We recently compiled a list of the AI News You Should Not Have Missed. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other AI stocks.
Artificial intelligence (AI) is the new buzzword that is attracting the attention of almost everyone on Wall Street. The sector, characterized by rapid growth, significant investment, and intense competition, has witnessed a surge in venture capital (VC) funding over the past few months. In 2023, global VC investment in AI startups exceeded $94 billion. This surge in funding reflects the strong belief that these investors have in the transformative potential of AI across various industries. Merger and acquisition activity in the field is also on the rise, with more than 1,100 such deals in 2023 alone. Larger tech companies are actively acquiring AI startups to bolster their capabilities in the shortest time possible.
Some sector-specific numbers highlight the AI potential in minute detail. For example, in the healthcare universe, the AI healthcare market is projected to reach $102 billion by 2028, with startups focusing on diagnostics, drug discovery, and personalized medicine. In finance, AI-driven financial services are expected to reach a market value of $26.67 billion by 2026, with startups focusing on fintech, fraud detection, and algorithmic trading. In the retail world, AI is revolutionizing through personalized shopping experiences and supply chain optimization, with the sector projected to grow at a 34.4% CAGR by 2030.
Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.
Hedge fund interest in AI has increased in the past few months, an indication of the long-term growth potential of the industry. During routine interviews with the media, investor conferences, and through their 13F activity, hedge fund managers have detailed their bullish views on AI. For example, Bill Ackman, the chief Pershing Square Capital Management, has said that AI startups represent the next frontier in technology, offering unparalleled opportunities for innovation. He adds that the key is finding those with a clear vision and the ability to execute in a rapidly evolving landscape.
Similarly, Ray Dalio of Bridgewater Associates is of the opinion that the impact of AI on industries is undeniable, and the startups driving this change are in a unique position to capitalize on it. Dalio adds, however, that it’s crucial to invest in those that are building sustainable, ethical models, as they will be the long-term winners. Paul Tudor Jones of Tudor Investment Corporation believes that AI startups are not just about tech but about transforming entire industries. He notes that the challenge is in navigating the hype and identifying the true innovators who have the potential to disrupt established markets.
Read more about these developments by accessing Billionaire Stan Druckenmiller Is Betting On AI Infrastructure, Tobacco and Industrial Stocks and 10 Tech Stocks to Monitor Amid Market Volatility According to Bernstein Analyst.
Our Methodology
For this article, we selected AI stocks based on the latest news and analyst ratings. These stocks are also popular among hedge funds. 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).
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 Washington-based technology company. It is hard to find established technology companies that offer a reliable path to AI growth. Microsoft, however, is an exception. The firm recently released results for the fourth fiscal quarter of 2024, topping market expectations on revenue by 15% year-on-year growth and operating income that came close to $28 billion. For those looking at ROI on AI, the numbers for Azure painted a healthy pattern, with AI workloads contributing to 30% year-on-year growth in the segment. The services and GitHub Copilot showed strong performance as well. Although the long-term outlook remains rosy, AI capex is likely to weigh on investor sentiment in the near term.
Microsoft Corporation (NASDAQ:MSFT) is one of the favorite AI stocks on Wall Street. DA Davidson recently maintained a Buy rating on the shares with a price target of $475, noting that the commentary from management suggested that demand for AI services remained strong as Azure continues to gain market share, and Azure demand levels were likely to remain similar throughout the upcoming fiscal year.
Overall MSFT ranks 6th on our list of the AI stocks you should not have missed. 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 timeframe. 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.
