We recently published a list of 10 Best Stocks to Buy for the Next 3 Months. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other best stocks to buy for the next 3 months.
The year 2025 began with the surprise announcement of DeepSeek AI, launched in China, which shook the markets. Further volatility was experienced when the US government implemented trade tariffs across China and Europe. In March, President Trump suggested that his proposed reciprocal tariff regime would offer “flexibility”, giving investors some relief. Although it is unclear what the term “flexibility” would entail. Rising tensions from conflicts in the Middle East and Europe added to market uncertainty. Looking ahead, investors will be watching closely for fresh economic indicators to assess the Fed’s stance on future interest rates.
The hedge fund industry is seen as a trusted source of investment opportunities. According to a report published by Reuters, assets have grown by nearly 56% since 2015. The industry had $4.51 trillion in assets under management (AUM) in 2024, 9.75% higher compared to the previous year. Total assets were the highest amount since 2021, rising by $401.4 billion in 2024 due to strong performances across different strategies.
In terms of returns, hedge funds continued to show improvement year-on-year. As per a report by Pivotal Path, hedge funds returned 5.7% in 2023 and 10.7% in 2024, while some managers showed gains above 50%. This performance substantiates the industry’s influence on markets.
Looking ahead, the hedge fund landscape is poised for significant changes in 2025, driven by evolving market conditions, technological advancements, and shifting investor preferences. Mordor Intelligence predicts that the US Hedge Fund Market will have a market size of $2.95 trillion in 2025 and is expected to reach $4.05 trillion by 2030, a CAGR of 6.52%.
Hedge funds have introduced new strategies for mitigating market risks for improved returns to their investors. These include diversifying towards smaller multi-strategy funds. After a decade of fluctuating demand, smaller multi-strategy funds have begun to show interest. In 2024, with traditional asset classes facing challenges from rising P/E ratios and tight credit spreads, the uncorrelated returns of reinsurance-linked strategies have become increasingly attractive. This is expected to drive substantial capital inflows into the sector in 2025, particularly from institutional investors seeking diversification and higher returns. Investors who can assess the market dynamics, adapt to changes, and identify future leaders in the space are well-positioned for success. Hedge funds have the resources to use advanced AI-driven technologies to predict market movements to ensure higher returns on volatile asset classes.
Investors seeking to mitigate the impact of such volatility will opt for more stable, low-risk investments such as fixed-income securities. These provide a continuous stream of income in periods of high interest rates. In contrast, those willing to take advantage of high interest rates would opt for sectors benefiting from such a scenario, including banking, real estate, or tech firms, which are geared to take on high market volatility.
Our Methodology
The best stocks to buy over the next three months are chosen based on hedge fund sentiment toward these investments. For this list, we used Insider Monkey’s Q4 2024 proprietary hedge fund holdings database and identified the 10 most popular hedge fund stocks. The stocks are ranked in ascending order of their hedge fund positions.
At Insider Monkey, we are obsessed with hedge funds. 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).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
No. of Hedge Fund Holders: 317
Upside Potential: 29.39%
Microsoft Corporation (NASDAQ:MSFT) is a pioneer in the technology sector. A global giant offering a wide range of software, services, and devices, with operations divided into three main segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment focuses on workplace and communication tools, including Microsoft 365, Teams, LinkedIn, and Dynamics 365. The Intelligent Cloud segment provides cloud-based services and server products, notably Azure, Visual Studio, and platforms such as GitHub. The More Personal Computing segment encompasses Windows operating systems, Surface devices, and gaming hardware brands such as Xbox, Game Pass, as well as managing search and news advertising through Bing, Microsoft News, and Edge.
Microsoft Corporation’s (NASDAQ:MSFT) earnings report for Q2 of 2025 revealed revenue of $69.63 billion, up 12.27%, clearing analysts’ estimates by $823.09 million and an EPS of $3.23. The AI segment contributed $13 billion to revenue, while revenue from cloud services was $40.9 billion, up 21%. The company’s Chairman and Chief Executive Officer, Satya Nadella, commented on the company’s cloud services’ performance, stating:
“Enterprises are beginning to move from proof-of-concepts to enterprise-wide deployments to unlock the full ROI of AI. And our AI business has now surpassed an annual revenue run rate of $13 billion up 175% year-over-year.”
Last year, Mr. Satya Nadella made a trip to Malaysia, as US tech firms continue to reduce their dependence on China as a regional partner due to a shift in US Government policies. Mr. Nadella announced that Microsoft Corporation (NASDAQ:MSFT) plans to launch its first cloud region in Malaysia with three data centers by mid-2025. More recently, the company also announced scaling back operations of Skype and transitioning existing users to Microsoft Teams instead. With an upside potential of nearly 30%, MSFT is one of the best stocks to buy.
Overall, MSFT ranks 2nd on our list of best stocks to buy for the next 3 months. While we acknowledge the potential for MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher 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.
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.
