We recently published a list of 10 Best American Stocks To Buy and Hold in 2025. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other best American stocks to buy and hold in 2025.
Will the Market Continue To Be Bullish in 2025?
Wall Street’s outlook for the stock market in 2025 reflects a cautious optimism following two consecutive years of substantial gains. Analysts predict continued growth, however at a more moderate pace compared to the explosive increases of 2023 and 2024. According to a report by CNN, published on January 1, strategists anticipate a 14.8% increase in the S&P 500 for 2025, which is significant but lower than the previous years’ performances. The Index saw gains of approximately 23% in 2024 and 24% in 2023. As per the report 2025 marks a return to typical growth rates after an extraordinary period of high returns, which has not been seen since the late 1990s.
While several factors are expected to contribute to the market growth, there are potential risks that can hinder it. One of the key factors contributing to growth is the anticipated business-friendly policies under President-elect Donald Trump. Dan Ives, who is a technology senior analyst at Wedbush Securities in his December 30 note mentioned his expectations that tech stocks can rise 25% in 2025 due to less regulation under the Trump administration. The analyst has picked Technology and Artificial Intelligence (AI) stocks as his best performers for the year.
On the other hand, there are potential risks that could negatively impact the stock market. For instance, the uncertainty surrounding Trump’s policy decisions may create a volatile environment for markets. Traders are particularly wary of how proposed tariffs could affect economic stability and investor confidence. David Sekera from Morningstar emphasizes that the implementation of tariffs is a significant wildcard that could sway market performance in either direction. We recently covered the analysis of Jurrien Timmer, Director of Global Macro at Fidelity Management & Research Company in our article titled, 12 High Growth International Stocks to Invest in Now. Here’s a piece from our coverage:
“While talking about large-cap stock performance, Timmer raises the question of whether this trend of narrow leadership will persist. He suggested that trends continue to move in the same direction until a significant change occurs. Given that large-cap growth stocks have dominated for years, it is reasonable to assume that they may continue to lead. However, he also cautioned the investors that as per the concept of mean reversion, asset prices will eventually return to their historical averages and when this happens, it could lead to sharp corrections in stock prices. Timmer believes that while 2024 was a “Goldilocks year,” for earnings and valuations, this year can be a tussle between higher earnings and rising long-term interest rates, thereby resulting in a volatile market.”
Our Methodology
To get the list of the 10 best American stocks to buy and hold in 2025, we used Insider Monkey’s third-quarter hedge funds database. Using the database we ranked the top 10 American stocks in ascending order of the number of hedge funds holding stakes in them.
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)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a major American technology company that ranks as the 2nd best American Stock to buy and hold in 2025. It develops and sells a wide range of products and services aimed at helping people and businesses with their computing needs. It has become a significant player in the cloud and artificial intelligence space due to its Azure platform. The company has the second largest share in the international cloud industry around 23-25%, driven by AI integration.
On January 27, Mark Moerdler, an analyst at Bernstein maintained a Buy rating on the stock, keeping his price target at $516. The analyst believes Microsoft Corporation’s (NASDAQ:MSFT) strategic focus on AI and its ongoing investment in its Azure cloud are factors that will catalyze growth in the future. Recently, the company has entered into a significant revenue-sharing agreement with OpenAI that extends their partnership until 2030. This deal is designed to enhance Microsoft’s Azure cloud services by providing access to OpenAI’s advanced artificial intelligence models, which will benefit Azure customers. Management has plans to invest $80 billion in its expenditure cycle to support cloud systems and AI workloads over the next fiscal year.
RiverPark Large Growth Fund stated the following regarding Microsoft Corporation (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 American stocks to buy and hold in 2025. 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 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.