We recently published a list of the 13 NASDAQ Stocks with the Highest Upside Potential. In this article, we are going to take a look at where Microsoft Corp. (NASDAQ:MSFT) stands against other NASDAQ stocks with high upside potential.

On April 7, Dan Ives of Wedbush Securities joined CNBC’s ‘Squawk on the Street’ to discuss how the current tariff environment could impact tech supply chains. Musk’s actions and Trump’s tariffs have contributed to broad economic uncertainty, which Ives also referred to as the economic Armageddon for US tech in an earlier conversation. He expressed concern about the structural supply chain challenges posed by recent tariffs and geopolitical tensions. Ives highlighted that the US tech sector has historically maintained an edge over China but this could be wiped out if manufacturing were relocated to the US. The logistical hurdles of building manufacturing plants in the US are not negligible and it would take 4 to 5 years to establish facilities capable of sustaining production levels comparable to those in Asia.

He also acknowledged that he hasn’t downgraded major stocks like the ones in MAG7 but remains cautious. If these previously highlighted issues persist for months, Ives anticipates drastic cuts in earnings. This uncertainty surrounding tariffs could lead to lower demand for emerging technologies like AI and cybersecurity. He explained that this situation could severely impact the US tech companies and lead to broader cuts across the tech sector — potentially up to 25% in earnings. He also criticized Elon Musk’s political involvement, which he believes has caused permanent damage to his brand and customer base. He estimated a 20% demand destruction in Europe and 10% in the US.

Our Methodology

We used the Finviz stock screener to select the 13 stocks with the highest analysts’ upside potential (at least 35%) as of April 8. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.

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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Microsoft Corp. (NASDAQ:MSFT)

Average Upside Potential as of April 8: 39.72%

Number of Hedge Fund Holders: 317

Microsoft Corp. (NASDAQ:MSFT) develops and supports software, services, devices and solutions worldwide. These are mainly offered through its Productivity and Business Processes segment, the Intelligent Cloud, and the More Personal Computing segment. It sells its products through OEMs, distributors, and resellers, and also directly through digital marketplaces, online, and retail stores.

On April 8, Jefferies lowered the price target on Microsoft from $500 to $475, while acknowledging the macroeconomic pressures that slightly reduced their fiscal year estimates by 1% to 2% for the software and internet sectors. However, the firm maintained a Buy rating on the stock because of the company’s position in AI-driven cloud, productivity, and business solutions.

In FQ2 2025, the company’s AI revenue surged by 175% year-over-year, which represented a $13 billion annual run rate. While Azure’s growth recently slowed down a bit, this performance excluded the impact of AI in this segment. Azure AI services grew by 157% in FQ2, which was 13 points of the segment’s overall growth. Over 200,000 monthly users are already on Azure AI Foundry, and Azure OpenAI app usage has doubled. Azure cloud revenue grew 31%. Microsoft Corp. (NASDAQ:MSFT) now expects 31% to 32% Azure growth in FQ3.

Generation Global Equity Strategy expressed optimism about the company due to its AI leadership potential. It stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q4 2024 investor letter:

“Microsoft Corporation (NASDAQ:MSFT), the world’s largest software company, has been in the portfolio for over a decade. We like the firm because its products align closely with society’s evolving needs. As the world digitises, demand for Microsoft’s tools will continue to grow. The company enjoys a wide economic moat – built on its unique market position, deep customer understanding and extensive global footprint.

Microsoft’s management team has a long-term vision. It makes bold investments in future growth, most recently in AI. We forecast that the IT intensity of the economy will double over the next 15 years. Microsoft is a rare company with USD 250 billion in revenues, projected to grow at 16% annually over the next five years.14 Earnings-per share could grow faster. Despite its near-term valuation appearing high, we believe Microsoft is well positioned to lead in the AI era, potentially doubling or tripling its market share. Additionally, we expect returns on capital (ROC) for its AI related investments to match historical levels, despite market scepticism.

There are risks. Demand for AI systems may not materialise as expected, and increasing pricing power among suppliers like Nvidia could pressure margins. Still, from our analysis we see substantial long-term value in this name.”

Overall, MSFT ranks 11th on our list of NASDAQ stocks with the highest upside potential. 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. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. 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.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.