In this article, we will take a detailed look at Jim Cramer November Portfolio: Top 10 Stocks.
Stock markets are roaring amid Donald Trump’s victory. Jim Cramer, who has long believed that Trump’s presidency would bode well for the stock market, earlier this week discussed the market’s reaction when chances of a Kamala Harris win were apparently rising. Looking back at Cramer’s analysis in hindsight gives us a nice overview of what groups of stocks could rise in the coming weeks and months.
Jim Cramer on Monday evening analyzed what caused the market to dip as of the closing session. Cramer believed the chances of Iowa turning blue spooked some market circles on various assumptions:
“Let’s start with the most incredible reactions, the bond market. Interest rates went sharply lower today. Now, see, I’m so used to higher, to interest rates going higher in a Democratic win, that this took me by surprise. It’s completely out of character. But the bond market is steep, and its judgment is not made on a whim. There had to be billions of dollars invested today on rates going lower if Harris wins the election. I find that astonishing.”
Cramer then talked about different groups of stocks that moved based on the sentiment that Harris could win this election. Housing stocks rose because the market is bullish based on potential subsidies if Harris wins. Tech stocks, however, fell, and Cramer explained the reason behind that:
“(hyper scalers and tech stocks) traded horribly today. What does it say? It says the traders are betting that Harris will stand by Biden’s FTC and antitrust appointments who are known to be anti-the hyper scalers,” Cramer added.
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For this article we watched some latest programs of Jim Cramer and picked 10 stocks he’s talking about. With each company we have mentioned its hedge fund sentiment. 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Hewlett Packard Enterprise Company (NYSE:HPE)
Number of Hedge Fund Investors: 58
Talking about data centers in a recent program, Jim Cramer said Hewlett Packard Enterprise Company (NYSE:HPE) shares should be bought aggressively.
“I will say that when I look at data centers in general, I did like HPE, especially with the news of Supermicro. I think HPE should be bought and bought aggressively.”
Hewlett Packard Enterprise Company (NYSE:HPE) shares recently jumped after rival Super Micro plunged following the unexpected resignation of its auditing firm, Ernst & Young LLP.
Hewlett Packard Enterprise Company (NYSE:HPE) conducted its AI day last month with several new products unveiled.
Hewlett Packard Enterprise Company (NYSE:HPE) has a strong moat in the IT industry amid high switching costs, achieving a customer retention rate of over 96%. Hewlett Packard Enterprise Company (NYSE:HPE)’s bundled solutions offer customers up to 30–40% in Total Cost of Ownership (TCO) savings, helping clients avoid overprovisioning—an advantage difficult for rivals to match.
Another key catalyst is Hewlett Packard Enterprise Company (NYSE:HPE)’s plan to acquire Juniper for $14 billion by early 2025. This acquisition will allow the company to deliver secure, AI-native, end-to-end solutions in networking, with Juniper addressing Hewlett Packard Enterprise Company (NYSE:HPE)’s wide-area and cloud networking gaps. The deal is expected to expand HPE’s higher-margin networking revenue from 18% to around 31% of its total revenue.
Hewlett Packard Enterprise Company (NYSE:HPE) is focusing on hyperscalers and AI service providers as its key target markets, both projected to grow at an annual rate of 29–30% through FY27. Much of this expansion is expected to stem from strong demand for liquid-cooled server solutions and networking, backed by significant capital expenditure from these clients. Networking, in particular, represents a high-growth area, with Hewlett Packard Enterprise Company (NYSE:HPE)’s management calling it “one of the biggest opportunities beyond servers” and projecting a combined market size of $135 billion by 2027.
9. Intel Corp (NASDAQ:INTC)
Number of Hedge Fund Investors: 75
Answering a question about Intel Corp (NASDAQ:INTC), Jim Cramer commented in a program on CNBC late last month:
“For the longest time, I would have told you to please don’t look. The stock has come down enough that I have to tell you, I’m not going to fight the tide anymore. I got people out about 30 or 40 points ago. I’m done. I think it is not a great stock, but I’m not going to tell you to sell it.”
