We recently compiled a list of the 9 Trending AI Stocks on Latest News and Ratings. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other AI stocks.
AI’s Appetite for Resources and the Price of Progress
A Bloomberg report from December 13, AI Wants More Data. More Chips. More Real Estate. More Power. More Water. More Everything, explores the resource-intensive nature of artificial intelligence, emphasizing its demands on electricity, water, and infrastructure. ChatGPT and similar AI systems require vast amounts of power, far exceeding traditional services like Google Search. AI models require enormous energy, materials, and specialized hardware like GPUs. This is driving a global race for resources, with companies seeking efficient solutions, including nuclear power and synthetic data generation, the report states.
The infrastructure required to support AI, from data centers to power grids, faces significant challenges, with rising demands for energy and materials like copper, silicon, and rare metals. While AI presents a tremendous opportunity, the article highlights potential environmental impacts, talent shortages, and increasing infrastructure costs. As AI companies compete to meet the growing needs of generative AI, the global ecosystem is reshaping.
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The Future of AI and Energy in the U.S.
Byron Deeter, partner at Bessemer Venture recently joined CNBC’s ‘Closing Bell Overtime’ and discussed the continued strong investor interest in AI, with the U.S. government’s backing further supporting the country’s leadership in the sector. He highlighted the role of energy in AI development, noting the need for nuclear energy in the U.S. due to the growing demand for computing power. Deeter also talked about Service Titan, a company providing software for industries like plumbing and HVAC, which recently went public. He sees the IPO as a sign of more companies following suit in 2025, with a strong pipeline of potential filings for the coming year.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 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) uses AI across its cloud services, productivity tools, and business solutions to enhance automation, security, and user experience. Its AI initiatives include intelligent cloud services, AI-driven applications for business operations, and advanced capabilities in language processing and cloud computing.
Omidia, a technology consultancy estimates that Microsoft purchased 485,000 of Nvidia’s Hopper GPUs in 2024, as reported by Financial Times. The company significantly outpaced rivals like Meta, which bought 224,000, and Chinese companies ByteDance and Tencent, each acquiring around 230,000 units. The demand for Nvidia chips surged as Big Tech invested billions in AI infrastructure to stay competitive.
Microsoft’s investment in Nvidia chips more than tripled from 2023, driven by its AI services and Azure cloud platform, which supports OpenAI and other clients, the report stated. Despite Nvidia’s dominance, the rise of custom AI chips and concerns about slower growth and U.S.-China trade restrictions have tempered its stock performance. Omdia estimates that 43% of server spending in 2024 went to Nvidia, reflecting peak demand. You can also read our report: Nvidia’s (NVDA) Dependence On Microsoft (MSFT) Is A Non-Issue With Its Tech Dominance.
Overall MSFT ranks 2nd on our list of the trending AI stocks. 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.