In this piece, we will take a look at the top stocks that are poised to disrupt their industries by 2030 with technology according to investment bank UBS.
When it comes to investing and making massive gains on the stock market, disruption is the name of the game. The biggest firms on the market right now are all disruptors of their industries. These firms have ushered in new products and used technology to allow consumers to improve their daily lives.
Since the word disruption is well used in stock market discourse, a brief history lesson is in order. The term disruptive innovation was popularized by the late Harvard Business School professor Clayton Christensen. Despite being widely used, disruption innovation is far from being a widespread effect. In essence, while all disruptive innovation is innovation, not all innovation is disruptive innovation. To understand how, consider an HBR article co authored by Professor Christensen. In it, the authors share that “too many people who speak of “disruption” have not read a serious book or article on the subject.”
Truly disruptive firms end up anticipating the needs of customers that larger incumbents ignore, believe Christensen and his compatriots. This enables the entrants to establish a foothold in the market, after which they upscale their products to also target the customers that incumbents are focused on. However, a firm doesn’t have to be an entrant in its industry to be a disruptor, as the authors point to the iPhone’s success in leveraging existing business processes that truly reshaped the course of the world.
Consequently, in order to analyze the stock market returns offered by disruptive innovation, a good place to start would be to see the share price of firms that Professor Christensen believes are disruptors. The article provides two examples; one is of the firm responsible for the iPhone and the other is of the company that is dominating the global streaming market.
Starting from the former, its shares are up by a whopping 209,000%+ since they started trading on the NASDAQ exchange. The latter is a relatively newer entrant to the stock market. The stock started to trade in 2002, and since then, it has gained 61,000%+. Mind you, both of these are calculated after stock splits. Safe to say, disruption is rewarding, but to understand its impact on the share price of the former company, we’ll have to dig in slightly deeper.
Using post split stock prices, before the launch of the iPhone, the shares had gained roughly 3,800%. Since the launch of the iPhone, the stock is up by almost 4,600%, despite the higher base effect of the higher share price and the global stock market disruption during the 2008 Great Recession and the COVID 19 recession. In today’s AI driven market, the firm is one of the most valuable companies in the world courtesy of its $3.51 trillion market capitalization.
Since disruption often occurs on market fringes, it’s hard to predict which firm will be the next one to shake things up. Using Christensen’s criteria, the world’s preeminent AI GPU manufacturer whose shares are up 727% since OpenAI publicly released ChatGPT isn’t a disruptor. This is because it offers its products and services to customers that it serves already, while true disruptors are those that might end up gaining market popularity by catering to customers that are ignored by large incumbents due to profitability or other factors.
Another great example of disruption, or what Christensen terms as ‘big bang disruption’ is in the gaming console market. For years, two gaming consoles, namely the Xbox and the PlayStation have dominated the market. Within these, the PlayStation is the original disruptor and a device that dealt a deadly blow to the arcade industry. In American culture, Pinball holds a pivotal place, especially for those who were growing up in the pre internet era.
Data from Harvard shows that Pinball sales in the US peaked at roughly 1.3 million units in 1993, despite the fact that arcade video games had already become available since 1978. However, from the 1.3 million units in 1993, the sales dropped to less than 5 million in just a couple of years in 1997. This was because the PlayStation was launched in 1994, and by 1997, its sales had surged to 20 million. A key differentiating factor for the console that enabled its meteoric rise was its popularity. The PlayStation at the time was available for $299 while Pinball machines could cost as much as $7,500. The console also offered more video game variety, and it allowed children and adolescents to enjoy gaming from the comfort of their homes. In short, the video game console served the needs of players ignored by Pinball (those who wanted to play at home), and its ‘big bang’ occurred when the console caught on with the broader Pinball market.
Therein lie the secrets to disruption. With these details in mind, let’s look at UBS’ latest list of firms that can use technology to disrupt their industries. The bank believes that “these are leading disruptors in sectors undergoing technological transformation, which should lead to consequential and enduring impact” to allow them to deliver “superior earnings growth.”
An investor in a trading room with an illuminated monitor showing stock/market trends.
Our Methodology
To make our list of stocks that will use technology to disrupt their industries, we divided the 29 stocks in UBS latest report into two categories. The first lists OTC stocks by their year to date share price gains, while the second ranks US listed stocks by the number of hedge fund shareholders during Q2 2024.
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).
29. Samsung Electronics Co., Ltd. (OTC:SSNLF)
YTD Share Price Gain: -28.89%
Samsung Electronics Co., Ltd. (OTC:SSNLF) is a global diversified technology company with a presence in the consumer electronics, semiconductor fabrication, consumer electronics, and chip fabrication industries. It is one of the biggest smartphone manufacturers in the world, and also a key player in the semiconductor manufacturing industry. Consequently, Samsung Electronics Co., Ltd. (OTC:SSNLF) depends on cyclical up trends to drive revenue. Additionally, the firm’s memory division has suffered lately as weak demand and its sizeable market share have driven volumes lower. However, Samsung Electronics Co., Ltd. (OTC:SSNLF) also benefits from advanced research and development which allows it to develop advanced chip manufacturing processes such as gate all around (GAA) 2 nanometer. UBS believes that Samsung Electronics Co., Ltd. (OTC:SSNLF) can use technology to drive innovation in the green technology industry.
28. Société Générale Société anonyme (OTC:SCGLY)
YTD Share Price Gain: -4.41%
Société Générale Société anonyme (OTC:SCGLY) is one of the oldest and largest banks in France. This allows it to be a sizable entity in the banking industry, with €1.6 trillion in total assets as of June 2024. Looking at Société Générale Société anonyme (OTC:SCGLY)’s income statement, during the first half of 2024, 68% of the firm’s €42 billion came through interest. Consumer deposits, central bank deposits, and hedging derivatives accounted for most of the interest income. Consequently, with a lower rate environment expected in the future, Société Générale Société anonyme (OTC:SCGLY) could struggle to maintain its income in consumer and central bank divisions. Yet, it is also one of the biggest digital banks in France, which provides the firm a key leg up over rivals in the highly growing space. Additionally, out of the bank’s €13.5 billion in noninterest income in H1, €13.1 billion came through its asset management business. Through this, Société Générale Société anonyme (OTC:SCGLY) provides equipment leasing and fleet management services. The bank is due to sell a portion of this business next year to generate capital and streamline operations. This is at the heart of a turnaround by the bank which is struggling to bring its valuation level with peer firms.