While Intel Corp (NASDAQ:INTC) is going through a positive phase, its challenges are far from over. Revenue saw a slight improvement in Q3 2024, but other aspects appear set to worsen over the next 12 to 24 months. Investors should be mindful that in 2025, Intel Corp (NASDAQ:INTC) is expected to generate $4–$5 billion in operating cash flow against a projected $20–$23 billion in capital expenditures. Intel reported $5.1 billion in operating cash flow and spent $18.1 billion in the first nine months of this year.
Intel bulls are linking their hopes with Intel Corp (NASDAQ:INTC)’s foundry business. But the segment posted weak results in both the second and third quarters, with a third-quarter revenue drop of 8% and an EBIT loss that grew to $5.8 billion. Once seen as a potential competitor to Taiwan Semiconductor Manufacturing (TSM), Intel’s steep third-quarter decline raised serious doubts about its manufacturing competitiveness.
Despite short-term efforts to revive growth, Intel Corp (NASDAQ:INTC) is facing a harsh reality. It lags significantly behind its competitors in developing mobile CPUs and GPUs. Intel’s missed opportunities in the mobile sector and delayed entry into AI GPUs have further eroded its market position, causing it to lose substantial ground to rivals.
ClearBridge Large Cap Value Strategy stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter:
“While the market environment clearly was a headwind in the third quarter, several of our large positions also faced challenging conditions, which negatively impacted results. In the information technology (IT) sector, Intel Corporation (NASDAQ:INTC) has come under additional pressure due to continued softness in the company’s core PC and server markets as well as concerns on the company’s longer-term competitive position. While Intel’s turnaround is not happening overnight, we are constructive on the outlook into 2025: the company’s product positioning should be much improved and it should be positioned to gain market share in a cyclical upswing in which it has strong earnings power. A somewhat adverse spending environment due to AI myopia has weighed on shares, but we still think the market is undershipping PCs and general servers following a COVID normalization period that saw demand get pulled ahead and then languish as companies froze IT budgets. The installed base is now getting older, and we expect a strong refresh cycle into next year. The delay is actually beneficial to Intel, whose product positioning will be all the more improved. While our investment case is not predicated on an M&A transaction, and we believe one is unlikely, the expression of interest in the company speaks to the value of the assets, which we think still trade at a meaningful discount to fair value.”
8. Eli Lilly And Co (NYSE:LLY)
Number of Hedge Fund Investors: 100
Jim Cramer sounded disappointed with Eli Lilly And Co (NYSE:LLY) numbers in a latest program on CNBC, saying he was expecting “extraordinary” numbers from Eli Lilly And Co (NYSE:LLY) amid weight-loss drugs and a guidance raise.
“We got nothing like that. Instead they reported a clear miss… The explanation was totally opaque. I’m still trying to figure out what the heck happened. Too much supply, too little demand?”
There were several points in Eli Lilly And Co (NYSE:LLY)’s report that spooked investors. Management revised down the upper range of Lilly’s revenue guidance, citing “inventory decreases in the wholesaler channel” for key growth products Mounjaro and Zepbound in Q3. The updated outlook reflects ongoing supply chain challenges as these products face unprecedented demand.
However, Eli Lilly And Co (NYSE:LLY) bulls believe long-term catalysts for the stock are well intact.
To meet strong demand for its tirzepatide products, Lilly introduced new vial formats for Zepbound and Mounjaro, which improve accessibility and reduce supply strain on injection pens. The company has also been enhancing its go-to-market strategy, securing extensive U.S. health plan coverage for Zepbound and exploring expanded tirzepatide indications, including Medicare-eligible treatments like obstructive sleep apnea.
