In this article, we’ll explore Jim Cramer’s Top 10 Stock Picks You Can’t Ignore.
In a recent episode of Mad Money, Jim Cramer discussed the current divide between tech stocks and other sectors, highlighting their tendency to move in opposite directions. For example, on a day when the Dow Jones Industrial Average increased by 228 points and the S&P 500 went up by 0.13%, the NASDAQ, which is heavily influenced by tech stocks, dropped by 0.52%. Cramer thinks it’s because there isn’t enough new money flowing into the market.
“How did we get to this bizarre dichotomy between tech stocks and pretty much everything else, where the two groups now almost always seem to move in opposite directions? Take today: the Dow Jones Industrial Average gained 228 points, the S&P advanced 0.13%, but the NASDAQ—with all that tech in it—dropped a bomb. Yes, it fell 0.52%. How could there be such a schism?”
As a result, large institutions need to move their investments between sectors since they can’t invest in both at once. This shift is due to market mechanics rather than fundamental news. When stocks are already doing well, it’s difficult to attract new investment, especially when safer options provide attractive returns. Therefore, either tech stocks or other sectors will perform well, but not both simultaneously.
“It’s because there’s not enough money coming in from the sidelines, so these big institutions have to swap out of one group if they want to buy stock in another. Yet this action has nothing to do with fundamentals; it’s not about the news, it’s about pure market mechanics. When stocks are already red hot, it’s hard to attract new capital from the sidelines, especially when you can get a cozy 4% return for doing nothing. So, either tech wins or everything else wins, but there’s not enough cash for both of them to win at the same time.”
Market Shake-Up: Clear Winners and Losers Amid Fed’s Critical Rate Decision
Cramer notes that this situation results in distinct winners and losers, rather than a range of performance on a positive day. This is occurring amid uncertainty about whether the Federal Reserve will reduce interest rates by 25 or 50 basis points in their upcoming meeting. Cramer also notes that, despite his usual reluctance to speculate on the Fed’s decisions, recent market movements have been swayed by expectations of rate cuts. For example, when The Wall Street Journal indicated the Fed might choose a 50 basis point reduction, there was a notable shift towards cyclical stocks, particularly those related to housing. This shift, along with other positive news, contributed to the market’s best week of the year.
“What happens? We get winners and losers—not big winners and smaller winners, as you would normally expect on an up day like today. This is all against the backdrop of the big question: will the Fed cut rates by 25 basis points or 50 when it meets on Wednesday?
Now, you know me, I try to refrain from this parlor game of guessing the Fed’s next move based on the strength of the economy. Last week, when *The Wall Street Journal* indicated the Fed may actually be leaning toward 50 basis points, we saw this great migration into cyclicals, especially anything related to housing. Of course, last week, there was just enough good news to propel the entire market, which is why it was the best week of the year.
This leads me to this newfound great divide between tech and non-tech, because that’s how this market seems to be trading. It’s a big reason why I’m out here in Silicon Valley this week. Today, we saw a market that doesn’t believe in AI, or tech in general for that matter. It’s a market that believes a 50-basis-point rate cut will shift money from semiconductors to housing and anything housing-related, and people want to get ahead of that.”
Jim Cramer’s Definition of ABT: “Anything But Tech”
Jim Cramer noted that Monday’s market saw a wide range of winners. Healthcare stocks, retailers, and consumer packaged goods companies all did well, and even oil stocks, which have been lagging, are rebounding. This is unusual because typically when cyclical stocks rise, sectors like healthcare and consumer products would drop. Cramer explains this trend as part of a broader market shift he calls “ABT,” or “anything but tech.” Essentially, today’s market is focusing on sectors outside of technology.
“Today, the winners broadened out. The healthcare stocks got jiggy, retailers worked, and consumer packaged goods companies outperformed. Even the much-maligned oils are rallying. It’s crazy—healthcare and consumer products should be selling off when cyclicals rally, but that’s not what’s happening because it’s *ABT*. No, I’m not talking about the symbol for Abbott Labs. ABT means “anything but tech,” and that’s what today’s market was about.