27. E.ON SE (OTC:EONGY)
YTD Share Price Gain: 4.80%
E.ON SE (OTC:EONGY) is a diversified German energy company that provides electricity and gas to businesses and residential customers. It also has a renewable energy business division, as well as those covering technology areas such as gas quality and tracking management. UBS believes that the firm has the potential to disrupt the green technology industry. The company is still reeling from the after effects of the Russian invasion of Ukraine that disrupted German gas supplies. This is evident in the fact that E.ON SE (OTC:EONGY)’s stock on the ETR exchange has gained just 6% over levels before the invasion began. Its Energy Networks business is the largest contributor to operating income, and the business continues to struggle with lower volumes, cost management unwinding, and higher upstream costs. E.ON SE (OTC:EONGY) is currently aggressively focusing on grid investments, and its ability to generate returns through these should drive the hypothesis moving forward.
26. L’Air Liquide S.A. (OTC:AIQUY)
YTD Share Price Gain: 4.86%
L’Air Liquide S.A. (OTC:AIQUY) is a French industrial raw materials provider. The firm provides industrial and medical gases along with services to the renewable energy industry. It is another stock that UBS believes can play a key role in the green technology industry. It is one of the biggest companies of its kind and serves more than three million customers in 80 countries. Consequently, L’Air Liquide S.A. (OTC:AIQUY)’s hypothesis depends on the firm’s ability to cater to cyclical trends in the economy which are dependent on economic performance. Any increases in capital expenditure by industrial companies will translate into tailwinds for the stock. Additionally, spending cuts could hurt the shares as gas and services accounted for 95.5% of the firm’s Q1 revenue. These could hamper L’Air Liquide S.A. (OTC:AIQUY)’s ability to drive growth in renewable technologies.
25. Enel SpA (OTCPK:ENLAY)
YTD Share Price Gain: 8.07%
Enel SpA (OTCPK:ENLAY) is one of the biggest electricity and gas companies in the world. The firm produces and sells electricity, builds generation plants, and also operates in the renewable energy generation business. Its power generation business means that when power demand is high and prices are rising, Enel SpA (OTCPK:ENLAY) benefits from higher revenues. Consequently, its shares on the OTCPK market have gained 3.62% year to date. However, with economic conditions in Europe improving, power generation demand can pick up and lead to catalysts for the share price. Enel SpA (OTCPK:ENLAY) is also currently focused on expanding its grid generation capacity and is shifting attention away from renewable power generation. The firm expects its capital expenditure to average €11.9 billion per year between 2024 and 2026. This will mark a drop over the previous average of €13.7 billion. Over the same time period, while Enel SpA (OTCPK:ENLAY) aims to reduce its power generation spending by €5 billion, it aims to grow grid investments by €4 billion. Consequently, the ability to use high power rates to recuperate its grid investments should play a key role in the stock’s future.
24. Vonovia SE (OTC:VONOY)
YTD Share Price Gain: 8.07%
Vonovia SE (OTC:VONOY) is a German real estate company that manages and sells residential real estate properties. It is a disruption player in the financial technology innovation space believes UBS. It is Germany’s largest real estate player and can benefit from the rise in urbanization and population growth. Vonovia SE (OTC:VONOY) has made interesting investments lately which provide it with the technology platform for disruption. For instance, it led a €100 million investing round in an Austrian company that specializes in quickly manufacturing prefab homes. However, Vonovia SE (OTC:VONOY) has struggled with writedowns for most of the past year and a half as German property prices slump due to the ongoing economic crisis accelerated by the Russian invasion of Ukraine.
23. PT Bank Mandiri (Persero) Tbk (OTC:PPERY)
YTD Share Price Gain: 14.32%
PT Bank Mandiri (Persero) Tbk (OTC:PPERY) is an Indonesian bank with a global presence. It has operations in Indonesia, Singapore, Hong Kong, the UK, and other countries. The bank caters to the needs of retail customers and businesses, and it operates through Sharia and conventional banking channels. It’s a UBS fintetech disruption stock, which is unsurprising when we analyze PT Bank Mandiri (Persero) Tbk (OTC:PPERY)’s digital banking initiatives. It is a partner of Bozeman, Montana based data analytics company FICO (Fair Isaac) to use software to analyze more than 1.5 billion transactions and reduce fraud. Its Livin’ digital banking application offers users close to 90 features and had 20 million monthly users as of 2024 start. According to the bank, the application has the capacity to process up to 100,000 transactions per second. Indonesia’s central bank expects digital banking transactions to touch $4.5 trillion in 2024, making it unsurprising that PT Bank Mandiri (Persero) Tbk (OTC:PPERY) stands to capture quite a bit of this sizeable market.
22. Standard Chartered PLC (OTC:SCBFY)
YTD Share Price Gain: 30.34%
Standard Chartered PLC (OTC:SCBFY) is one of the biggest diversified banks in the world. It covers the needs of businesses, governments, and retail customers. Unlike several other mega banks, Standard Chartered PLC (OTC:SCBFY) has a well diversified income statement that is reliant on transaction processing, lending, capital markets, macro trading, wealth management, and deposits along with others. This allows it to hold the ship steady no matter what the economic tides are. For instance, during H1 2024, Standard Chartered PLC (OTC:SCBFY)’s trade and working capital business that helps firms with their daily operations saw revenue fall by 8% annually to sit at $626 million. Similarly, mortgages and other lending revenue dropped by 17% to $227. Yet, Standard Chartered PLC (OTC:SCBFY)’s revenue grew by 11% to $9.6 billion as it was fueled by credit trading, investment products, and treasury operations. It is also one of the hottest players in the digital banking industry where it operates via the Standard Chartered nexus business. This business offers other banks the ability to set up digital banks or use Standard Chartered PLC (OTC:SCBFY)’s products as a banking as a service (BaaS). No wonder then that the bank is UBS’ favorite for digital banking disruption.