Another key catalyst comes from oncology. Eli Lilly And Co (NYSE:LLY) is seeing robust demand for its non-incretin medicines, notably Verzenio, which grew 32% year-over-year in Q3, aided by higher U.S. prices and a 70% adoption rate in metastatic breast cancer treatments. To further capitalize on Verzenio’s success, Lilly is testing it in combination with Imlunestrant in a Phase III trial, aiming to enhance patient outcomes and address current inefficiencies in metastatic ER+ breast cancer care.
PGIM Jennison Health Sciences Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its Q2 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a diversified biopharmaceutical company with core franchises in Diabetes, Obesity, Immunology, Neurodegeneration, and Oncology. The company is one of the two global leaders in diabetes with blockbuster products in Trulicity and recently launched Mounjaro (tirzepatide) to serve this large underserved market. To date, the Mounjaro launch is the strongest for any diabetes drug ever launched, which we attribute to off label usage in the obesity indication as well as on label use in diabetes. We believe the tirzepatide (the generic name for Mounjaro) franchise is also uniquely positioned to grow substantially from here thanks to its recent approval for obesity. To that note, in late 2023, Eli Lilly received approval for tirzepatide in obesity and is commercializing it for obesity under a new brand name, Zepbound. While still early in the launch, uptake has been extremely strong, exceeding that of both Wegovy and Mounjaro at the same timepoint in their launches. While Alzheimer’s Disease has been a tough market for drug developers, Eli Lilly has breakthrough designation from the food and drug administration (FDA) for donanemab and recently presented Phase III pivotal trial data that positions donanemab as the most efficacious drug in the class. In June, the FDA advisory committee voted unanimously in favor of donanemab as an effective treatment where the benefits outweigh the risks, praising the therapy as innovative. Donanemab was then approved under the brand name Kisunla in early July. Eli Lilly also has exciting franchises in dermatology, immunology, and oncology that are starting to add meaningfully to growth. With a proven history of strong commercial execution and one of the highest research and development (R&D) success rates in the industry, we see opportunity for continued success. With a lack of meaningful patent expirations for the rest of the decade. Eli Lilly is uniquely positioned amongst its larger-cap peers. Recent positive performance has been driven by the continued strong growth of Mounjaro and Zepbound, which led to a big guidance raise on the 1Q call, an unusual action for Eli Lilly this early in the year, which speaks to their confidence in the strong trends they are seeing.”
7. Advanced Micro Devices (NASDAQ:AMD)
Number of Hedge Fund Investors: 108
Jim Cramer said Advanced Micro Devices (NASDAQ:AMD)’s latest quarterly numbers were good but not good enough to satisfy Wall Street since expectations from the chipmaker are high. Cramer said Advanced Micro Devices (NASDAQ:AMD) is facing supply constraints and cannot make enough chips to meet the demand, which he called a “high-quality problem.”
Cramer said he’s thinking about buying Advanced Micro Devices (NASDAQ:AMD) shares on the dip.
“The numbers were simply good, but not good enough given the expectations. That’s why the stock dropped more than 10% to where I think we should be getting some for the Charitable Trust.”
What happened in Advanced Micro Devices (NASDAQ:AMD) results?
Despite a 120% growth in data center revenue and a 29% growth in client segment, Advanced Micro Devices (NASDAQ:AMD) fell because of guidance. Advanced Micro Devices (NASDAQ:AMD) raised its AI revenue outlook for the year from $4.5 billion to $5 billion.
Advanced Micro Devices (NASDAQ:AMD) bulls believe the market should stop comparing the company’s chips with Nvidia and focus on its data-center growth and its competitive edge over other players like Intel. Advanced Micro Devices (NASDAQ:AMD)’s strong growth in the data center segment is indeed impressive, driven by Instinct GPU shipments and strong sales of EPYC CPUs. Advanced Micro Devices (NASDAQ:AMD) will continue to benefit from organic growth catalysts in this segment despite the competition from Nvidia. According to Goldman Sachs Research, global data center demand could surge by 160% by 2030. In the U.S., data centers are projected to use 8% of total power by 2030, up from 3% in 2022. McKinsey estimates that adding the required U.S. capacity will need over $500 billion in infrastructure investment by the decade’s end.