The implications are pretty stark, folks. Market commentators call this a rotation, but that understates what’s really happening here because the move is so vicious and devoid of realism. The market’s action is dictating what we do. For example, we know that the principal beneficiaries of rate cuts are the housing stocks, which rallied again today. This is the second day these stocks jumped as rates continue to plummet. But today, day two, was zero-sum.”
Tech stocks also experienced notable gains because of key events. For example, Larry Ellison from Oracle reported strong earnings and emphasized the need for many additional data centers.
Our Methodology
This article summarizes Jim Cramer’s latest Mad Money episode, where he discussed various stocks. We have selected the ten most notable companies he mentioned and ranked them based on their ownership levels by hedge funds, from the least owned to the most owned.
At Insider Monkey we are obsessed with 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).
Jim Cramer’s Top 10 Stock Picks You Can’t Ignore
10. ARM Holdings plc (NASDAQ:ARM)
Number of Hedge Fund Investors: 38
Last Monday, Jim Cramer recommended buying stocks of Micron Technology, Inc. (NASDAQ:MU), Advanced Micro Devices, Inc. (NASDAQ:AMD), and ARM Holdings plc (NASDAQ:ARM), noting that the semiconductor sector had experienced an extreme sell-off, making these stocks likely candidates for a rebound. Since then, ARM Holdings plc (NASDAQ:ARM), a major player in semiconductor design, saw a notable 10% increase, despite a recent 6% drop due to reports of weak orders for new iPhones, which use ARM’s chip architecture.
This dip does not concern Cramer much, especially considering ARM Holdings plc (NASDAQ:ARM)’s stock has surged nearly 175% since its public debut about a year ago. The key question now is whether ARM Holdings plc (NASDAQ:ARM) can continue this upward momentum.
“Last Monday, I told you it was time to buy the stocks of Micron, AMD, and ARM Holdings because the semiconductor sell-off had gotten too extreme, and these three seemed ripe for a bounce. Since then, ARM Holdings, the semiconductor design colossus, has rallied about 10%, even with today’s brutal 6% decline on reports of weak orders for new iPhones, which contain their chip architecture. But I don’t mind the pullback, given that ARM’s stock is up almost 175% since it went public roughly a year ago. The question is, can it keep running?”
ARM Holdings plc (NASDAQ:ARM) is a strong investment opportunity due to its leading position in the semiconductor industry, especially in the growing edge AI and mobile technology markets. Recently named Morgan Stanley’s top large-cap pick, ARM Holdings plc (NASDAQ:ARM) is set for significant growth, particularly with its energy-efficient AI processing technology. Its v9 architecture is widely adopted, including in devices like the iPhone 16, which uses ARM Holdings plc (NASDAQ:ARM) chips for AI functions. This widespread use is expected to boost ARM Holdings plc (NASDAQ:ARM)’s royalties and revenue in the coming years.
In its Q1 FY25 earnings report, ARM Holdings plc (NASDAQ:ARM) showed a 39% increase in revenue from the previous year, driven by strong performance in mobile and automotive segments. Morgan Stanley forecasts a 35% annual growth rate for ARM Holdings plc (NASDAQ:ARM)’s mobile business from FY24 to FY27, due to rising demand for AI chips and custom silicon.
With a robust licensing and royalty model, including partnerships with major companies like Apple Inc (NASDAQ:AAPL), ARM Holdings plc (NASDAQ:ARM) is well-positioned for long-term success. Despite some short-term economic uncertainties, its advancements in AI and custom chip solutions support a positive outlook for the future.
