We recently compiled a list of the 12 AI News Investors Probably Missed. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other AI stocks.
AI is evolving rapidly with recent breakthroughs making it more accessible and efficient than ever. Smaller, cost-effective models are emerging, which are challenging the idea that cutting-edge AI requires massive resources. DeepSeek seems to be a great example of that.
Moreover, Tech Crunch reported that barely a week after DeepSeek unveiled its R1 reasoning AI model, Hugging Face has launched Open-R1, a project to replicate and fully open-source DeepSeek’s R1 reasoning AI model, addressing concerns about its lack of transparency. While R1 has gained attention for its efficiency and top performance, Hugging Face aims to demystify its training process to promote responsible use and innovation. Using its Science Cluster, the team plans to recreate R1 and make it a foundation for future open-source models, emphasizing the collaborative benefits of openness in AI.
Rethinking AI Dominance in a Multi-Model World
At CNBC’s WorldWide Exchange, Zack Kass, an AI futurist and former Head of GTM at OpenAI, discussed the implications of a Chinese firm creating a GPT-4 equivalent model with remarkable efficiency. He highlighted how this reflects a shift from reliance on capital and scale toward innovation driven by necessity. Kass noted that while U.S. firms have benefited from abundant resources, China’s limitations spurred creative breakthroughs, such as building a competitive model at a lower cost.
He addressed skepticism about claims regarding the model’s development cost and chip usage and suggested that it is reasonable to assume the information is largely accurate. Kass also commented on the evolving role of national security in AI, emphasizing the private sector’s growing involvement. While a U.S. executive order aimed at restricting China’s access to chips may not have achieved its intended impact, it may have unintentionally fueled innovation.
Kass argued that the research behind AI models is becoming increasingly accessible, which could lead to more discoveries worldwide. He dismissed concerns over U.S. dominance in AI, framing this development as an opportunity for cheaper, widely available technology. On open source, Kass noted that the future likely involves a diverse ecosystem of models, rather than dominance by a single proprietary approach.
For this article, we selected AI stocks by reviewing 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) provides AI-powered cloud, productivity, and business solutions, improving operations and security while heavily investing in AI advancement.
UBS analyst Karl Kierstead reiterated a Buy rating on Microsoft (NASDAQ:MSFT) with a $525 price target, noting the stock’s slight 2% dip after DeepSeek’s announcement aligns with Microsoft’s strategy. The company’s decision not to fund OpenAI’s GPU compute targets and focus on building inference infrastructure for enterprise customers is seen as a strategic pivot. While Microsoft’s heavy investment in OpenAI now faces rising competition, its capex growth may slow after FY25 if AI becomes less compute-intensive. Investor sentiment could improve if Microsoft highlights capex discipline and ROI during its upcoming updates. Kierstead noted:
“That ‘bet’ looks like a clever one. While Microsoft (NASDAQ:MSFT) has made a very large singular bet on OpenAI, which now faces heightened competition, the pace of Microsoft’s capex growth could slow beyond FY25 if, in fact, AI becomes LESS compute-heavy. Investor sentiment might even improve post Wednesday’s print if Microsoft explains that their StarGate/OpenAI decision was about capex discipline, restoring investor confidence in their capex growth and ROI outlook.”
Overall, MSFT ranks 2nd on our list of the AI stocks investors probably missed. 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 time frame. 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.