Advanced Micro Devices (NASDAQ:AMD)’s forward adjusted PEG ratio of 1.05 is over 40% lower than the median for the tech sector (XLK).
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2024 investor letter:
“Shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) lagged the market after the company reported earnings results that, while generally strong, left the market wanting more. The company reported AI revenue of ~$600 million and increased its forward-looking outlook for AI revenue growth, but shares took a breather, as results missed elevated expectations after the stock’s strong performance. Despite the stock’s underperformance during the quarter, the company’s AI story remains very much intact. The growth outlook for the company is supported by better cloud demand, enterprise recovery and continued share gains ahead of the company’s new AI product launch.”
6. Nvidia Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 179
Last month, Jim Cramer talked about the pullback in Nvidia Corp (NASDAQ:NVDA) shares and taunted the stock’s naysayers saying NVDA bears seem to always come up with “obituaries” when the stock goes lower.
“The greatest stock of this generation is simply taking a periodic break, like we’ve seen many times before.”
Investors will be keenly watching Nvidia Corp (NASDAQ:NVDA) when the company reports its latest quarterly results next month.
Nvidia’s declines after the Q2 results were more or less expected amid Blackwell delay reports confirmed by management. However, the delays were mainly due to a change in Blackwell GPU mask. That does not affect the main functional logic or design of the chip, according to analysts. While Blackwell has been delayed for a few months, it does not change the core growth thesis for Nvidia Corp (NASDAQ:NVDA).
Nvidia Corp (NASDAQ:NVDA) is set to see huge growth on the back of the data center boom amid the AI wave.
At Nvidia Corp (NASDAQ:NVDA)’s GPU Technology Conference in March 2024, CEO Jensen Huang estimated annual spending on data center infrastructure at about $250 billion. Over the next decade, this could total between $1 trillion and $2 trillion, depending on how long this level of investment continues. During the same Q&A session, Bank of America’s Vivek Arya echoed this estimate, suggesting the total addressable market would fall in the $1-2 trillion range, particularly as countries invest in their own AI infrastructure. By the end of the decade, spending could be at the high end of that range.
Of course, Nvidia Corp (NASDAQ:NVDA) won’t dominate the entire $2 trillion opportunity, as it faces competition from companies like AMD and internally developed AI accelerators from Google, Amazon, and even Apple. Some analysts believe Nvidia Corp (NASDAQ:NVDA)’s data center market share between 2025 to 2029 will be over $950 billion—less than half of the total market—but still enough to make it the leader in the sector.
Baron Opportunity Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:
“Given the stellar returns of their stocks over the last couple of years, particularly NVIDIA Corporation, and the weights they grew to in the portfolio, we trimmed NVIDIA and Microsoft Corporation during the period. As we articulated above, our views regarding AI and the leadership of these two companies have not changed. On an absolute basis, NVIDIA and Microsoft remain the top two positions in the portfolio – as of this writing NVIDIA is our largest position and Microsoft is second – and both remain material overweights versus the Benchmark.”
5. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 184
Jim Cramer in a latest program on CNBC talked about Apple Inc (NASDAQ:AAPL) results and admitted that iPhones will no longer be the centerpiece of the stock’s thesis in the future:
“And they gave us a guide down. Even as I say own it, don’t trade it, I recognize the consensus going into next quarter was 6.8% growth, which was not going to be met. I told you this repeatedly; I told you that it was way too high. I said the stock would go down. Apple’s looking for low to mid single-digit growth now. It’s exactly as I said. But to me, Apple’s a changing story. It’s going to be less about the release of the iPhone and more about the software.”