21. Intesa Sanpaolo S.p.A. (OTC:ISNPY)
YTD Share Price Gain: 42.02%
Intesa Sanpaolo S.p.A. (OTC:ISNPY) is the final over the counter bank stock on our list. It is an Italian bank that provides asset management, private banking, insurance, investment banking, and other services. It earns most of its income through interest, which leaves Intesa Sanpaolo S.p.A. (OTC:ISNPY) at the mercy of interest rates and economic activity. During H1 2024, the bank’s interest income and interest margin grew by 23% and 16.5%, respectively. Yet, the growth stalled down the income statement, as Intesa Sanpaolo S.p.A. (OTC:ISNPY)’s €4.8 billion in profit marked a 12.6% annual growth. The reliance on interest income is unsurprising as the bank is Italy’s largest lender. The tighter credit environment has manifested itself in other ways on Intesa Sanpaolo S.p.A. (OTC:ISNPY)’s balance sheet too, with Intesa Sanpaolo S.p.A. (OTC:ISNPY)’s provisions for risk and other charges growing by nearly 61% during H1. The fact that it’s another UBS fintech disruptor stock is unsurprising as the bank announced in October that it is reducing head count by 9,000 employees worldwide, accelerating artificial intelligence, digital banking, and cutting costs. Intesa Sanpaolo S.p.A. (OTC:ISNPY) also plans to hire 3,500 new employees to focus on wealth management and insurance.
20. Lonza Group AG (OTC:LZAGY)
YTD Share Price Gain: 50.06%
Lonza Group AG (OTC:LZAGY) is a Swiss healthcare company that is one of the biggest in the world. The firm operates primarily in the manufacturing outsourcing segment of the pharmaceutical industry. It enables customers to manufacture biosimilars, genetic therapies, and other associated products. This provides Lonza Group AG (OTC:LZAGY) with a diversified business model that is less reliant on cyclical trends than other high growth firms such as biotechnology companies. This is because biosimilars are cheaper variants of expensive drugs, while gene therapies require extensive development spending. The business model worked in Lonza Group AG (OTC:LZAGY)’s favor in July after its shares jumped by 11% after the firm’s H1 operating income of 893 million francs beat analyst estimates of 802 million. The firm has several catalysts as its products have fueled the development of new drugs such as Alzheimer’s treatments. Additionally, Lonza Group AG (OTC:LZAGY) has struggled because of sluggish demand for its Capsule & Health Ingredients business, and as the firm attunes capacity to match demand, its margins can improve.
19. Rolls-Royce Holdings plc (OTC:RYCEY)
YTD Share Price Gain: 99.46%
Rolls-Royce Holdings plc (OTC:RYCEY) is one of the most well known industrial equipment companies in the world. While known primarily for its former Rolls-Royce cars, the firm now focuses on selling machinery such as jet engines, naval engines, nuclear reactors, and power systems. Rolls-Royce Holdings plc (OTC:RYCEY) is a UBS disruptive stock for the green technology industry. We don’t have to look far to understand why. The primary reason behind the optimism is the firm’s small modular reactors (SMRs) that are all the hype in the nuclear industry these days. SMRs are lighter, cheaper, and easier and quicker to build than traditional reactors. They also use a more powerful fuel called High Assay Low Enriched Uranium (HALEU), which has a higher concentration of enriched uranium. This means that SMRs can use less fuel to generate more power. Rolls-Royce Holdings plc (OTC:RYCEY)’s expertise in SMRs has won several contracts already, and it also has plans to use SMRs to generate power on the Moon for NASA’s Artemis program.
18. Barclays PLC (NYSE:BCS)
Number of Hedge Fund Holders In Q2 2024: 20
Barclays PLC (NYSE:BCS) is a well known global British bank. One of the largest banks of its kind, the firm had a whopping $1.6 trillion in assets as of its latest quarter. Crucially for Barclays PLC (NYSE:BCS), the current environment particularly in the banking industry might be perfectly suited for it. Take note of the fact that since their peak in January 2022, Barclays PLC (NYSE:BCS)’s shares have gained a mere 9%. In fact, were it not for the stock’s 76% gains since mid February 2024, it would be down by 38% since the peak. So, what’s driving this recent optimism behind Barclays PLC (NYSE:BCS)? Well, one factor is the bank’s income. As of H1 2024, £6.3 billion of the bank’s £13.2 billion in net income came via investment banking. Investment banking thrives in a low rate environment, and since the Fed’s rate cut in September, the stock has gained 10.29%. Yet, there are some potential tailwinds since Barclays PLC (NYSE:BCS)’s exposure to the UK economy could see risks of default by some loans given by the bank.
During the Q2 2024 earnings call, Barclays PLC (NYSE:BCS)’s management explained how it’s preparing for uncertainty in interest rates:
“We have also updated our UK rate expectations for 2024, and now assume one base rate cut to 5% by the end of the year. Together, these trends mean that we have increased our 2024 guidance for Group NII, ex-investment bank and head office, to circa GBP11 billion for the full year, up from GBP10.7 billion. Within this, NII guidance for Barclays UK increased from $6.1 billion to circa $6.3 billion, excluding the Tesco Bank acquisition. A further UK rate cut to 4.75% towards the end of the year, which is currently assumed in the latest consensus, would not materially change NII this year. Moving on to the structural hedge on Slide 10. As a reminder, the structural hedge is designed to reduce volatility in NII and manage interest rate risk. As rates have risen, the hedge has dampened the growth in our NII, and in a falling rate environment, we will see the benefit from the protection that it gives us.
