We recently compiled a list of the 10 Best Stocks To Invest In According to Billionaires. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other billionaire-approved stocks.

Billionaires and top hedge fund managers typically dominate the stock market, focusing on leading companies with strong track records and exceptional performance. They usually don’t waste time with underperformers—they target the market’s elite.

The Stock Market Rally

Before diving into the top stock picks among billionaires, reviewing how the market has performed so far this year is essential. On September 18, the Federal Reserve cut its policy rate by 50 basis points, lowering it to 4.75%–5.00% from 5.25%–5.50%. This move fueled a market rally, pushing stocks to a new intraday record high, and marking the 39th all-time high of 2024—the first since mid-July. Minneapolis Fed president Neel Kashkari acknowledged that while the rate cut was unusual historically, shifting the policy focus from controlling high inflation to addressing a weakening labor market was necessary. Here are some comments:

“Right now, we still have a strong, healthy labor market. But I want to keep it a strong, healthy labor market, and a lot of the recent inflation data is coming in looking very positive that we’re on our way back to 2%. So I don’t think you’re going to find anybody at the Federal Reserve who declares mission accomplished, but we are paying attention to what risks are most likely to materialize in the near future.”

Market expectations point to an equal probability of the Federal Open Market Committee (FOMC) cutting rates by either a quarter- or half-percentage point at its November meeting, with a higher chance of the larger reduction in December. Overall, markets are signaling the Fed’s intent to bring rates to a “neutral” level that neither stimulates nor restricts economic growth.

What the Top Dogs of Wall Street are Saying About the Market

For nearly two years, bulls have dominated Wall Street, driven by a resilient U.S. economy and growing enthusiasm around artificial intelligence (AI). This momentum has propelled the Dow Jones Industrial Average, the S&P 500, and the tech-heavy Nasdaq Composite to multiple record highs in 2024. Despite the surge, not everyone seems hopeful about the market, with some of the most influential billionaire investors, including Warren Buffett of Berkshire Hathaway, signaling caution. Buffett, known for his long-term optimism, has been a net seller of stocks for seven straight quarters.

On the other hand, billionaire investor Ray Dalio recently raised concerns about the “enormous amount of debt” burdening the U.S. economy. He cautions that neither former President Donald Trump nor Vice President Kamala Harris is likely to focus on addressing debt sustainability in the upcoming presidential election, suggesting that the pressure from the $35.3 trillion national debt will persist, regardless of the election outcome.

Our Methodology

In this article, we analyzed Insider Monkey’s exclusive database of billionaire stock holdings to select the 10 stocks with the highest number of billionaire investors. These billionaires are founders or managers of some of the world’s leading hedge funds and companies.

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).

Microsoft Corporation (NASDAQ:MSFT)

Number of Billionaire Investors: 34

Microsoft Corporation (NASDAQ:MSFT) is a tech giant renowned for its popular software offerings, including Windows and Office, as well as being a key player in cloud computing through Microsoft Azure. Additionally, the tech giant has invested billions in OpenAI, the creator of ChatGPT, and has integrated AI across many of its products.

In fiscal Q4 2024, Microsoft Corporation (NASDAQ:MSFT) reported $64.7 billion in revenue, a 15% increase year-over-year. Net income rose 10% YoY to $22 billion. A major driver of this growth is Microsoft Azure, which has benefitted from AI integrations. With a 31% market share, Azure is poised to generate substantial value amid strong demand for cloud solutions.

Mizuho recently reiterated its positive outlook on Microsoft Corporation (NASDAQ:MSFT), maintaining an Outperform rating and a price target of $480. The endorsement followed Microsoft’s announcement of a new $60 billion share buyback program, matching the previous plan set three years ago. The company also raised its quarterly dividend by nearly 11%, continuing a six-year trend of dividend growth.

Microsoft Corporation (NASDAQ:MSFT) tops the list of the 10 best stocks to buy, with 34 billionaires holding stakes in the company as of the June 2024 quarter.

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.”

Overall MSFT ranks 1st on our list of the stocks to invest in according to billionaires. While we acknowledge the potential of MSFT as an investment, we believe that there are under-the-radar AI stocks trading at highly discounted valuations that hold greater promise for anyone looking to diversify their portfolio. If you are looking for an AI stock that is more promising than MSFT, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.