Apple Inc (NASDAQ:AAPL) recently posted decent quarterly results but concerns remain around its iPhone 16 sales and growth. Analysts are deeply divided on this stock. Morgan Stanley recently called Apple’s current position “challenging,” with KeyBanc and TF International Securities expressing concerns over iPhone sales volume. KeyBanc downgraded Apple to “underweight” with a $200 price target. Wedbush analyst Dan Ives remains bullish, reiterating his view that Apple Inc (NASDAQ:AAPL) could reach a $4 trillion market cap.
Recently, Apple Inc (NASDAQ:AAPL) reclaimed a top-5 position in China’s smartphone market, its 15.6% market share is still down from last year, especially against Huawei, which surged with over 40% growth. Xiaomi also continues to challenge Apple Inc (NASDAQ:AAPL)’s competitive edge. Notably, the iPhone 16 had only about three weeks of Q3 sales, yet didn’t lift Apple Inc (NASDAQ:AAPL)’s market share for the quarter, despite expectations for initial sales to be strong.
In the latest earnings call, Apple Inc (NASDAQ:AAPL) CEO Tim Cook highlighted new features for the iPhone, such as a more comfortable watch band and sleep apnea detection, but none appeared to be major demand drivers for new customers.
Wedgewood Partners stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q3 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) also contributed to performance as investors continued to favorably discount the recent unveiling of its AI strategy. As we have noted in the past, the Company has been at the forefront of proprietary semiconductor computer processor development for well over a decade. Given the compute-intensive nature of AI applications, Apple is well situated to develop a suite of compelling, consumer-friendly AI services that are also cost-effective. Apple’s AI value proposition should compel consumers to continue growing their engagement in the Apple ecosystem over the next several years.”
4. Alphabet Inc (NASDAQ:GOOGL)
Number of Hedge Fund Investors: 216
Talking about Alphabet Inc (NASDAQ:GOOGL)’s latest quarterly results, Jim Cramer said on CNBC that no one was expecting strong results from the company, even him despite owning the stock for his charitable trust.
“We had a quarter that was like the old Google when it was still called Google. Search was fabulous. YouTube was great. Google Cloud is on fire. It shot up almost 3% in response, and I bet it can keep running for days and days. It was that much better than expected.”
Cramer said Alphabet Inc (NASDAQ:GOOGL) shares are inexpensive.
Alphabet (NASDAQ:GOOGL) reported strong quarterly results recently. The results show that the market has been ignoring the company’s key secondary businesses and the stock remains undervalued despite concerns around AI search and regulatory onslaught.
Alphabet Inc (NASDAQ:GOOGL)’s secondary ventures in AI, autonomous driving, and other areas are making solid progress, especially in the Waymo robotaxi segment. Currently, Google’s stock trades below 20 times forward earnings, offering potential upside as EPS and other financial metrics strengthen in coming years. For next year, the consensus EPS estimate sits around $9. However, Alphabet Inc (NASDAQ:GOOGL) has consistently beaten projections, delivering $7.54 in trailing twelve-month EPS compared to the expected $6.79—a roughly 11% outperformance.
What are the key drivers for Alphabet Inc (NASDAQ:GOOGL)?
Alphabet Inc (NASDAQ:GOOGL) remains on track to reach a $100 billion revenue run rate from YouTube Ads and Google Cloud by the end of 2024. In its autonomous driving division, Waymo has shown notable progress, with paid autonomous rides growing 200% quarter-over-quarter to 150,000 weekly rides as of late October, thanks to a fleet of 700 vehicles in service since August.
This growth is significant: Waymo vehicles now average about 30.6 autonomous rides per day—substantially higher than Uber’s average of 4.18 rides per driver daily, based on Uber’s 31 million daily trips and 7.4 million drivers last quarter. This performance underscores Waymo’s competitive edge in autonomous ride volume compared to traditional ride-hailing.
