We recently compiled a list of the ChatGPT Stock Advice: 10 Recent Stock Recommendations. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other stocks recommended by ChatGPT.
ChatGPT has quickly become an essential tool for both professional and personal use, thanks to its human-like responses. Analysts are also exploring its potential for stock picking, using criteria like low P/E ratios to find undervalued stocks. While some question the reliability of ChatGPT for providing accurate and up-to-date information, a study from the University of Florida suggests that ChatGPT can predict stock price movements more accurately than some basic analysis models.
OpenAI recently made a major leap by launching GPT-4o, a new AI model, alongside a desktop version of ChatGPT and an updated user interface. This update brings GPT-4 to all users, including those on the free tier, with enhanced speed and capabilities in text, video, and audio. The “o” in GPT-4o stands for “omni,” indicating its ability to support 50 languages and be available via APIs, allowing developers to start building applications with the new model right away.
The S&P 500 and NASDAQ are on track for their tenth consecutive positive session, driven by the same bullish factors that have propelled the market throughout the year. Inflation continues to trend downward, raising expectations that the Federal Reserve will cut interest rates in September. This potential for rate cuts supports the market by fostering conditions that could lead to a soft economic landing.
Ed Clissold, Ned Davis Research chief U.S. strategist, told CNBC that quarterly earnings growth has consistently accelerated over the past few quarters, with Q2 showing strong results and Q3 expected to follow suit. This steady growth suggests no significant changes in the underlying market thesis, keeping investor sentiment positive.
Despite the recent volatility seen in August, which was partly driven by a spike in market uncertainty and liquidity issues, analysts do not expect this to carry over into September. The possibility of rate cuts by the Fed is providing a solid foundation for the market, though there are some concerns about elevated earnings estimates for Q3 and the upcoming election.
The Dow Jones Industrial Average is close to an all-time high, with stocks like Travelers, Boeing, and 3M leading the charge. Analysts predict a broad market advance, with potential for catch-up in sectors that have lagged behind this year. As interest rates are likely to come down, the market rally could broaden beyond just AI and mega-cap growth stocks.
Looking ahead to next week, key economic data will be in focus, including PCE data on Friday and consumer spending insights on Tuesday. Investors are hoping for “Goldilocks” economic data—not too hot, not too cold—that would confirm the Fed’s rate cut path without signaling an economic downturn. The market favors moderate economic growth, which would support continued stock market gains.
In a world overwhelmed by information, ChatGPT offers a solution for investors. Its natural language processing capabilities allow it to sift through vast amounts of data and provide concise, actionable summaries, helping investors make informed decisions. By reducing information costs and democratizing financial knowledge, ChatGPT is becoming an invaluable tool for individual investors.
Our Methodology
For this article we prompted ChatGPT multiple times to recommend stocks, based on the data as of its knowledge cutoff date. ChatGPT recommended 10 stocks based on “historical trends” and the “market landscape” from various sectors which have “substantial” potential over the next few years. We shortlisted the stocks that were recommended the most and then further selected the ones that were the most widely held by hedge funds. We have sorted these stocks based on the number of hedge fund investors as of Q2 2024.
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft’s recent cloud growth, particularly in its Azure service, fell short of expectations, leading to some disappointment among investors. While the company has been a leader in AI-driven growth over the past year, this quarter’s results showed a deceleration, raising concerns about whether the momentum gained from AI is starting to wane. This deceleration in cloud revenue, coupled with a significant increase in capital expenditures (CapEx), has led to uncertainty about Microsoft’s future growth trajectory.
Despite these concerns, some investors see any potential dip in Microsoft’s stock as a buying opportunity. With its position as a key player in the tech sector, Microsoft Corporation (NASDAQ:MSFT) remains a strong contender in the market. Investors are also looking for signs in the upcoming earnings report that could serve as catalysts for future growth, particularly in relation to AI-driven profits and overall demand for Microsoft’s AI tools.
Gil Luria, a software analyst at D.A. Davidson believes that the guidance provided by Microsoft in its upcoming call is expected to be crucial, as it will reveal whether the company plans to continue increasing its CapEx despite the slower revenue growth. Investors are beginning to adjust their expectations around AI’s contribution to Microsoft’s business, acknowledging that while the company’s AI advancements are impressive, the growth may not be as rapid as previously anticipated.
Brent Thill, Jefferies analyst emphasized that while Microsoft Corporation (NASDAQ:MSFT) missed its growth targets, the miss was small, and the company remains well ahead of its competitors in AI. He pointed out that the weakness was largely due to softer demand in Europe and a dip in transactional business during the quarter. Even so, Microsoft’s performance, particularly in AI, continues to outpace expectations, and Thill expects the company to regain momentum in the latter half of the year. Thill continues to rate Microsoft Corporation (NASDAQ:MSFT) as a top pick, maintaining a price target of $550.
Overall MSFT ranks 2nd on our list of ChatGPT’s recent stock recommendations. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some 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, heck out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
