3. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders as of Q4: 317
Adage Capital Management’s Equity Stake: $2.98 Billion
Microsoft Corporation (NASDAQ:MSFT) reported impressive financial results for Q4, with revenue reaching $69.63 billion, marking a 12.27% year-over-year increase and surpassing expectations. Earnings per share (EPS) came in at $3.23, exceeding analyst forecasts of $3.12, highlighting the company’s continued profitability and strong market presence. Beyond financial performance, Microsoft achieved a major milestone in quantum computing by developing a topological qubit, a breakthrough with potential applications in artificial intelligence, medicine, and cryptography. This advancement solidifies Microsoft’s leadership in quantum research and enhances its long-term growth prospects.
Despite being at the forefront of technological innovation, Microsoft Corporation (NASDAQ:MSFT)’s shares declined on March 10 due to investor concerns over a potential recession and uncertainty surrounding trade policies. The fluctuating trade policies due to tariffs introduced by President Donald Trump have raised concerns over pricing stability and supply chains, leading some investors to offload stocks, particularly in the tech sector, where companies like Microsoft rely on global markets for production and distribution. The uncertainty has contributed to volatility in growth stocks, as investors weigh potential economic risks amid shifting trade regulations.
Moreover, a physicist has recently challenged Microsoft’s claim of creating the first topological qubits, arguing that the test used to detect the necessary quasiparticles, known as the topological gap protocol (TGP), is flawed. While Microsoft’s 19 February announcement lacked peer-reviewed proof, the company maintains that it has made significant progress beyond the published research. The critique, led by Henry Legg of the University of St Andrews, suggests that without a reliable test for Majorana quasiparticles, the foundation of Microsoft’s qubit breakthrough remains uncertain. However, the company’s quantum computing lead, Chetan Nayak, dismissed the criticism as a misrepresentation of their research. Despite this controversy, Microsoft (NASDAQ:MSFT) remains a strong stock to buy due to its robust financial performance, leadership in AI and cloud computing, and continued innovation in next-generation technologies like quantum computing.
Mairs & Power Growth Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q4 2024 investor letter:
“Unlike the dot-com companies that operated at the turn-of-the-century, many of today’s technology companies are established businesses with significant cash flows. We have argued, and continue to argue, that many of these investments are perfectly aligned with our investments process in that they embody durable competitive advantages, above-average growth prospects, and excellent management teams.
A perfect example is Microsoft Corporation (NASDAQ:MSFT), which has grown to become the largest holding in the Growth Fund. Microsoft has a near monopoly on the office software productivity market with its Microsoft Office Suite. The company’s Azure platform is a leader in cloud computing and has been steadily gaining share. Thanks to its Office and Azure products, the company is deeply embedded within many enterprise IT ecosystems. Therefore, it should be well-positioned to expand its presence within its customer base, as it rolls out premium-price AI solutions. The company is not resting on its laurels and plans on spending an astounding $80 billion in 2025 to build out AI data centers.”