The expected NII tailwind from the hedge is significant and predictable. GBP11.7 billion of aggregate gross income is now locked in over the three years to the end of 2026, up from GBP9.3 billion at Q1. We have around GBP170 billion of hedges maturing between 2024 and 2026 at an average yield of 1.5%. As we said in February, reinvesting around three quarters of this around 3.5% would compound over the next three years to increase the structural hedge income in 2026 by circa $2 billion versus 2023. In response to greater stability in customer and client deposit behavior, we have slightly increased the average duration. Given the high proportion of balances hedged and the programmatic approach we take, we are relatively insensitive to the short-term impact of potential rate cuts.”
17. Alcon Inc. (NYSE:ALC)
Number of Hedge Fund Holders In Q2 2024: 22
Alcon Inc. (NYSE:ALC) is a Novartis spin off that is one of the biggest eye care products providers in the world. Its size and association with the healthcare giant have enabled it to amass considerable resources. As of its latest quarter, Alcon Inc. (NYSE:ALC) had cash and equivalents worth $1.1 billion. These enable the firm to maintain its competitive edge in a highly complex industry. Alcon Inc. (NYSE:ALC) enjoys significant competitive advantages in the industry courtesy of its wide portfolio of intraocular lenses which range from simple solutions to trifocal and tri focal lenses. Alcon Inc. (NYSE:ALC) has also kept the pedal to the metal in developing new products. It secured FDA clearance for two new surgical systems in June, and they could generate sizeable catalysts for the firm in the future.
Alcon Inc. (NYSE:ALC) also operates in the reusable lens industry Here’s what the firm had to say about a new product during the Q2 2024 earnings call:
“In addition, we will further expand our reusable portfolio with the upcoming launch of PRECISION7. PRECISION7 is a new contact lens specifically designed for a one week replacement schedule that’s based on a unique proprietary technology. We expect PRECISION7 to help drive continued share gains in the reusable category, where we have historically been under indexed. As a reminder, one point of share gain in the global reusables category corresponds to approximately $40 million of revenue for Alcon. We’re working with a handful of eye care professionals in the US who have started fitting PRECISION7 and early feedback has been excellent. We will continue to collect this feedback with select customers through 2024 ahead of a broader commercial launch in 2025.”
16. Stryker Corp (NYSE:SYK)
Number of Hedge Fund Holders In Q2 2024: 53
Stryker Corp (NYSE:SYK) is one of the biggest medical device companies in the world. It is one of the few global companies capable of manufacturing surgical robots. These are among the hottest growing categories in the medical devices market. Stryker Corp (NYSE:SYK)’s Mako and Triathlon products for joint surgery are fast growing and have completed more than one million surgeries. The firm is also aggressively innovating as it launched the Pangea platform to help doctors place plates at bone fracture locations. Along with Pangea, Stryker Corp (NYSE:SYK) also launched its defibrillator during the second. This allows the firm to generate sizeable catalysts for itself in the future through high revenue growth. It also means that the threats of competitors announcing similar or better platforms are lower due to the latest technologies being implemented in these devices. Despite the fact that higher rates and inflation typically constrain spending on expensive medical devices, Stryker Corp (NYSE:SYK)’s shares have gained 21.5% year to date. Other catalysts include use case expansion for existing products, but it is possible that growth from the new products has already been priced into the stock.
Stryker Corp (NYSE:SYK) is also integrating AI into its products. Here’s what the firm shared during the Q2 2024 earnings call:
“Lastly, we announced this morning that we received FDA clearance for our Spine Guidance 5 Software featuring Copilot, which introduces smart powered instruments to our Q guidance ecosystem. This innovative technology is designed to support surgeon precision by providing auditory and sensory alerts when approaching anatomical boundaries during spinal procedures and enhanced patient safety and outcomes. Copilot is an important step on our development pipeline which also includes Mako Spine. Mako Spine with Copilot is on track to launch in Q4 and Mako’s Shoulder is on track to launch at the end of the year.”
15. Trane Technologies plc (NYSE:TT)
Number of Hedge Fund Holders In Q2 2024: 57
Trane Technologies plc (NYSE:TT) is an American building products firm that is based in Ireland. It sells industrial scale items such as heating and ventilation systems, transportation heating and ventilation systems, and other items. This provides it with wide exposure to the construction and industrial industries. Since the firm’s products are key in building heat management, Trane Technologies plc (NYSE:TT) can prove to be a key player in the clean energy and green technology industry. Subsequently, despite the fact that its target industries are among those most sensitive to interest rates, Trane Technologies plc (NYSE:TT)’s shares are up 63% year to date. Additionally, the ongoing AI boom which has spurred the demand for data centers provides the firm with a key growing market. Its industrial nature also provides insight into Trane Technologies plc (NYSE:TT)’s future through bookings. On this front, the firm ended Q2 with $5 billion in bookings, which not only marked a 5% annual growth but marked a new record. These came at a time when broader construction spending was constrained, and as a result, it was a testament to Trane Technologies plc (NYSE:TT)’s strong management.
Trane Technologies plc (NYSE:TT)’s management commented on its data center exposure during the Q2 2024 investor call. Here is what they said:
“I would say that we should maybe challenge ourselves as to what’s normal, okay. We’re a lot bigger business than we were four years ago, obviously. Lead times, that’s not — I would say that’s — I would say lead times are back to what I would call a normal rate. For data centers, for sure. We have data center customers that are providing us visibility to their needs well in advance than, say, maybe some of the other verticals. So that’s a part of it. But look, we’re seeing tremendous strength, really, in almost all verticals. As we looked in the Americas in our commercial HVAC business in the quarter, I think we spoke before, we tracked 14 different verticals. It was hard for us to find a vertical that was down. So we just have broad-based strength. We certainly are seeing a lot of demand in the high growth verticals like data centers, but we’re also seeing nice demand in other verticals as well.”
