Top 10 Stocks to Watch as Investors Brace for Potential Recession

2. Microsoft Corp (NASDAQ:MSFT)

Number of Hedge Fund Investors: 279

Scotiabank recently started covering Microsoft Corp (NASDAQ:MSFT) with a Sector Outperform rating and highlighted the company’s strong position in the race to develop artificial intelligence.

“Based on our fieldwork, 2025 will be a paradigm-shifting year during which customer investments accelerate in AI on Azure and Microsoft 365 Copilot,” said Scotia Capital analysts, led by Patrick Colville, in a detailed note to investors.

Scotiabank set a $470 price target on the stock, saying about 60% of companies are using foundational models in the public cloud. Azure, they said, is well-positioned to capture spending on generative AI.

“Almost all IT decision makers plan to add additional use cases in 2025,” Colville said. “Microsoft’s partnership with OpenAI, Inc. and pre-existing customer relationships are the key advantage for Azure in AI. Based on our fieldwork, a slow moderation in growth in Microsoft’s traditional public cloud business is the most likely outcome – important for assuaging investor fears that one revenue source is being substituted for another.”

Columbia Seligman Global Technology Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q4 2024 investor letter:

“Within software, the fund maintained an underweight position to Microsoft Corporation (NASDAQ:MSFT), which proved beneficial as share price for the company fell during the fourth quarter. Microsoft’s outlook for its Azure business came down slightly, which hampered the stock price at times during the quarter and, combined with losses on the Open AI business, led to a disappointing end to 2024. The company has guided its capital expenditure spending up slightly and investors continue to wait for additional monetization from the company’s large commitment to AI infrastructure spending. The fund continued to hold an overweight allocation to Oracle as we believe Oracle is positioned to be a major beneficiary of the AI rollout and has the potential to compete with other large cloud providers, such as Amazon, Alphabet and Microsoft. Oracle shares moved lower during the quarter and the stock suffered its worst day of the year in December, as the company narrowly underperformed analysts’ average estimates. Oracle’s business model remains strong as demand for computer power that can handle AI is increasing and the company’s revenues from its cloud infrastructure unit moved higher year over year.”