moment they leave. It’s a late-stage capitalist directive. What can I say? What doctor has time to talk to you? What nurse practitioner can give you the time of day?”
Transforming Customer Service with Superior AI Agents
Cramer pointed out that companies are pushing their employees hard to boost profits, which can create a stressful environment. However, after attending Marc Benioff’s keynote, he recognized the potential of a technology called Agent Force. This AI initiative can engage with customers politely, and efficiently answering common questions by using personalized data.
Cramer argued that AI is an ideal solution for customer service, as it can provide clear and friendly assistance without the frustrations that often come from human employees who are overwhelmed and eager to leave. AI agents can listen, reason, and either direct customers appropriately or handle their inquiries on their own.
“Companies are already squeezing as much as they can out of their employees to boost stock prices and profits for executives. Then it hit me while watching Marc Benioff’s incredible keynote today. He described an initiative called Agent Force, and I realized what this technology can really do. It has time for you, acknowledges you, and is polite. It can almost always answer your questions because there are only so many that get asked regularly, and it has the data to respond your data. It knows your preferences.
This is the perfect way to handle customer interactions instead of relying on humans who can be unclear, impatient, or exhausted. Humans are, well, human, harried and ready to go home. But machines infused with AI are delightful, smart, and engaging. They don’t mind going to work, and that’s where these AI agents come in. The machines can listen, reason, and either direct you to the right place or handle everything themselves.”
Jim Cramer explained that AI offers a better experience than what we currently have. For instance, in retail, AI knows customer preferences, helps with returns, and suggests alternatives based on previous purchases, reducing the need to deal with human salespeople who might be stressed or impatient. If customers are still unhappy, they can opt to talk to a human, but they might prefer the friendly interaction with the AI agent.
“So, what AI really is and what it does is provide us with something better than what we currently have. It’s a retailer that knows all about your preferences, can help you return an item, and asks if you want something different from what you bought last time. It frees you from the hassle of a human salesperson who might be frustrated or upset. And if you’re not satisfied, you can still speak to a human if you want to—but I doubt you will, because the AI agent is just so much more pleasant.”
Revolutionizing Everyday Life: How AI Outperforms Humans in Healthcare, Driving, and Beyond
Cramer added that AI’s potential extends beyond retail. He believes that in ten years, we might wonder why we relied on doctors when AI agents could provide kinder, more empathetic care. These AI systems could analyze millions of test results, quickly identifying serious health issues like melanoma, heart disease, or kidney cancer, making it easier to spot dangerous patterns before they become serious problems. AI’s ability to compile and analyze data effectively is key to this advancement.
“It’s not just retail. In ten years, I think we’ll wonder why we ever wasted a doctor’s time when AI agents were so much better, kinder, and more empathetic. Doctors could analyze millions of test results that might have taken a decade to sort through, identifying dangerous patterns well before they become problematic—like melanoma, heart disease, or kidney cancer. It’s all in the data, and only AI can compile it in an accessible way.”
Additionally, Jim Cramer pointed out that self-driving cars are becoming more common and are significantly safer than human drivers since they don’t get distracted or impaired. He noted that AI can also handle tasks like proofreading and correcting errors without making mistakes. This efficiency allows law firms to operate with fewer associates.
“We see self-driving cars everywhere. They’re much safer than human drivers. They don’t drink and drive—they don’t even drink. An AI agent can proofread, correct, and never make a mistake. Law firms can now hire half as many associates because of this efficiency”
Finally, Cramer emphasized that AI agents often perform better than humans in most situations. For repetitive tasks, he believes it’s preferable to interact with a courteous and efficient AI rather than a stressed or frustrated human who may not want to engage.
“The bottom line is that if you let the AI agent do its job, it will outperform humans in the vast majority of cases. And for repetitive tasks, trust me: you’d much rather have a polite and friendly AI agent than a harried, angry, or exhausted human who really doesn’t want to deal with you.”
Our Methodology
This article summarizes Jim Cramer’s latest Morning Thoughts, highlighting ten key stocks he reviewed. We ranked them by hedge fund ownership, from the least to the most owned.