In the third quarter, Alphabet Inc (NASDAQ:GOOGL)’s Search & Other segment saw a 12.2% year-over-year revenue increase, rising from $44.03 billion to $49.39 billion. YouTube advertising also performed well, with revenue up 12.2% to $8.92 billion from $7.95 billion. Meanwhile, Alphabet Inc (NASDAQ:GOOGL)’s subscriptions, platforms, and devices revenue grew even more sharply, surging 27.8% from $8.34 billion to $10.66 billion.
Google Cloud has been expanding steadily, with revenue climbing from $13.06 billion in 2020 to $33.09 billion in 2023. Notably, Google Cloud turned profitable for the first time in 2023, posting $1.72 billion in operating profit—a significant improvement from a $5.61 billion loss in 2020. This segment’s performance continues to strengthen, with the latest quarterly revenue reaching $11.35 billion, up 35% from $8.41 billion in the same period last year.
Cooper Investors Global Equities Fund (Hedged) stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q3 2024 investor letter:
“Alphabet Inc.’s (NASDAQ:GOOGL) operating performance remains strong with sales growing 14% in the most recent quarter. Highlights included the ongoing secular growth of digital advertising driving Google search (+14%), YouTube’s continued success as a leading content platform (+13%) and the performance of the Cloud business (+29%). In conjunction with this strong sales momentum, Alphabet’s increased focus on expenses is delivering margin expansion such that Operating Income grew 26%.
Despite this operational momentum, Alphabet’s share price declined 11% in the quarter as a federal judge ruled against the company in its case with the US Department of Justice. The case pertains to Google’s monopolisation of both the search and digital advertising markets which is claimed to limit competition and innovation and/or in
Potential remedies include prohibiting exclusive agreements which make Google the default search engine on Apple or Samsung devices, forcing Alphabet to share its advertising technology with rivals, or in the extreme breaking the company apart. The timing and outcomes remain somewhat uncertain however we remain of the belief that at the fundamental level Alphabet’s products are best of breed across several verticals and are benefitting from secular industry trends and that these factors will be the ultimate determinant of long-term shareholder returns.”
3. Meta Platforms (NASDAQ:META)
Number of Hedge Fund Investors: 219
Jim Cramer also talked about Meta Platforms (NASDAQ:META)’s latest quarterly results in a recent program on CNBC:
“I think everyone’s underestimating their ability to dominate the digital advertising market.”
Cramer lauded Meta Platforms (NASDAQ:META)’s dominance in the consumer internet and AI space:
“Most importantly, 500 million people use Meta’s AI platform, and Mark Zuckerberg says it will be the largest of the generative AI platforms by year-end. Meta AI is spectacular; if you haven’t used it, it’s smart and funny.”
Despite posting strong quarterly results, Meta Platforms (NASDAQ:META) shares fell as rising AI-related expenses yet again spooked investors about ROI. However, Meta platforms (NASDAQ:META) bulls believe Zuckerberg’s plan to keep spending on AI is totally justified.
Meta platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. Meta also reported strong adoption of its Llama AI model, attracting over 500 million monthly active users across its platforms. This progress positions Meta well for robust profitability in the next two years as it scales its AI infrastructure.
Meta Platforms (NASDAQ:META)’s advancements in Reels and WhatsApp are helping manage CapEx growth as the company strives to stay competitive in AI.
Meta Platforms (NASDAQ:META)’s clear monetization strategy for its generative AI, especially with Llama3, makes it a strong contender against rivals like OpenAI’s ChatGPT. Meta Platforms (NASDAQ:META)’s substantial user base of 3.3 billion provides a data and distribution edge that could capture a significant share of the GenAI market. Although short-term investors may be concerned about Meta Platforms (NASDAQ:META)’s increased AI spending, its forward P/E ratio of 24x, based on FY 2025 EPS estimates of $24.62, makes it the second-most affordable big tech stock, after Google, within its peer group (Apple, Amazon, Microsoft, and Google).
According to some estimates, Meta Platforms (NASDAQ:META) is on track to potentially achieve $25-26 per share in EPS next year, slightly above the consensus estimate. Factors such as a strong U.S. economy, lower inflation, favorable online ad pricing, and AI investments could fuel earnings growth. If Meta’s valuation aligns with the industry average P/E of 26.6x, shares could reach over $600.
