2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Investors in Q2 2024: 279
GS’ Number Of Funds: 79
Microsoft Corporation (NASDAQ:MSFT) is another big tech giant. Like Alphabet, the firm plays a key role in the artificial intelligence industry, and it benefits from its close partnership with OpenAI – the firm that’s responsible for popularizing AI in the collective imaginations of investors and the general public. While the exact figure isn’t known, what is clear is that Microsoft Corporation (NASDAQ:MSFT) has invested billions of dollars in AI, which means that the technology – and its monetization – are now a fundamental part of the big tech firm’s $3 trillion market capitalization. In fact, Microsoft Corporation (NASDAQ:MSFT)’s enterprise computing business, which accounted for $28.5 billion of its $64 billion in FYQ4 revenue, is another key component of the AI hypothesis as the firm is expected to earn revenue from AI by targeting products to business and enterprise users. In fact, this exposure to enterprise spending has been part of the reason why Microsoft Corporation (NASDAQ:MSFT)’s shares are down by 11% since July while Apple’s shares have lost just 2.89% as investors are increasingly worried about near term AI revenue generation.
Baron Funds mentioned Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter. Here is what the firm said:
“Microsoft Corporation is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Oice products, but over the last five years it has built a $135 billion run-rate cloud business, including its Azure cloud infrastructure service and its Oice 365 and Dynamics 365 cloud-delivered applications. The stock contributed to performance because of continued strong operating results and investor enthusiasm regarding Microsoft’s leadership across the secular megatrends of AI and cloud computing. Recent business momentum continued to show evidence of the strength and attractiveness of Microsoft’s product portfolio among its customer set: (1) Azure OpenAI – its suite of AI services – is now used by 65% of the Fortune 100 and contributed 7% of Azure revenue (an annualized run rate of $5.2 billion); (2) GitHub Copilot – its AI code writing service – is bending the productivity curve for developers (reports of 40%- plus improvements in developer efficiency) and now has 1.8 million paid subscribers, with growth accelerating to over 35% quarter-over-quarter; and (3) Copilot Studio – its AI application service that makes it easier for anyone to build an application, automate a workflow, or create a Copilot using natural language. 30,000 organizations across every industry have used Copilot Studio to customize Copilot for Microsoft 365 or build their own, up 175% quarter-over- quarter. In the March quarter, Microsoft again reported better-than-expected financial results, highlighted by Microsoft Cloud growing 23% year- over-year, with the fastest commercial bookings in six quarters, and Azure accelerating to 31% constant currency growth, up from 28% in the previous quarter. June quarter guidance came in-line with consensus, but the company provided higher guidance for the most important segment, Intelligent Cloud, on the back of continued strong trends across Azure and Azure OpenAI. We remain confident that Microsoft is one of the best- positioned companies across the overlapping software, cloud computing, and AI landscapes.”