At Insider Monkey we are obsessed with 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).
Don’t Miss Out: Jim Cramer’s 10 Key Stocks to Watch
10. KLA Corporation (NASDAQ:KLAC)
Number of Hedge Fund Investors: 55
Jim Cramer reported that in the semiconductor sector, Citi has cut its price targets for KLA Corporation (NASDAQ:KLAC), a company that was previously highly praised.
“Elsewhere in chips, Citi lowered its price targets on once-darling semiconductor equipment maker KLA Corp.”
A positive outlook on KLA Corporation (NASDAQ:KLAC) is supported by its strong earnings, leadership in semiconductor process control, and high demand driven by technological advancements. In its latest earnings report for Q4 2023, KLA Corporation (NASDAQ:KLAC) generated revenues of $2.25 billion, showing a year-over-year increase due to rising demand for its semiconductor equipment and services, especially in process control and yield management.
As a leader in this area, KLA Corporation (NASDAQ:KLAC) is well-positioned to benefit from semiconductor manufacturers seeking greater efficiency and yield, making its technology essential for the industry’s success. The ongoing global demand for semiconductors—driven by trends like AI, 5G, and IoT—further boosts KLA Corporation (NASDAQ:KLAC)’s growth, as chip manufacturers look to expand capacity.
Additionally, KLA Corporation (NASDAQ:KLAC)’s commitment to research and development, along with its focus on next-generation technologies, enhances its product offerings and strengthens its competitive edge. Recent announcements about expanding its product portfolio and increasing its capacity to meet market demands further reinforce a positive outlook for KLA Corporation (NASDAQ:KLAC)’s future growth potential.
Parnassus Mid Cap Fund stated the following regarding KLA Corporation (NASDAQ:KLAC) in its Q2 2024 investor letter:
“KLA Corporation (NASDAQ:KLAC), a provider of process control and yield management solutions for the semiconductor and related nanoelectronics industries, continued its strong run. We expect KLA will continue to benefit from the increasing complexity of chip designs.”
9. Hewlett Packard Enterprise Company (NYSE:HPE)
Number of Hedge Fund Investors: 58
Jim Cramer noted that Bank of America has upgraded Hewlett Packard Enterprise Company (NYSE:HPE), giving it a buy rating and setting a price target of $24.
“Bank of America upgraded Hewlett Packard Enterprise to a buy rating with a $24 price target.”
In its latest quarterly report, Hewlett Packard Enterprise Company (NYSE:HPE) announced revenues of $7.2 billion for Q3 2023, showing a year-over-year increase driven by rising demand for its hybrid cloud services and infrastructure. Hewlett Packard Enterprise Company (NYSE:HPE) is strategically focusing on hybrid cloud solutions, with its GreenLake platform gaining popularity as businesses seek more flexibility in managing workloads.
Additionally, Hewlett Packard Enterprise Company (NYSE:HPE)’s investments in edge computing position it as a leader in a fast-growing market, where processing data closer to its source is increasingly important. Recent partnerships with major tech companies further enhance Hewlett Packard Enterprise Company (NYSE:HPE)’s market presence and capabilities, leading to the development of innovative solutions for future growth.
Announcements about improvements to the GreenLake platform and continued investments in AI and edge technologies highlight Hewlett Packard Enterprise Company (NYSE:HPE)’s potential for ongoing success, reinforcing a positive outlook on its growth trajectory.
8. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Investors: 75
Jim Cramer reported that Intel Corporation (NASDAQ:INTC)’s struggling shares rose 7% after the company announced plans to separate its manufacturing foundry business into an independent unit with its own board, allowing it to seek outside funding. Additionally, Intel Corporation (NASDAQ:INTC) revealed a partnership with Amazon Web Services to create custom AI semiconductors.
“Embattled Intel shares jumped 7% after the chipmaker late Monday announced plans to turn its manufacturing foundry business into an independent unit. It will have its own board and the potential to raise outside capital. Intel said, separately, that it entered a deal with cloud computing giant Amazon Web Services to produce custom AI semiconductors.”
