We recently compiled a list of the 10 Best Tech Stocks to Buy According to Brad Gerstner. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other tech stocks.
Gerstner is Bullish on Tech in 2024
On December 1, 2023, Brad Gerstner, the CEO of Altimeter Capital, appeared in an interview on CNBC where he explained that tech stocks are expected to outperform non-tech stocks in 2024. Over the past 10 years, tech earnings have compounded at almost 16% and non-tech earnings have compounded at 6%. 2023 was a rebound year for the tech industry after a downturn in 2022 due to rising interest rates. Big Tech companies and their operational efficiencies have poised them for strong growth. While inflation and interest rates will determine what goes down, companies that have invested in augmented intelligence will experience secular growth. Gerstner thinks that the spread between 16% and 6% will be a recurring trend in 2024.
Gerstner Thinks Now is the Right Time to Invest in Tech
On June 11, Brad Gerstner made another appearance on CNBC and addressed the speculation surrounding the software industry. Gerstner suggested that despite headwinds, the software industry is still valuable as companies and startups are still making deals. Gerstner believes there are three main reasons for the downward trajectory of the software industry. He thinks that CEOs and CTOs are cautious when it comes to making investments in software. Executives want a clearer picture of the AI boom before making risky investments. Moreover, interest rates are higher than expectations, due to delayed rate cuts and compressing multiples. Lastly, general uncertainty about the future has been detrimental to the growth of the software industry. Gerstner pointed out that since the software industry is trading at 20% below its ten-year average, this may be the best time to allocate stakes in software companies. You can also take a look at the best Robinhood stocks under $20.
Gerstner thinks data and databases are extremely vital to AI applications. He thinks that companies using data to power AI are far ahead of companies simply automating services. Big Tech companies have data at the forefront of all their artificial intelligence applications. You can also read our piece on the stocks hedge funds are crazy about right now.
Brad Gerstner is bullish on tech, and particularly software and AI. In Q1 2024, he initiated 6 new positions and also raised his stakes in 2 stocks, ending the quarter with a portfolio of $6.5 billion in 13F securities. With that, let’s discuss his top tech stock picks.
Our Methodology
We scanned Altimeter Capital’s Q1 portfolio and picked growth stocks from the fund’s top 13F holdings. Additionally, we’ve also added overall hedge fund sentiment, as of Q1 2024. 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).
Note: All pricing data is as of June 28.
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Altimeter Capital’s Stake Value: $694,133,306
Number of Hedge Fund Holders: 293
Microsoft Corporation (NASDAQ:MSFT) is among Brad Gerstner’s top 5 stock picks. The stock accounts for nearly 11% of Altimeter Capital’s 13F portfolio. The company’s overall growth in the quarter was driven by the demand for Microsoft Cloud, which logged $35 billion in revenue, up by 23% year-over-year. Microsoft Azure remained a top pick among customers. Over 65% of the Fortune 500 companies and more than 30,000 organizations use Azure OpenAI Service and more than 30,000 organizations use Copilot Studio to customize Copilot for their organization’s needs. The number of organizations using Copilot grew by 175% quarter-over-quarter.
Microsoft introduced Phi-3 in April, the company’s family of small language models measuring 3.8 billion parameters, that perform better than large models. It is available in the Microsoft Azure AI Model Catalog and on Hugging Face. Phi-3 models will also be available as an NVIDIA NIM Microservice that is capable of being deployed anywhere. Microsoft Corporation (NASDAQ:MSFT) plans to launch additional models to the Phi-3 like Phi-3-small, measuring 7 billion parameters, and Phi-3-medium, measuring 14 billion parameters.
Azure Arc, a hybrid multi-cloud management tool, now has over 33,000 customers, increasing twofold year-over-year. The company saw an 80% increase for its $100 million Azure deals year-over-year. $10 million deals, on the other hand, doubled in the same time frame. Its next-gen analytics platform, Fabric, has over 11,000 paid customers.
At the end of the first quarter of 2024, 293 hedge funds held stakes in Microsoft Corporation (NASDAQ:MSFT) with total positions amounting to $88.16 billion. Mar Vista Investment Partners is also bullish on the stock because of its strong position in the digital landscape. Here are comments from Mar Vista Investment Partners’ Q1 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) continues to occupy a strong position, poised to capture market share as businesses navigate the transition to a digital-first landscape and embrace generative AI-driven solutions. The company’s commanding presence in the enterprise arena, combined with its comprehensive product portfolio encompassing Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS), establishes it as a crucial provider of IT solutions for companies of all sizes. Microsoft is effectively executing its strategy in a sizable market by offering a roadmap for digital transformation and adoption of AI-driven solutions, such as ChatGPT, while enhancing productivity and reducing costs. Consequently, we anticipate that Microsoft’s solutions should exhibit resilience even in a more challenging macroeconomic environment, supporting low double-digit growth in intrinsic value within our investment horizon.”
Overall MSFT ranks 5th on our list of the best tech stocks to buy according to Brad Gerstner. You can visit 10 Best Tech Stocks to Buy According to Brad Gerstner to see the other tech stocks that are on hedge funds’ radar. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that 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.