14. IQVIA Holdings Inc. (NYSE:IQV)
Number of Hedge Fund Holders In Q2 2024: 59
IQVIA Holdings Inc. (NYSE:IQV) is a software and project management company that caters to the needs of the healthcare industry. This places it right at the epicenter of the potential of artificial intelligence to disrupt healthcare especially when it comes to developing new drugs. As of H1 2024, 55% of IQVIA Holdings Inc. (NYSE:IQV)’s revenue came from its research and development business, essentially flat year over year. This was because research spending at pharma companies slows down when interest rates are high. Revenue growth for IQVIA Holdings Inc. (NYSE:IQV)’s technology business and contract business was also muted. Crucially though, this wasn’t due to any fundamental weakness for the firm; instead, it reflected a slowdown in the broader industry. Consequently, as healthcare spending picks up, IQVIA Holdings Inc. (NYSE:IQV) could see tailwinds.
Oakmark Capital mentioned IQVIA Holdings Inc. (NYSE:IQV) in its Q2 2024 investor letter. Here is what the fund said:
“IQVIA Holdings was the top detractor during the quarter. Although the U.S.-based health care com- pany’s stock price fell following the release of first quarter results, the company’s fundamentals were in-line with consensus expectations. Forward-look- ing indicators in the clinical trial business continue to be favorable, and management foresees gradual improvement in the technology and analytics solu- tions segment in the second half of this year and a stronger rebound next year. We believe IQVIA should sustain above-average long-term growth even though it trades at a discount to other life sci- ences and data/information services companies.”
13. Linde plc (NASDAQ:LIN)
Number of Hedge Fund Holders In Q2 2024: 63
Linde plc (NASDAQ:LIN) is the final green technology disruptive stock on our list. It is one of the biggest suppliers of industrial gases in the world. Some of the firm’s products include oxygen, hydrogen, carbon dioxide, helium, and rare gasses. As was the case with Trane Technologies, Linde plc (NASDAQ:LIN) has a lot of exposure to the industrial market. However, unlike Trane, its products aren’t in demand by the data center industry leading to revenue slowdown and weak share price performance. The stock is up by 15.8% year to date, and a global exposure worked against the firm’s favor during H1. This was because while Linde plc (NASDAQ:LIN)’s North American revenue grew by 3.1% annually, Asian sales were flat on the back of Chinese sluggishness while turmoil in Europe meant that EMEA sales ended 3.6% lower. Some ways in which Linde plc (NASDAQ:LIN) can benefit from the green economy include the push to green ammonia and a growth in demand for carbon capture products.
Linde plc (NASDAQ:LIN)’s management commented about the clean energy industry during the Q2 2024 earnings call. Here’s what they shared:
“Turning now to the industrial end markets; chemicals and energy grew 5% from North American activity, primarily in the U.S. Gulf Coast, hydrogen as well as Mexican energy services. We supply some of the most cost-competitive customers in the world and their higher production rates reflect their share of the global market. Looking forward, this end market will likely be the largest beneficiary of the project backlog, especially around clean energy projects. While OCI represents just one example, there are several more that comprise the $8 billion to $10 billion of near-term pipeline opportunities which we are pursuing and making good progress.”
12. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders In Q2 2024: 67
Intuitive Surgical, Inc. (NASDAQ:ISRG) is the second medical robotics company on our list. UBS expects it to disrupt the healthcare industry through technology, and the premise behind this should be self evident. Intuitive Surgical, Inc. (NASDAQ:ISRG) bread and butter product is its Da Vinci robot lineup. The product has enabled the firm to capture a whopping 57% of the global market to provide it with key brand recognition and competitive advantages. Since medical robots are expensive products, healthcare providers typically prefer staying with one provider due to training costs and error risk. The specialty nature of its product also enables Intuitive Surgical, Inc. (NASDAQ:ISRG) to benefit from recurring revenue in the form of maintenance and after sales service. Its financial health depends on the broader health of the medical industry and spending, and since it’s reliant on one product lineup, Intuitive Surgical, Inc. (NASDAQ:ISRG) has to continually innovate or risk competition. The firm has made some moves on this front this year as it offers 150 upgrades and 10,000 times the computing power over predecessors with its Da Vinci V robot.
Here’s what Intuitive Surgical, Inc. (NASDAQ:ISRG)’s management shared about the DaVinci robot during the Q2 2024 earnings call:
“Just starting with some of the feedback that we’ve discussed before, you look at what customers are immediately appreciating and some of the things you would expect around ergonomics, increases in precision and vision, the head in UI, onscreen graphics and other things. And so taken together, each one of those features are leading to some efficiency gains in particular in sort of console time. And that has been kind of noticed across the customer base. And I think that’s where we’re starting — we’re hearing a little bit about what can that mean in terms of adding a procedure a day, increasing utilization of the system. And so that’s what both our surgeon customers and our executive customers are noticing as a result of their investment in da Vinci 5.
You know, some of the other features, Case Insights, Force Feedback, we’re excited to work with customers and we know that’s going to take time to develop and really quantify some of those impacts. In terms of pushback, today what we are seeing is a little bit what Jamie talked about. We are starting, customers will have to evaluate the value of da Vinci 5. We have these early adopters that are excited about what it can be. And as we move in through our measured launch, we will continue to have to underscore, and reinforce the value that it brings, and communicate that to executives and their teams.”
11. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders In Q2 2024: 68
The Goldman Sachs Group, Inc. (NYSE:GS) is one of the most well known and biggest banks in the world. However, despite its heft and brand image, it has been one of the most struggling banks on Wall Street recently. As of H1 2024, 63% of its pre expense revenue came from interest, while the remainder was dominated by market making operations. This signifies The Goldman Sachs Group, Inc. (NYSE:GS)’s stature as one of the world’s premier investment banks. Consequently, investment banking is at the center of its hypothesis, and the decision to close its struggling consumer division has also allowed the stock to recover from the pain it felt in 2023. The Goldman Sachs Group, Inc. (NYSE:GS)’s shares are up 32% year to date and 73% over the past twelve months. The diversified business also means that the bank stands to benefit from a resurgence in the stock market and investment activities and hedge some of the revenue drop stemming from future Fed rate cuts.