9. e.l.f. Beauty Inc. (NYSE:ELF)
Number of Hedge Fund Investors: 40
Jim Cramer also discussed e.l.f. Beauty Inc. (NYSE:ELF), a cosmetics company known for its affordable products and a long-time favorite of his in the consumer goods sector. Cramer noted that while beauty can be subjective, e.l.f. Beauty Inc. (NYSE:ELF) focuses on enhancing eyes, lips, and faces.
Despite a strong performance last quarter, e.l.f. Beauty Inc. (NYSE:ELF)’s stock dropped 14% after it failed to increase its guidance enough, leading to a significant decline in its stock price since then. Cramer questions whether this downturn might present a good buying opportunity for investors.
“Beauty is in the eyes of the beholder, but for this company, it resides in the eyes, lips, and face. Investors may have frown lines, but will *e.l.f. Beauty* make up for a blemished sector and put on a happy face? All right, what are we supposed to do with the stock of *e.l.f. Beauty*, the value-oriented cosmetics player that’s long been one of my favorite growth stories in the consumer products space?
A little over a month ago, these guys reported what I thought was an excellent quarter, but apparently, they didn’t raise guidance enough, and the stock plunged 14% the next day. Since then, the stock’s been put through the meat grinder. So, could this be a buying opportunity?”
e.l.f. Beauty Inc. (NYSE:ELF) stands out as a strong investment choice due to its impressive financial performance, rapid sales growth, and innovative product strategies. In Q1 2025, e.l.f. Beauty Inc. (NYSE:ELF) exceeded expectations with earnings per share (EPS) of $0.87, beating the forecast of $0.67, and revenues of $324.48 million, surpassing analyst predictions. This strong performance is fueled by high demand and successful product launches, like the Power Grip line.
For fiscal 2024, e.l.f. Beauty Inc. (NYSE:ELF) reported over $1 billion in net sales, a 77% increase from the previous year, with international sales up 115%. e.l.f. Beauty Inc. (NYSE:ELF)’s innovative strategies also led to a 30% growth in color cosmetics, outperforming the overall market and securing top positions in market share.
Looking ahead, e.l.f. Beauty Inc. (NYSE:ELF) forecasts 20-22% net sales growth for fiscal 2025, driven by international expansion, ongoing product innovation, and potential acquisitions. These factors position e.l.f. Beauty Inc. (NYSE:ELF) for continued growth, making it an attractive investment opportunity for those seeking growth potential.
ClearBridge Multi Cap Growth Strategy stated the following regarding E.l.f. Beauty, Inc. (NYSE:ELF) in its first quarter 2024 investor letter:
“In consumer sectors, we added Tractor Supply Company and E.l.f. Beauty, Inc. (NYSE:ELF). ELF, in the consumer staples sector, is the third-largest mass cosmetics brand in the U.S. We believe the flywheel of ELF’s consumer value proposition, its innovation pipeline, and its unique ability to bring prestige-like products to mass consumers and high consumer engagement will enable the company to continue to outgrow the global market.
We see significant opportunity for ELF to transform itself from an emerging U.S. color cosmetics brand to a global beauty stalwart by doubling its share in the U.S. over the next few years and gaining share in international and skincare markets. ELF is profitable, balancing growth and earnings, and has an attractive balance sheet.”
8. Alight Inc. (NYSE:ALIT)
Number of Hedge Fund Investors: 42
When a viewer asked Jim Cramer about his thoughts on Alight Inc. (NYSE:ALIT), he stated that he wants to see the firm start making money before he forms an opinion, as the company has not achieved profitability yet.
“Okay, I want to see that company actually make money before I weigh in on it. It has not been able to do so yet.”
Alight Inc. (NYSE:ALIT) is a strong investment due to its excellent financial performance, shift to cloud-based solutions, and focus on improving operational efficiency. Alight Inc. (NYSE:ALIT)’s migration to the cloud has saved $75 million annually, enhancing its services while cutting operational costs.