Baron Opportunity Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q3 2024 investor letter:
“Shares of Meta Platforms, Inc. (NASDAQ:META), the world’s largest social network, were up this quarter, due to impressive top-line growth of 22% year-over-year and solid forward guidance. Despite its large scale, Meta continues to outgrow the broader digital advertising industry, with better AI-driven content recommendations increasing engagement in products like Instagram Reels, and AI improving ad targeting and conversion rates. Our industry checks have continued to validate advertiser adoption and satisfaction, with improvements in Reels monetization, as well as strong adoption of Advantage+, Meta’s AI-driven service to allocate advertiser budgets across its content surfaces.
Meta continues to innovate in Gen AI, with a leading AI research lab and the best open-source models to date. We believe CEO Mark Zuckerberg’s open-source approach will encourage a broader developer ecosystem and standardization based on Meta, which will be beneficial for the company even if Meta doesn’t directly monetize model usage over the near term. In a blog this summer, titled “Open Source AI Is the Path Forward,” Zuckerberg laid out his case:…” (Click here to read the full text)
2. Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Talking about Microsoft Corp (NASDAQ:MSFT) earnings results, Jim Cramer said in a latest program that the company’s guidance seems to be conservative and the stock fell mostly because traders bought it after headline numbers but sold after the company talked about detailed numbers during the earnings call:
“For as long as I’ve known Amy Hood, and that’s probably about three decades, she’s been conservative in giving outlooks. That’s her nature. It’s a big reason why she’s so great at her job. She never overpromises. She’s more than likely to deliver on her projections. If you look at her body of work, that’s what she has done over and over again. Incredible track record.”
Cramer also praised Microsoft Corp (NASDAQ:MSFT)’s growing market share in the enterprise space:
“They will have total dominance of AI in the enterprise market, a remarkable feat, and they did it in about a year’s time. You may want to say that’s not worth anything and lock in some gains. I say fine.”
Microsoft Corp (NASDAQ:MSFT) shares recently fell after the company reported its latest quarterly results. Analysts believe most of the revenue beat came from PC segment, while investors were paying more attention to AI and Azure. Azure’s 34% growth met expectations, though guidance for next quarter fell short, projecting between 31% and 32% growth—1 percentage point below forecasts. This dip is attributed to delays in data center capacity from third-party providers, though Azure’s consumption trends remained steady.
Investors hoping for a rebound in IT spending were likely disappointed, as stable Azure consumption suggests no significant uptick in the second half of the year. In addition, the lower-than-expected Q2 guidance underscored tempered growth expectations.
AI services, however, contributed a robust 12 points to Azure’s growth, a steady continuation from the previous quarter. Microsoft’s management confirmed strong demand for AI services, although supply constraints are limiting further expansion. Microsoft Corp (NASDAQ:MSFT) anticipates AI-related revenues, including M365 Copilot and Azure AI, could reach $10 billion annually by next quarter—making it one of the fastest-growing segments in Microsoft Corp (NASDAQ:MSFT)’s history.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Office products, but over the last five years it has built a $147 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. Shares gave back some gains from strong performance over the first half of this year. For the fourth quarter of fiscal year 2024, Microsoft reported a strong quarter with total revenue growing 16%, in line with the Street; Microsoft Cloud up 22%; Azure up 30%; 43% operating income margins; and 36% free cash flow margins. Core Azure growth came in one point shy of expectations, however, due to a soft European market and continued constraints on AI compute capacity. In the same vein, while Microsoft reiterated its fiscal 2025 targets of double-digit top-line and operating income growth, quarterly guidance called for Azure growth to slow a bit before accelerating in the back half of the fiscal year, as capital expenditures increase, yielding an expansion of AI compute capacity. We believe this investment is a leading indicator for growth, with more than half of the spend related to durable land and data center build outs, which should monetize over the next 15-plus years. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes, and we remain investors.”