A bullish view on Intel Corporation (NASDAQ:INTC) is supported by improvements in earnings, advancements in semiconductor technology, and strategic investments in manufacturing. In its latest quarterly report, Intel Corporation (NASDAQ:INTC) reported $12.9 billion in revenue for Q2 2023, largely due to increased demand for its chips, especially in the data center and AI markets.
The introduction of its Intel 4 Manufacturing Process improves product performance and efficiency, helping Intel compete better with rivals like Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA). As demand for AI and data center solutions grows, Intel Corporation (NASDAQ:INTC) is also developing specialized chips, such as the Gaudi and Habana processors, which are expected to boost future revenue.
Additionally, Intel Corporation (NASDAQ:INTC)’s plans to build new manufacturing plants in the U.S. and Europe will strengthen its supply chain and enhance production capacity over the long term. Recent announcements about expanding AI initiatives and updates on manufacturing progress highlight Intel Corporation (NASDAQ:INTC)’s commitment to growth, reinforcing a positive outlook for its recovery and future success in the semiconductor market.
Ariel Global Fund stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q2 2024 investor letter:
“Alternatively, several positions weighed on performance. One of the world’s largest semiconductor chip manufacturers by revenue, Intel Corporation (NASDAQ:INTC), underperformed in the period on news of a longer than expected turnaround in profitability within the Foundry business. This was exacerbated by disappointing near-term guidance due to a weakening demand environment signaling an extended replacement cycle.
We view the quarter as a temporary trough that should dissipate as we see signs of a cyclical recovery for personal computers (PCs) and central processing units (CPUs), driven by the Windows 11 upgrade. In our view, the market is overlooking the progress Intel is making to advance its manufacturing process. Not to mention, the company’s efforts to serve as a viable second source foundry partner of leading-edge silicon. We believe the separation of the design and manufacturing businesses will be a key catalyst in unlocking improved financial performance while also enhancing the competitiveness of the foundry business.”
7. Applied Materials Inc. (NASDAQ:AMAT)
Number of Hedge Fund Investors: 77
Jim Cramer mentioned that Citi has reduced its price targets for Applied Materials Inc. (NASDAQ:AMAT), a semiconductor equipment manufacturer that was once highly regarded.
“Citi also lowered its price targets on once-darling semiconductor equipment maker Applied Materials”
Applied Materials, Inc. (NASDAQ:AMAT) is driven by strong earnings, its leadership in semiconductor equipment, and high demand for advanced manufacturing technologies. In its latest quarterly report for Q3 2023, Applied Materials, Inc.(NASDAQ:AMAT) reported revenues of $6.43 billion, showing significant year-over-year growth due to increased demand for its semiconductor manufacturing equipment.
As a leading provider of equipment and software for semiconductor fabrication, Applied Materials, Inc. (NASDAQ:AMAT) is well-positioned to benefit from the industry’s growth, especially as manufacturers invest in advanced nodes and technologies. The ongoing global demand for semiconductors, driven by trends like AI, cloud computing, and 5G—supports a strong market for Applied Materials, Inc. (NASDAQ:AMAT)’s products, boosting its growth prospects.
Moreover, Applied Materials, Inc. (NASDAQ:AMAT)’s focus on research and development, along with its commitment to expanding offerings in materials engineering and sustainability, positions it to meet the changing needs of the semiconductor industry. Recent announcements about increasing capacity to meet market demand and advancements in its product portfolio further enhance a positive outlook for Applied Materials, Inc. (NASDAQ:AMAT) future growth.
6. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Investors: 84
In other news about chips, Jim Cramer said that Citi has reduced its price targets for Lam Research Corporation (NASDAQ:LRCX), which was once a highly regarded semiconductor equipment manufacturer.
“In other news about chips, Citi has reduced its price targets for Lam Research, which was once a highly regarded semiconductor equipment manufacturer.”
Lam Research Corporation (NASDAQ:LRCX)’s positive outlook is based on its strong earnings, leadership in semiconductor manufacturing, and growing demand for advanced technology nodes. In its latest earnings report for Q4 2023, Lam Research Corporation (NASDAQ:LRCX) reported revenues of $4.2 billion, showing significant year-over-year growth driven by high demand for its semiconductor equipment.