Alight Inc. (NYSE:ALIT) has also made significant progress in reducing debt, retiring $740 million and lowering net leverage to 2.8 times EBITDA. A $155 million share buyback further boosts shareholder value. Growth in its Business Process-as-a-Service (BPaaS) segment, which expanded by 12.7% and now makes up 21% of total revenue, highlights Alight Inc. (NYSE:ALIT)’s shift to more profitable, recurring revenue streams.
Additionally, Alight Inc. (NYSE:ALIT) has improved its margins, with an adjusted gross margin up by 350 basis points and an EBITDA margin of 25%, showcasing its ability to manage costs and increase profitability. These factors make Alight Inc. (NYSE:ALIT) well-positioned for long-term success in the human capital solutions market.
Meridian Growth Fund stated the following regarding Alight, Inc. (NYSE:ALIT) in its Q2 2024 investor letter:
“Alight, Inc. (NYSE:ALIT) is a leading cloud-based human capital technology provider of enterprise-level software that helps businesses and their employees manage critical human resources functions. Through its investments in software and automation, Alight has built a distinct advantage that allows its customers to deliver HR services at a much lower cost while providing a better experience for employees.
We slightly trimmed the position early in the quarter when the stock appreciated on the announced sale of a non-strategic business unit and news that an activist investor had initiated a position. Later in the period, the stock declined when Alight announced weaker-than-expected results. We believe the softer quarter will prove to be an isolated event.”
7. Hewlett Packard Enterprise Company (NYSE:HPE)
Number of Hedge Fund Investors: 58
Jim Cramer commented on Hewlett Packard Enterprise Company (NYSE:HPE) by saying that he believes HPE will exceed expectations with its offering. He agreed that Hewlett Packard Enterprise Company (NYSE:HPE) is very inexpensive at $17 and expressed his optimism, matching the viewer’s positive view.
“I think HPE is going to surprise people with that offering. You’re absolutely right; it’s a very inexpensive stock. Down here at $17, I’m as positive as you are!”
Hewlett Packard Enterprise Company (NYSE:HPE) is positioned for strong growth, driven by its solid recent earnings and strategic moves. Hewlett Packard Enterprise Company (NYSE:HPE)’s Q3 2024 results were impressive, with $7.5 billion in revenue and increased net income, reflecting both effective management and high demand for its products. Hewlett Packard Enterprise Company (NYSE:HPE) is capitalizing on the growing need for flexible IT solutions through its GreenLake platform, which provides hybrid cloud services tailored to modern businesses.
Additionally, recent acquisitions and partnerships, such as with Aruba Networks, enhance its network and cybersecurity capabilities. With the broader trend of digital transformation accelerating, Hewlett Packard Enterprise Company (NYSE:HPE) is well-placed to benefit from these industry shifts, making it a promising investment.
6. NextEra Energy Inc. (NYSE:NEE)
Number of Hedge Fund Investors: 73
Jim Cramer described NextEra Energy Inc. (NYSE:NEE) as a “red-hot stock” when he was asked by a viewer, and mentioned that its sector is also performing well. He believes that NextEra Energy Inc. (NYSE:NEE) still has potential to rise further.
“Red hot stock! The cohort’s red hot too. I don’t think it’s done; I think it can go higher.”
NextEra Energy, Inc. (NYSE:NEE) is a strong investment option due to its leading role in the renewable energy sector and solid financial performance. NextEra Energy, Inc. (NYSE:NEE) is well-positioned to take advantage of the global shift towards clean energy and the growing demand for electricity driven by industries like AI and electric vehicles.
In Q2 2024,NextEra Energy, Inc. (NYSE:NEE) reported a 9% increase in adjusted earnings, reaching $1.968 billion, even though it slightly missed revenue expectations. NextEra Energy, Inc. (NYSE:NEE) saw a 27% rise in cash from operations, showing its ability to handle challenges such as higher interest rates. Ongoing investments in solar and wind power, combined with supportive regulatory policies, boost its long-term growth prospects.