Ariel Investments mentioned The Goldman Sachs Group, Inc. (NYSE:GS) in its Q4 2023 investor letter. Here is what the firm said:
“Global investment bank, Goldman Sachs Group, Inc. (GS), also increased in the period on solid earnings results. The top- line came in strong led by elevated financing activity and an improvement in advisory revenues, despite weak transaction volumes within the investment banking segment. Should conditions remain conducive, management remains cautiously optimistic the business will experience continued recovery in both capital markets and strategy activity. Meanwhile, GS continues to successfully execute on its strategic initiatives to improve the overall return of the company. It is right sizing headcount and narrowing its ambitions in consumer strategy through divestitures and an enhanced focus on driving profitability in Platform Solutions by 2025. With potential regulatory capital constraints from B3E, GS noted it will reign in buybacks over the short-term but maintain its dividend. Looking ahead, we continue to view the near and long-term outlook for Goldman as attractive at current levels, given favorable business trends, continued positive momentum on strategic initiatives and active expense/capital management programs.”
10. Intercontinental Exchange, Inc. (NYSE:ICE)
Number of Hedge Fund Holders In Q2 2024: 70
Intercontinental Exchange, Inc. (NYSE:ICE) is one of the most consequential financial technology and services firms in the world. It owns and operates the illustrious New York Stock Exchange, which is the world’s most valuable stock exchange in terms of market capitalization. Consequently, Intercontinental Exchange, Inc. (NYSE:ICE)’s indisputable position on Wall Street as the go to medium for public listings provides it with a wide moat and reduces the threat from new entrants. However, unlike Nasdaq Inc which has managed to diversify its revenue, as of H1 2024, 62% of Intercontinental Exchange, Inc. (NYSE:ICE)’s revenue came from its exchange business. Consequently, the firm thrives when capital market conditions enable robust trading activity. In fact, Intercontinental Exchange, Inc. (NYSE:ICE)’s decision to spend $16 billion to buy data analytics provider Black Knight has still been unable to remove the domination of exchanges on its income statement. The firm benefits from the fact that it runs a wide variety of exchanges apart from the NYSE. These include bonds, futures, and others to introduce critical diversification within the exchanges revenue stream. In fact, Intercontinental Exchange, Inc. (NYSE:ICE) benefited from the diversification during the third quarter when energy trading volume grew by 23% annually and was driven by natural gas.
Third Point Management mentioned Intercontinental Exchange, Inc. (NYSE:ICE) in its Q2 2024 investor letter. Here is what the fund said:
“During Q2, we added to our position in Intercontinental Exchange, Inc. (NYSE:ICE). We originally invested in ICE in April 2023 when the FTC’s challenge to the company’s proposed acquisition of Black Knight impacted the share price. While the deal overhang has lifted, we believe a re-rating opportunity from a structural and cyclical acceleration of growth is still ahead. Importantly, we expect that AI will drive new growth opportunities across most of ICE’s businesses, extending the runway for value creation.
ICE is a collection of dominant information services and exchange assets that automate diverse and large asset classes (Energy, Mortgages, Fixed Income, Rates and Equities) while producing vast amounts of proprietary data. CEO Jeff Sprecher has led ICE for over 20 years. Under his visionary leadership, the company has compounded organic revenue and EPS at ~5% and ~15%, respectively, and adopted new modalities through organic investment and strategic acquisitions, most notably creating the flagship clusters of Energy and Mortgage, franchises we believe are of very high business quality. On the horizon, we expect an acceleration of growth to a consistent low double digit organic algorithm in these businesses, and a re-rating of the stock as price follows value creation…” (Click here to read the full text)”
9. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders In Q2 2024: 93
Oracle Corporation (NYSE:ORCL) is primarily a software company that is known for its enterprise resource planning (ERP) software. In the AI age, the firm has also capitalized on the market shortage of NVIDIA’s GPUs to develop a business division that caters specifically to the needs of customers who need these GPUs to train and operate their AI models. This business is Oracle Corporation (NYSE:ORCL)’s Oracle Cloud Infrastructure (OCI), and it promised more than 100,000 NVIDIA Blackwell GPUs for customers in 2025. This will make Oracle Corporation (NYSE:ORCL) one of the first in the world to get access to these hot chips. The firm is also the second largest player in the ERP market courtesy of its 18.4% market share. This lends the firm a stable business with not only recurring revenues but also customers which are hesitant to switch vendors unless absolutely necessary.
Janus Henderson mentioned Oracle Corporation (NYSE:ORCL) in its Q2 2024 investor letter. Here is what the fund said:
“Enterprise software company Oracle Corporation (NYSE:ORCL) was a top contributor to relative performance. The company reported revenue and bottom line metrics that were in line to slightly below consensus; however, it also reported record bookings for new business. This accelerating revenue growth outlook is being driven by AI cloud infrastructure deals and boosted sentiment in the stock.”
8. ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Holders In Q2 2024: 97
ServiceNow, Inc. (NYSE:NOW) is a software as a service (SaaS) firm that provides business process management products and services. This means that the stock and the firm’s revenue are dependent on business activity which is influenced by economic health. Consequently, as the economy has continued to chug along in 2024, ServiceNow, Inc. (NYSE:NOW)’s stock is up 38% year to date. Over its four latest quarters, the firm has raked in $1.3 billion in trailing twelve month net income on the back of continued deal diversification. Through this, ServiceNow, Inc. (NYSE:NOW) grew its customers with recurring revenue greater than $20 million by 40% in Q2, and it added six new customers with annual contract value greater than $10 million in Q3. These metrics are key for SaaS companies like ServiceNow, Inc. (NYSE:NOW) as they help broaden the revenue base and add margin heavy revenue to the income statement.