As a key provider of equipment for making semiconductor devices, especially for advanced nodes, Lam Research Corporation (NASDAQ:LRCX) is well-positioned as the industry moves toward smaller geometries, making its technology essential for manufacturers. The increasing global demand for semiconductors, driven by trends in AI, 5G, and IoT, boosts Lam Research Corporation (NASDAQ:LRCX)’s growth prospects, as its products are critical for producing next-generation chips.
Lam Research Corporation (NASDAQ:LRCX)’s investments in research and development, particularly in areas like atomic layer deposition (ALD) and etch processes, highlight its commitment to advancing technology for future chips. Recent announcements about expansion plans and new product innovations in response to market needs further strengthen a positive outlook on Lam Research Corporation (NASDAQ:LRCX)’s growth potential.
Artisan Select Equity Fund stated the following regarding Lam Research Corporation (NASDAQ:LRCX) in its Q2 2024 investor letter:
“The top contributors to performance for the quarter were Alphabet, Lam Research Corporation (NASDAQ:LRCX) and Elevance. Lam Research shares rose 10% during the quarter and are up 67% over the past year, primarily due to optimism around the pending investment cycle in semiconductor capital expenditures. Lam is one of the largest equipment manufacturers used to make semiconductor chips.
This equipment, commonly referred to as WFE (wafer fabrication equipment), is expected to experience significant growth due to a combination of a cyclical rebound in memory chips and growing demand for new AI-related chips. Lam’s product portfolio is particularly well positioned to benefit from both trends and should grow even faster than the overall market. Its shares now trade at ~30X prior peak earnings, which suggests this dynamic is well understood by the market and is mostly priced in.”
5. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Investors: 88
Jim Cramer noted that in the server market, Mizuho Securities has begun coverage of Dell Technologies Inc. (NYSE:DELL), giving it an “outperform” rating.
“Also in the server market, Mizuho Securities started coverage of Dell with an outperform.”
Dell Technologies Inc. (NYSE:DELL) is supported by strong earnings growth, an expansion in cloud infrastructure, and high demand for its PCs and enterprise solutions. In its latest quarterly report, Dell Technologies Inc. (NYSE:DELL) announced revenues of $22.9 billion for Q2 2023, reflecting a 7% year-over-year increase driven by solid demand for PCs and servers, showcasing resilience in its core markets.
Dell Technologies Inc. (NYSE:DELL) is significantly increasing its focus on cloud solutions by forming partnerships with major cloud providers and promoting its own Dell Technologies Cloud, positioning itself well in the expanding cloud infrastructure market. Additionally, demand for Dell Technologies Inc. (NYSE:DELL)’s enterprise solutions, including storage and networking products, continues to grow as businesses invest in IT modernization, further enhancing revenue prospects.
Dell Technologies Inc. (NYSE:DELL)’s strategic initiatives in AI and data analytics are improving its product offerings and competitiveness. Recent announcements about expanding cloud services and launching new products to enhance customer experience highlight Dell Technologies Inc. (NYSE:DELL)’s commitment to future growth, supporting a strong positive outlook for its potential.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its Q2 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) was a top contributor despite reporting disappointing first-quarter earnings results, because investors looked through the near-term disappointment and expected strong growth from AI-related servers and personal computers. We expect Dell to participate in the growth of artificial intelligence hardware, especially as enterprises invest more aggressively. We like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
4. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Investors: 100
Jim Cramer reported that JPMorgan has lowered its price target for QUALCOMM Incorporated (NASDAQ:QCOM) from $230 to $210 per share but maintained its buy rating. Analysts noted that QUALCOMM Incorporated (NASDAQ:QCOM) is likely to lose modem revenue as Apple continues to develop and source its mobile components.
“JPMorgan cut its Qualcomm price target to $210 per share from $230 but kept its buy rating. The analysts said, however, that Qualcomm is about to lose modem revenue as Club name Apple Inc. (NASDAQ:AAPL) continues efforts to make and source mobile components in-house.”