NextEra Energy, Inc. (NYSE:NEE) is set to benefit from increased electricity demand, particularly from companies seeking renewable energy for data centers. Despite some short-term fluctuations in stock price, NextEra Energy, Inc. (NYSE:NEE)’s strong dividend yield, robust cash flow, and leading position in renewable energy make it a promising choice for long-term investors.
ClearBridge Large Cap Growth Strategy stated the following regarding NextEra Energy, Inc. (NYSE:NEE) in its Q2 2024 investor letter:
“AI-related momentum was a key driver of performance in the second quarter, lifting the enablers in technology as well as holdings like renewable power producer NextEra Energy, Inc. (NYSE:NEE) that supply the increasing energy needs of data centers. Parts of the market lacking an AI connection, like our medical device holdings, underperformed despite no change to fundamentals.
We have managed through several similar momentum periods over our tenure and have delivered long-term results for shareholders by staying true to an approach that emphasizes diversification across three buckets of growth companies (select, stable and cyclical) and seeks to take advantage of attractive entry points into quality growth businesses.”
5. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Investors: 84
Jim Cramer believes that Lam Research Corporation (NASDAQ:LRCX) is significantly undervalued and could potentially rebound strongly, with the possibility of a 200-point increase despite a potential 50-point drop. He agreed with a viewer’s view on Lam Research Corporation (NASDAQ:LRCX), emphasizing his extensive experience with Lam Research Corporation (NASDAQ:LRCX) compared to current traders. Cramer advised against trying to follow the recent tech sell-off, as it often leads to wasted effort and financial losses.
“I think Lam is dramatically oversold. I think it could be a coiled spring. Maybe it has 50 points down, but I think it could have 200 points up. I agree with you, and I’ve known the company for a very long time, certainly more than the traders who are dumping it right now. So anyway, don’t try to chase this move out of tech, please. I’ve seen this kind of thing before, it’s just not worth your effort. It will only result in you churning your dollars and losing money.”
Lam Research Corporation (NASDAQ:LRCX) presents a strong case for growth, thanks to its solid performance in the semiconductor sector and multiple growth opportunities. Lam Research Corporation (NASDAQ:LRCX) has consistently exceeded market expectations, as shown by its Q4 fiscal 2024 earnings report, where it posted $3.87 billion in revenue and an EPS of $7.78, both higher than predicted.
Key factors driving this growth include the increasing demand for AI-powered chips, high-bandwidth memory (HBM), 3D DRAM, and advanced packaging technologies. Additionally, rising demand for NAND memory, driven by technological advancements, plays a significant role, with Lam Research Corporation (NASDAQ:LRCX) leading in NAND etching technology.
Lam Research Corporation (NASDAQ:LRCX)’s strategic focus on research and development (R&D) and expanded production capabilities position it well to take advantage of these industry trends. Further boosting confidence, hedge funds, institutional investors, and positive analyst ratings reflect a strong belief in Lam Research Corporation (NASDAQ:LRCX)’s long-term growth potential. With the AI and memory markets on the rise, Lam Research Corporation (NASDAQ:LRCX) is well-positioned for continued earnings growth in the future.
Artisan Select Equity Fund stated the following regarding Lam Research Corporation (NASDAQ:LRCX) in its Q2 2024 investor letter:
“The top contributors to performance for the quarter were Alphabet, Lam Research Corporation (NASDAQ:LRCX) and Elevance. Lam Research shares rose 10% during the quarter and are up 67% over the past year, primarily due to optimism around the pending investment cycle in semiconductor capital expenditures. Lam is one of the largest equipment manufacturers used to make semiconductor chips.
This equipment, commonly referred to as WFE (wafer fabrication equipment), is expected to experience significant growth due to a combination of a cyclical rebound in memory chips and growing demand for new AI-related chips. Lam’s product portfolio is particularly well positioned to benefit from both trends and should grow even faster than the overall market. Its shares now trade at ~30X prior peak earnings, which suggests this dynamic is well understood by the market and is mostly priced in.”
4. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Investors: 130
Jim Cramer highlighted Broadcom Inc. (NASDAQ:AVGO), a semiconductor and AI infrastructure company, noting that it has experienced significant fluctuations recently. Despite Cramer finding Broadcom Inc. (NASDAQ:AVGO)’s September 5th results impressive, he pointed out that its AI revenues fell short of expectations, which led to the stock dropping over 10% the following day.
“Boy, do we have a treat tonight! Broadcom, the $76 billion semiconductor and AI infrastructure company, has been a wild trader these last few weeks. When Broadcom reported on September 5th, even though I thought the results were terrific, their AI revenues came in a bit light versus expectations, and the stock ridiculously plunged more than 10% the next day.”
Broadcom Inc. (NASDAQ:AVGO) offers a strong investment opportunity due to its significant growth prospects, particularly in the artificial intelligence (AI) sector and its broad range of business activities. Broadcom Inc. (NASDAQ:AVGO) expects AI-related revenue to reach $12 billion for fiscal 2024, thanks to its leadership in Ethernet networking and custom accelerators for AI data centers. Its recent acquisition of VMware has enhanced its position in AI and infrastructure software.
In Q3 2024,Broadcom Inc. (NASDAQ:AVGO) reported impressive results, with a 47.3% year-over-year increase in revenue to $13.1 billion, surpassing expectations. Broadcom Inc. (NASDAQ:AVGO)’s infrastructure software segment saw revenue nearly triple to $5.8 billion. Although Broadcom Inc (NASDAQ:AVGO)’s Q4 revenue forecast is a slightly cautious $14 billion, its earnings per share (EPS) grew by 18.1%, reflecting strong growth.
Analysts are optimistic about Broadcom Inc. (NASDAQ:AVGO)’s long-term prospects, with price targets suggesting a potential upside of up to 70%. This optimism is driven by Broadcom Inc. (NASDAQ:AVGO)’s leadership in AI semiconductor solutions and diverse revenue sources. Despite some economic risks and competition, Broadcom Inc. (NASDAQ:AVGO)’s strong earnings and cash flow make it a compelling long-term investment.
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Investors: 179
Jim Cramer noted that NVIDIA Corporation (NASDAQ:NVDA)’s stock has been struggling since its last earnings report, even though the company is performing well. He pointed out that NVIDIA Corporation (NASDAQ:NVDA), like other tech stocks, is currently contributing to market losses.
“And yes, Nvidia—that stock is still struggling since its last earnings report. Nvidia is doing better than ever, but it doesn’t matter. Nvidia, like the rest of tech, is just a share donor to the rest of the market.”
NVIDIA Corporation (NASDAQ:NVDA) is a strong investment choice due to its dominant position in the AI and GPU markets. In fiscal Q2 2024, NVIDIA Corporation (NASDAQ:NVDA) reported an extraordinary 111% increase in revenue and a 137% rise in EPS compared to the previous year, far surpassing expectations.
This growth is driven by high demand for AI chips like the H100, key partnerships with major tech companies such as Meta Platforms, Inc. (NASDAQ:META) and OpenAI, and continued investments in AI infrastructure. Analysts are optimistic about NVIDIA Corporation (NASDAQ:NVDA)’s future, predicting a 33% potential price increase thanks to its strong market position and growth potential.
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Investors: 184
Jim Cramer explained that money flowed out of stocks like Apple Inc. (NASDAQ:AAPL) after reports from several firms suggested weak pre-orders for the new iPhone 16. This news led to a significant sell-off in Apple Inc. (NASDAQ:AAPL) related stocks.
“The money poured out of stocks like Apple on word from a few firms that the weekend’s pre-orders for the new iPhone 16 were anemic (more on that later). All you need to know is that it caused an eruption of selling in anything connected to Apple.”
