Jim Cramer is Talking About 10 Falling Stocks Amid Latest Market Rotation

2. Microsoft Corp (NASDAQ:MSFT)

Number of Hedge Fund Investors: 293

While talking about Microsoft Corp (NASDAQ:MSFT), Jim Cramer in a latest program referred to comments from CNBC host David Faber, who thinks big data center spending could “turn out to be a big waste of money.”

Cramer wondered whether Microsoft Corp (NASDAQ:MSFT) data spending could also end up without big returns.

“I think Co-pilot and AI platform will be huge but will it be big enough to justify their investment, even if the stock sells for 37 times earnings, there is not enough room for failure.”

Jefferies analyst Brent Thill recently chose Microsoft Corp (NASDAQ:MSFT) as his top enterprise AI pick. While talking to CNBC, the analyst said Microsoft is in “great shape” with its “Copilot strategy” for the back half of 2024.

Dan Ives of Wedbush also believes MSFT is one of the leaders in the AI enterprise segment.

New Street Research started covering the stock with a Buy rating. The firm said that Microsoft Corp (NASDAQ:MSFT) is well positioned to grow profit in the “low teens for years to come” even if the AI revolution fails to pan out. New Street Research has a $570 price target on Microsoft Corp (NASDAQ:MSFT).

Analysts believe Microsoft Corp’s (NASDAQ:MSFT) AI ecosystem around its products would strengthen its Cloud division thanks to Microsoft Corp’s (NASDAQ:MSFT) integration of AI into its Cloud products. Microsoft Corp’s (NASDAQ:MSFT) Intelligent Cloud segment’s profit in the latest quarter totaled $12.51 billion, a whopping 32% growth on a YoY basis.

Microsoft Corp’s (NASDAQ:MSFT) huge investments to revive its Search business are also working. Bing’s market share has jumped to 3.64% as of April 2024, a 0.88 points gain on a YoY basis.

Wall Street expects Microsoft Corp’s (NASDAQ:MSFT) earnings to grow 12.50% next year. The  stock’s forward P/E of 31 based on 2025 EPS makes it look attractive at the current levels. Average analyst estimate for Microsoft Corp (NASDAQ:MSFT) is $483, which presents a 14% upside potential from the current levels.

ClearBridge Sustainability Leaders Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:

“The Strategy trailed the Russell 3000 Index benchmark largely due to our diversified positioning, although we maintain a considerable portfolio allocation to large cap AI-related companies. These positions were indeed among our top contributors in the quarter, such as Microsoft Corporation (NASDAQ:MSFT). The company is finding more ways to deploy AI for sustainability objectives such as its ability to better measure, predict and optimize complex systems, which can help its partner communities reduce wildfire risk.”