During the Q3 2024 earnings call, ServiceNow, Inc. (NYSE:NOW)’s management shared key details about its deals:
“From an industry perspective, technology, media and telecom was very strong, growing net new ACV over 100% year-over-year. Retail and Hospitality also had a fantastic quarter, growing over 80% year-over-year. Health care and life sciences and manufacturing also saw strength. Year-to-date, U.S. Federal has demonstrated outstanding execution, further growing net new ACV on top of a phenomenal 2023. In Q3, we landed five deals over $5 million and two over $20 million. Overall, we once again achieved a robust renewal rate in the quarter reflecting the value ServiceNow consistently provides to customers.
The importance of the Now platform has driven the number of customers paying us over $1 million in ACV to 2020. What’s more, the number of customers paying us $20 million or more grew nearly 40% year-over-year, powered by large deal momentum. We closed 96 deals greater than $1 million in net new ACV in the quarter, including six with new logos. Among them, 15 deals were over $5 million and six deals were over $10 million. The proliferation of large deal reflects a greater emphasis on selling the platform, and with it, more products per transaction. In Q3, 18 of our top 20 deals included seven or more products. Our GenAI capabilities also continue to gain commercial traction in the quarter. As Bill mentioned, we now have 44 customers spending more than $1 million in Now Assist, including six over $5 million and two over $10 million.”
7. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders In Q2 2024: 117
Salesforce, Inc. (NYSE:CRM) is a customer relationship management software products provider. The firm’s specific focus on the human resource market ties its fate closely to the economy and particularly to the labor market. As a result, Salesforce, Inc. (NYSE:CRM)’s shares are up by a weak 13% year to date as investors struggled to keep faith in the labor market amidst the Fed’s 24 year high rate hike cycle. Salesforce, Inc. (NYSE:CRM)’s stock was the perfect illustration of the SaaS industry’s thirst for growth in May. This was because the shares tanked by 19.7% after first quarter revenue of $9.13 billion missed analyst estimates of $9.17 billion despite marking an 11% annual growth. Key to evaluating Salesforce, Inc. (NYSE:CRM)’s performance is its bookings, as they indicate customer interest in the product. Looking ahead, improvement in the labor market and the economy should drive the stock.
Salesforce, Inc. (NYSE:CRM)’s management shared details about its plans to increase deal value during the Q1 2025 earnings call:
“Data Cloud gives every company a single source of truth and you can securely power AI insights and actions across the entire Customer 360.
Now let me tell you why I’m excited about Data Cloud and why it’s transforming our customers and how it’s preparing them for this next generation of artificial intelligence. Data Cloud was included in 25% of our $1 million plus deals in the quarter. We added more than 1,000 data cloud customers for the second quarter in a row. 8 trillion records were ingested in the Data Cloud in the quarter, up 42% year-over-year and we processed 2 quadrillion records, that’s a 217% increase compared to last year. Over 1 trillion activations drove customer engagement, which is a 33% increase year-over-year. This incredible growth of data in our system and the level of transactions that we’re able to deliver, not just in the core system but especially in data cloud is preparing our customers for this next generation of AI.”
6. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders In Q2 2024: 130
Broadcom Inc. (NASDAQ:AVGO) is a diversified technology company that is one of the leading players in the global semiconductor industry. The firm designs and sells a variety of semiconductor products that are used in networking and other applications. It also has a strong application specific integrated circuit (ASIC) division which enables businesses to access customized chips for data centers and other workloads. Broadcom Inc. (NASDAQ:AVGO) has also managed to diversify its business division by growing cybersecurity software products. Its VMWare acquisition enabled the firm to grow software revenue by a whopping 300% in its fiscal Q3 to add high margin and recurring revenue into its business. Broadcom Inc. (NASDAQ:AVGO) stands to benefit from the growing AI industry as its ASIC division can enable businesses to develop chips and reduce reliance on NVIDIA’s products.
Baron Funds mentioned Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter. Here is what the fund said:
“Broadcom Inc. is a global technology leader that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions. The stock rose during the quarter as it reported strong earnings on the back of its two key growth drivers, AI semiconductors and its acquired VMware software business. The company once again increased its outlook for AI-related revenue, now expecting $11 billion or more this year (versus prior guidance for $10 billion), on the back of strength in both hyperscale custom compute and networking chips, where Broadcom maintains dominating share. In networking, Broadcom’s solutions are critical to enabling AI training factories to scale towards 100,000 chip clusters in the near term and 1 million chip clusters over the coming years. In AI custom compute, Broadcom designs custom accelerators for large consumer- internet AI companies (such as Google and Meta), who are building increasingly large AI clusters to drive improvements in user engagement and targeted advertising on their consumer media platforms. VMware remains on track to continue rapid sequential growth while simultaneously reducing operating expenses, driving faster-than-expected margin expansion and accretion, as management has simplified the product offering and is converting customers from a license model to subscriptions. We believe VMware will grow beyond the $4 billion near-term quarterly target, well above current analyst expectations. These two factors combined have caused a re-rating to the growth profile for the overall company. To quote CEO Hock Tan, “there is only one Broadcom. Period.”
5. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders In Q2 2024: 142
Mastercard Incorporated (NYSE:MA) is one of the two dominant payment processing and card payment service providers in the US. It covers 24% of the US credit card market share, making it a smaller player to Visa. The advent of financial technology and the internet has meant that firms like Mastercard Incorporated (NYSE:MA) have to be on their toes or lose market share to upstart. On this front, 2024 has been quite a consequential year for the firm. It has seen Mastercard Incorporated (NYSE:MA) and Visa agree to a historical settlement to assuage merchant woes related to fees. This is key since the pair have already been irking merchants through their 60 day fraud protection policies. However, the deal has been put on hold, and regulatory pressure is also increasing on the sector after the Justice Department’s decision to sue Visa for being a debit card monopoly. On a broader level, Mastercard Incorporated (NYSE:MA)’s stock depends on consumer spending trends, with higher spending leading to tailwinds.