Apple Inc. (NASDAQ:AAPL) presents a strong investment case due to several key factors. The recent introduction of the iPhone 16, which includes advanced AI features, is expected to spark a major upgrade cycle, with analysts forecasting sales of up to 240 million units due to high pent-up demand.
Additionally, Apple Inc. (NASDAQ:AAPL)’s focus on integrating AI across its entire product range, including iPhones, iPads, and Macs, aims to enhance user experiences and create new revenue opportunities. Combined with impressive growth in its services sector and strong profit margins, these factors contribute to a favorable long-term outlook for Apple Inc. (NASDAQ:AAPL), with analysts predicting a potential price increase of about 25%.
Baron Technology Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“The Fund’s chief relative detractor was Apple Inc. (NASDAQ:AAPL), even though it was a meaningful contributor to absolute performance, as we added to our Apple position significantly during the period. We bought Apple well, but in 20/20 hindsight we didn’t buy enough. Because Apple has an oversized weight in the Benchmark (its average weight was 15.7% for the period), when Apple’s stock outperforms (it appreciated 23.0%), it has generally been a headwind to relative performance.
Our Apple underweight accounted for 33% of our relative underperformance for the period. This quarter we increased the size of our position in Apple Inc., a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally.
The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile. Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago…” (Click here to read more)
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Jim Cramer expressed enthusiasm about Microsoft Corporation (NASDAQ:MSFT), calling it one of the top five stocks in the market. He praised the viewer’s knowledge, saying that Microsoft Corporation (NASDAQ:MSFT) is a great choice.
“Oh my, let me tell you something! You’ve hit on one of the top five stocks in this entire market. I like Microsoft. The kid obviously knows what he’s doing! We should just put him right here—he can press the buttons for me. Maybe you can find him!”
Microsoft Corporation (NASDAQ:MSFT) is a strong investment due to its leadership in cloud computing and artificial intelligence, positioning it for ongoing growth. In 2024, Microsoft Corporation (NASDAQ:MSFT) reported impressive financial results, with a 20% increase in profits and a 17% rise in revenue to $61.9 billion in Q3, driven by a 31% growth in its Azure cloud platform.
Microsoft Corporation (NASDAQ:MSFT)’s substantial investments in AI, including its partnership with OpenAI, have bolstered its market position. Products like Microsoft 365 Copilot and Azure OpenAI services are expected to bring in billions in annual revenue. Analysts are positive about Microsoft Corporation (NASDAQ:MSFT)’s potential in generative AI, with price targets between $500 and $550.
Additionally, Microsoft Corporation (NASDAQ:MSFT) is expanding its global reach with a $2.9 billion investment in Japan to enhance its cloud and AI capabilities. Microsoft Corporation (NASDAQ:MSFT) also saw a 51% increase in gaming revenue, partly due to its Activision Blizzard acquisition, showcasing the strength of its diverse business segments. Microsoft Corporation (NASDAQ:MSFT)’s leadership in AI and cloud computing, along with strategic investments, makes it a top stock pick for 2024 and beyond, with considerable growth potential.
Alger Spectra Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. The company operates through three segments: Productivity and Business Processes (Office, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search).
During the quarter, shares contributed to performance after the company reported strong fiscal third quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of AI adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 31% in constant currency of which 7% was AI related versus 3% two quarters ago.
Further, management noted most of the AI revenue continues to stem from inference rather than training indicating high quality AI applications by Microsoft’s clients. Management also indicated that the significant cost-cutting programs in corporate America are done, suggesting that the cost optimization headwinds previously impacting Azure’s growth are over.
Separately, management provided color on their new AI-productivity tool, Copilot, noting that approximately 60% of Fortune 500 companies are already using Copilot, and that the quarter witnessed a 50% increase in Copilot assistance integration within Teams. We continue to believe that Microsoft has the potential to hold a leading position in AI, given its innovative approach and demonstrated high unit volume growth opportunity.”
While we acknowledge the potential of Microsoft Corporation (NASDAQ:MSFT), 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 the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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