QUALCOMM Incorporated (NASDAQ:QCOM) is backed by strong earnings, its leadership in 5G technology, and growing opportunities in the automotive and IoT markets. In its latest quarterly report, QUALCOMM Incorporated (NASDAQ:QCOM) reported revenues of $8.45 billion for Q3 2023, fueled by high demand for smartphone chips and increased royalty income.
As a major player in the 5G market, QUALCOMM Incorporated (NASDAQ:QCOM) stands to benefit from the rapid global adoption of 5G technology, which is essential for smartphones and many connected devices. QUALCOMM Incorporated (NASDAQ:QCOM) is also expanding into the automotive sector with its Snapdragon platform for advanced driver assistance systems (ADAS) and connected vehicles, presenting significant growth opportunities.
Additionally, QUALCOMM Incorporated (NASDAQ:QCOM) is forming strategic partnerships with leading tech companies to enhance its market position and drive innovation. Recent announcements about new automotive partnerships and advancements in 5G technology underscore QUALCOMM Incorporated (NASDAQ:QCOM)’s commitment to future growth, supporting a strong bullish outlook on its prospects.
Aristotle Capital Value Equity Strategy stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2024 investor letter:
“QUALCOMM Incorporated (NASDAQ:QCOM), a leading wireless communications technology company, was the largest contributor for the quarter. After a period of weaker global demand for smartphones (driven by a slowdown in China) and elevated channel inventory, demand from Chinese handset manufacturers accelerated 40% year‐over‐year. More importantly, in our opinion, Qualcomm continues to execute on a previously identified catalyst of shifting its business mix beyond smartphones.
The company announced increased progress for its automotive and Internet of Things (IoT)solutions. Within auto, the increase in vehicle content has resulted in 35% year‐over‐year revenue growth, with a design win pipeline of ~$45 billion, keeping the company on track to achieving ~$4 billion in auto‐related revenues by 2026. In recent years, despite persistent threats of insourcing from large clients (most notably Apple), Qualcomm has been able to retain its high market share in handsets while simultaneously expanding in non‐smartphone devices.
We believe this progress is a testament to Qualcomm’s history of high (and productive) R&D spending, resulting in technological superiority. We believe Qualcomm’s technologies will continue to benefit as the world stays on a path toward a proliferation of connectivity between varying devices and as AI applications extend from the cloud to on‐device.”
3. Micron Technology Inc. (NASDAQ:MU)
Number of Hedge Fund Investor: 120
Jim Cramer noted that Citi has lowered its price target for Micron Technology Inc. (NASDAQ:MU) from $175 to $150 per share while keeping its buy rating. Analysts expect Micron Technology Inc. (NASDAQ:MU)’s upcoming quarterly earnings to fall below expectations due to weakness in DRAM, a type of semiconductor memory.
“Citi cut its Micron price target to $150 per share from $175 but kept its buy rating. The analysts expect below consensus numbers when Micron reports quarterly earnings next week. They cite weakness in DRAM, dynamic random access memory, which is a type of semiconductor memory.”
Micron Technology, Inc. (NASDAQ:MU) is set for strong growth, fueled by rising demand for memory products in sectors like artificial intelligence, 5G, and cloud computing. In its recent Q3 2024 earnings report,Micron Technology, Inc. (NASDAQ:MU) reported a 15% increase in revenue to $5.2 billion, surpassing expectations and showing improved gross margins, which highlights its effective management despite supply chain issues.
Micron Technology, Inc. (NASDAQ:MU)’s advancements in DDR5 and 3D NAND technologies give it a competitive edge and the potential to capture more market share. Furthermore, its attractive valuation compared to peers suggests it could rise in value as market conditions improve. With strategic partnerships and support from the U.S. government for semiconductor manufacturing, Micron Technology, Inc. (NASDAQ:MU) is well-positioned to seize future opportunities, making it an appealing investment choice.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Jim Cramer reported that Microsoft Corporation (NASDAQ:MSFT) has announced a 10% increase in its quarterly dividend and approved a new $60 billion stock buyback program. Morgan Stanley analysts noted that this dividend increase aligns with similar boosts over the past nine years, while Deutsche Bank commented that the plan shows management’s commitment to profitable growth.