1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 308
Jim Cramer said in a latest program on CNBC that Amazon.com Inc (NASDAQ:AMZN) reported a strong quarter and talked about the company’s rising spending:
“The revenue forecast for the current quarter fell short of expectations, I’m sure someone will freak out about that. Their operating income guidance was excellent because they’ve been very disciplined about controlling expenses. The stock caught fire in after-hours trading. Amazon is spending like mad. Why? Because they want to dominate retail, whether it be Prime with advertising. Along with that dominance comes the most lucrative cloud business.”
Amazon (NASDAQ:AMZN) threw it out of the park with its latest quarterly results amid strong Cloud growth. Amazon Web Services has generated $27.5 billion in revenue, marking a 19% year-over-year increase. The segment’s operating income is expanding at nearly 2.5 times the rate of its revenue growth, boosting Amazon.com Inc (NASDAQ:AMZN)’s overall operating income. At this pace, AWS is on track to deliver $110 billion in annualized revenue. If it maintains its ~20% growth rate, AWS could reach $125-130 billion in revenue in FY 2025.
For the ongoing quarter, Amazon.com Inc (NASDAQ:AMZN) expects revenue between $181.5 billion and $188.5 billion, implying growth of up to 11%. Amazon.com Inc (NASDAQ:AMZN)’s stock currently trades at a forward P/E of 32.9, higher than the big tech average of 25.5. If Amazon grows its earnings per share (EPS) by an average of 25% annually over the next three years, it could achieve an EPS of around $9.25 by FY 2027 (up from an estimated $4.74 in FY 2024). Applying a 35x P/E ratio in line with Amazon.com Inc’s (NASDAQ:AMZN) historical average suggests a fair stock value of over $300. The primary catalyst for this target would be AWS’s robust operating income growth.
Alphyn Capital Management stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter:
“Amazon.com, Inc.’s (NASDAQ:AMZN) continued growth is driven by its strong performance in AWS and advertising, which grew 19% and 20%, respectively. E-commerce growth moderated to 9.3%, likely due to softer consumer demand.
In previous letters, I mentioned how Amazon’s heavy investments in logistics and fulfillment suppressed margins for some time, but the company is now reaping the rewards of those earlier expenditures. European operations have been profitable for the second consecutive quarter, while North American operating margins have risen from pandemic lows to 5.3%. A key ongoing area of focus for Amazon has been reducing the “cost to serve”; this is beginning to show tangible benefits. In 2023, Amazon undertook a “regionalization” strategy, which divided the U.S. into eight distinct regions for fulfillment and transportation, with corresponding distribution centers in each. As I learned from an expert interview done by InPractise, “regionalization” has resulted in estimated shipping expenses dropping from $4.76 per unit to $4.50, and they are now approximately $4.26, with potential reductions of 2-3% annually. Interestingly, Amazon leaned on its third-party vendors (3P) to finance much of this strategy. It did so by requiring 3P vendors ship inventory to the multiple regional distribution centers, instead of to a single location as they used to do. Moreover, Amazon imposed penalties for failing to meet strict minimum and maximum quantities. In this way, Amazon used 3P inventory to expand its distribution capacity by around 24 million square feet, much of which it could use for its own 1P inventory. Clever strategy, but one wonders if this raises the risk of an eventual vendor backlash due to the added financial and logistical pressures on 3P sellers.
Like Alphabet, Amazon is investing heavily in its AWS infrastructure to support its growing AI business. In the first half of the year, the company spent $30.5 billion on capital expenditures, with plans to exceed that in the year’s second half. When questioned about this during the earnings call, CEO Andy Jassy emphasized that they are seeing significant demand for AI-related services, which he believes will become a “very large” business for Amazon.”
While we acknowledge the potential of Amazon.com Inc (NASDAQ:AMZN), our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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