We recently published a list of 10 Best Major Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other best major stocks to buy according to hedge funds.
After a notable growth of 25% for the broader market in 2024, the S&P 500 index gained a little under 4% in the first month of 2025. The stock market had a mixed start to 2025 after the U.S. tech companies took a massive hit from the launch of Deepseek’s R1 AI model. Despite a major blow, the tech-heavy NASDAQ 100 index has gained over 4.50% year-to-date.
Also Read: 10 Large-Cap Stocks Insiders Are Selling Recently
Inflation and Tariff Concerns
U.S. stocks fell on February 12 following the release of January inflation data. The consumer-price index (CPI) soared 3% in January from a year ago, exceeding economists’ estimates. The data has somewhat stoked investors’ concerns about price pressures and the worry that interest rates might not come down as expected.
January CPI usually indicates big price adjustments made by businesses at the start of the year. Moreover, the beginning of a new administration has an impact on businesses. According to Goldman Sachs Research’s chief US equity strategist David Kostin, every five-percentage-point increase in the US tariff rate is estimated to reduce S&P 500 EPS by roughly 1-2%.
Therefore, if the U.S. administration sustains the proposed tariff rates, a 25% tariff on imported goods from Mexico and Canada and an additional 10% tariff on imports from China would reduce S&P 500 EPS forecasts by nearly 2-3%, as per Goldman’s Research.
However, the tariff policy doesn’t slow down the AI investment by the U.S. tech giants as they continue to expand their AI-related services and products. Four out of the Big Five companies are projected to invest over $300 billion in 2025 building data centers to fuel the AI boom.
Our Methodology
We have listed the top 10 best major stocks based on hedge fund sentiment, according to Insider Monkey’s database. The best major stocks are ranked in ascending order of the number of hedge fund holders, as of Q3 2024.
Why do we care about what hedge funds do? 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)
No. of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a leading developer of computer software, operating systems, artificial intelligence, and cloud computing. The company’s strongest unit is its cloud business, which generates the most revenue.
On February 11, Microsoft Corporation (NASDAQ:MSFT) announced an expanded partnership with Anduril, an American defense technology company, to begin the next phase of the U.S. Army’s Integrated Visual Augmentation System (IVAS) program. This deal will allow Microsoft Azure to be Anduril’s go-to hyperscale cloud for all workloads related to IVAS and Anduril AI technologies.
RiverPark Advisors, an investment advisory firm, discussed Microsoft Corporation (NASDAQ:MSFT) in its “RiverPark Large Growth Fund” third quarter 2024 investor letter. The investment firm noted that MSFT is expected to accelerate growth in the second half of fiscal 2025 as more AI capacity comes online. RiverPark Advisors highlighted that the company’s cloud-based services are now generating the most revenue. Here is what RiverPark Advisors mentioned in the Q3 2024 investor letter.
“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 major stocks to buy according to hedge funds. While we acknowledge the potential of MSFT to grow, our conviction lies in the belief that 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 MSFTbut 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.