“Club name Microsoft announced a 10% increase in its quarterly dividend and approved a new $60 billion stock buyback program. Morgan Stanley research analysts said the dividend boost is in-line with increases over the past nine years. Deutsche Bank said the plan signals that management is “committed to profitable growth.”
Microsoft Corporation (NASDAQ:MSFT) is supported by its strong earnings, impressive growth in cloud services, and advancements in AI technology. In its latest quarterly report, Microsoft Corporation (NASDAQ:MSFT) reported $56.19 billion in revenue for Q4 2023, driven by increasing demand for its cloud offerings, especially Azure, which continues to lead the enterprise cloud market. This strong position is vital for long-term growth.
Moreover, Microsoft Corporation (NASDAQ:MSFT) is actively investing in AI, incorporating features like Copilot into Office applications, which improves its products and creates new revenue opportunities. Partnerships, such as with OpenAI, enhance its AI capabilities further. Additionally, Microsoft Corporation (NASDAQ:MSFT)’s diverse range of products, including Xbox and LinkedIn, adds stability and growth potential across different sectors.
Microsoft Corporation (NASDAQ:MSFT)’s plans to expand its AI services and invest in data centers show its commitment to addressing the rising demand for cloud solutions. Together, these elements place Microsoft Corporation (NASDAQ:MSFT) in a strong position for future growth, supporting a bullish outlook on its market potential.
Alger Spectra Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 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 third quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of AI adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 31% in constant currency of which 7% was AI related versus 3% two quarters ago.
Further, management noted most of the AI revenue continues to stem from inference rather than training indicating high quality AI applications by Microsoft’s clients. Management also indicated that the significant cost-cutting programs in corporate America are done, suggesting that the cost optimization headwinds previously impacting Azure’s growth are over.
Separately, management provided color on their new AI-productivity tool, Copilot, noting that approximately 60% of Fortune 500 companies are already using Copilot, and that the quarter witnessed a 50% increase in Copilot assistance integration within Teams. We continue to believe that Microsoft has the potential to hold a leading position in AI, given its innovative approach and demonstrated high unit volume growth opportunity.”
1. Amazon.com Inc. (NASDAQ:AMZN)
Number of Hedge Fund Investor: 308
Jim Cramer shared that Intel Corporation (NASDAQ:INTC) has struck a deal with Amazon Web Services to produce custom AI semiconductors. Amazon.com Inc. (NASDAQ:AMZN), a major customer of Intel Corporation (NASDAQ:INTC), uses its chips to power its AWS servers.
“Intel Corporation entered a deal with cloud computing giant Amazon Web Services to produce custom AI semiconductors. Amazon is a big customer of Intel chips to power its AWS servers.”
A positive outlook on Amazon.com, Inc. (NASDAQ:AMZN) is through its strong earnings growth, expansion in cloud services, and strategic investments in logistics and AI. In its latest quarterly report, Amazon.com, Inc. (NASDAQ:AMZN) reported impressive revenues of $134.4 billion for Q2 2023, largely driven by its strong performance in e-commerce and AWS (Amazon Web Services), which alone generated $22.1 billion.
AWS continues to thrive despite rising competition, reflecting solid demand for cloud solutions. Additionally, Amazon.com, Inc. (NASDAQ:AMZN)’s investments in logistics, such as new fulfillment centers and improved delivery technologies, will enhance customer experience and operational efficiency, driving sales growth.
Amazon.com, Inc. (NASDAQ:AMZN)’s use of AI to optimize supply chains and personalize customer interactions is also expected to boost sales. Recent announcements about expanding Prime offerings and ongoing AI investments further highlight Amazon.com, Inc. (NASDAQ:AMZN)’s confidence in its growth potential, reinforcing a positive outlook for its future in the marketplace.
While we acknowledge the potential of Amazon.com, Inc. (NASDAQ:AMZN), 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’.
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