We recently published a list of 12 Best NASDAQ Stocks To Buy in 2025. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other best NASDAQ stocks to buy in 2025.
As 2025 began, King Lip, chief strategist and partner at BakerAvenue Wealth Management expressed his bullish outlook for tech stocks in 2025 during a CNBC interview. He underscored a strong belief in the continued outperformance of tech stocks in 2025, driven by robust earnings growth and ongoing investments in AI infrastructure. Here’s a short excerpt from our article on the 12 Best Technology Stocks to Invest In for the Long Term that covered this:
“…Lip was against the prevailing sentiment among investors that big tech has peaked and that funds should rotate into smaller stocks or other themes. He argued that the recent weakness in the tech sector is largely due to technical rebalancing rather than a fundamental downturn. He emphasized that cash is likely to flow back into leading tech stocks, as they are projected to deliver the highest earnings growth in 2025, with an anticipated earnings increase of over 20%.”
While acknowledging the high valuations of many tech stocks, he argued that they remain within acceptable historical norms. On January 9, Mark Avallone, president at Potomac Wealth Advisors, joined ‘The Exchange’ on CNBC to discuss why technology is the best sector to invest in right now. He asserts that above-target inflation will prevent the Fed from implementing further easing measures, countering the notion that higher rates are detrimental. He noted that market rates have surged to all-time highs, with a significant increase of 1,800 points since October 2023. Avallone emphasizes that tech stocks, particularly cash-flowing mega-cap and large-cap companies, have shown resilience against rising rates, attributing this to improved operational efficiencies and ongoing technology spending even in a slowing economy.
Avallone highlighted recent deal chatter in the tech sector, including Shutter Stock’s potential acquisition in the uniform space, reflecting growing interest in technology-driven solutions. He is optimistic about the incoming administration’s impact on economic efficiencies and stock performance, particularly for large-cap tech firms and mid-cap companies focused on innovation. He views Hilton favorably for its technological advancements in office management and cost efficiency. In the defense sector, he expressed confidence in Boeing’s growth potential, emphasizing that significant cuts to defense spending are unlikely and that advancements in tech will enhance military capabilities.
Methodology
We first sifted through the Finviz stock screener to compile a list of the top 20 NASDAQ for 2025. We then selected the 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in 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).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a technology company that has been expanding its AI capabilities. This is fueled by the launch of advanced AI models in its Azure AI catalog. Azure integrates on-premises and cloud-based systems for enterprise clients.
In FQ1 2025, the company reported a 16% year-over-year revenue growth, reaching $65.6 billion. Notably, cloud revenue soared by 22%, exceeding $38.9 billion. This was driven by a 23% increase in Azure-led server products and cloud services. Azure Arc’s customer base has increased by 80% year-over-year. Azure Arc is a hybrid cloud management platform that extends Azure’s capabilities to non-Azure environments. This allows businesses to manage resources across various platforms seamlessly.
The company is updating its Azure partner program, making it more difficult to qualify for certain specializations, particularly in the AI space. The Azure Partner Program is a network of companies that collaborate with Microsoft to deliver and support Azure cloud solutions to customers. Starting in early 2025, partners specializing in AI on Azure must now demonstrate at least $5,000 in revenue from Azure AI services.
Creative Strategies’ Ben Bajarin believes that Microsoft Corp.’s (NASDAQ:MSFT) enterprise AI traction, particularly with Copilot, will take time to materialize. Microsoft Copilot is an AI-powered assistant integrated into Microsoft 365. It uses Azure’s cloud computing power for its functionality. Although many companies are planning to use the Copilot AI tool, it’s uncertain how much money Microsoft Corp. (NASDAQ:MSFT) will make from it.
RiverPark Large Growth Fund noted the company’s near-term Azure growth headwinds due to infrastructure limitations but remains confident in its long-term growth prospects. It stated the following regarding Microsoft Corp. (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT): MSFT was a top detractor in the third quarter following a fiscal fourth quarter earnings report that featured inline operating metrics but mixed guidance. Positively, the company reported strong revenue (+15%) and earnings growth (+10%), powered by Azure (+30%), and operating margins of 43%. Guidance however calls for lower than expected fiscal first quarter Azure revenue as infrastructure constraints limit growth, and higher capital expenditures throughout the company’s fiscal 2025 to alleviate these constraints. The company expects growth to reaccelerate in the back half of fiscal 2025 as more AI capacity comes online.
Cloud-based services have become the company’s largest revenue and earnings producer. The company’s Azure platform alone has the potential to grow to more than $200 billion in annual revenue over the next decade. Overall, we believe that the company will continue to deliver double-digit revenue and EPS growth and generate an enormous amount of free cash flow to return to shareholders and use for acquisitions.”
Overall, MSFT ranks 2nd on our list of best NASDAQ stocks to buy in 2025. While we acknowledge the growth potential of MSFT, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