L1 Capital mentioned Mastercard Incorporated (NYSE:MA) in its Q2 2024 investor letter. Here is what the firm said:
“The share prices of Mastercard and Visa, both long term Fund investments, have both drifted down over recent months. There have been no dramatic developments, but there has been a general slight softening in the rate of growth of consumer spending in the U.S. and globally, a court decision rejecting Mastercard and Visa’s proposed settlement of a long-lasting dispute with U.S. merchants as well as other modest adverse regulatory developments. We continue to view Mastercard and Visa as two of the highest quality businesses in the world, and both are well placed to continue to deliver attractive, risk adjusted returns to shareholders over time.”
4. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders In Q2 2024: 145
Uber Technologies, Inc. (NYSE:UBER) is the largest ride sharing services provider in the US. The firm holds 76% of the US ride sharing spending according to Bloomberg, and coupled with Lyft’s 24%, the duo effectively controls the entire US market. This lends Uber Technologies, Inc. (NYSE:UBER) with significant advantages, particularly in terms of user reach, network coverage, and lower costs. These enable the firm to entrench itself in the market to make it harder for newer firms or entrants to eat its share. Uber Technologies, Inc. (NYSE:UBER) also benefits from a strong willingness to diversify and evolve. The firm has stakes in urban air taxis, it operates a food. delivery business, and has teamed up with GM to start an autonomous ride sharing service. If it is successful with autonomous ride sharing and air taxis, Uber Technologies, Inc. (NYSE:UBER) could further increase its competitive moat.
RiverPark Advisors mentioned Uber Technologies, Inc. (NYSE:UBER) in its Q1 2024 investor letter. Here is what the fund said:
“UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than a ride sharing and food delivery service; we also see it as a global mobility platform with 142 million users (by comparison, Amazon Prime has 200 million members) and the ability to penetrate new markets of on-demand services, such as package and grocery delivery, travel, and hourly worker staffing. Given its $5.4 billion of unrestricted cash and $4.8 billion of investments, the company today has an enterprise value of $165 billion, indicating that UBER trades at 21x our estimates of next year’s free cash flow.”
3. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders In Q2 2024: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest contract chip manufacturer. The firm makes and sells chips for other companies, and it enjoys a distinct competitive edge over rivals through its process technologies, volumes, and yields. These are three key determinants of any semiconductor firm’s performance, and require billions of dollars in capital investment and years of research to master. Consequently, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has a wide moat in its industry which is unlikely to be matched by any new entrants. However, key threats in the form of geopolitical conflict in its manufacturing hub Taiwan, and Intel Corporation’s aggressive approach towards developing the 18A process node can change the narrative for Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) by quite a bit. This is especially due to the fact that the firm currently plans to produce advanced 2 nanometer chips in America only by 2028, while Intel is aiming to make similar chips next year at the earliest.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s management shared key details about its US chip making facilities during the Q3 2024 earnings call:
“Next, let me talk about our global manufacturing footprint update. TSMC’s mission is to be the trusted technology and capacity provider of the global logic IC industry for years to come. All of our overseas decisions are based on our customers’ needs.
They value some geographic flexibility and necessary level of government support. This is also to maximize the value of our shareholders. In Arizona, we have received strong commitment and support from our U.S. customers and the U.S. federal, state, and city governments and have made significant progress in the past several months. Our plan to build three fabs, will help create greater economies of scale, as each of our fabs in Arizona will have a clean room area that is approximately double the size of a typical logical fab. Our first fab entered engineered wafer production in April with 4-nanometer process technology, and the result is highly satisfactory with a very good yield. This is an important operational milestone for TSMC and our customers, demonstrating TSMC’s strong manufacturing capability and execution.
We now expect volume production of our first fab to start in the beginning of 2025 and are confident to deliver same level of manufacturing quality and reliability from our fab in Arizona as from our fabs in Taiwan. Our second and third fabs will utilize more advanced technologies based on our customers’ needs. The second fab is scheduled to begin volume production in 2028, and our third fab will begin production by the end of the decade. Thus, TSMC will continue to play a critical and integral role in enabling our customers’ success while remaining a key partner and enabler of the U.S. semiconductor industry.”
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders In Q2 2024: 219
Meta Platforms, Inc. (NASDAQ:META) is the world’s largest social media company. It owns and operates Facebook, Instagram, and WhatsApp. As of March, 3.2 billion users were using its products to provide Meta Platforms, Inc. (NASDAQ:META) with a wide moat in the social media industry. This moat is the firm’s bread and butter since the vast majority of its revenue comes through allowing advertisers to target its users. Its dominance in social media has enabled Meta Platforms, Inc. (NASDAQ:META) to amass significant resources, as evident by the firm’s $32 billion in cash and equivalents. In turn, these resources allow it to establish a foothold in emerging industries, the latest example of which is artificial intelligence. Meta Platforms, Inc. (NASDAQ:META) is among the few firms in the world with access to a foundational AI model, and the firm is using it to improve advertisers’ experience on its platform. It is also targeting its users with AI products, and the success of these initiatives depends on Meta Platforms, Inc. (NASDAQ:META)’s ability to monetize its AI offerings.
Polen Capital mentioned Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter. Here is what the fund said:
“Meta Platforms delivered robust results in the period, with revenue growth accelerating in the first quarter. However, revenue comparisons for Meta will become more difficult from here, and its guidance for 2Q revenue fell below market expectations. After the company’s “year of efficiency,” where it cut costs in its core business, management is now indicating another ramp-up in GenAI and metaverse spending, spurring concerns about future profit margins. Metaverse spending, by our calculations, is now over $20 billion per year with little to no expected return on the foreseeable horizon.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders In Q2 2024: 279
Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software company. The firm has a commanding presence in both consumer operating systems and enterprise cloud computing industries. Cloud computing was responsible for $28.5 out of Microsoft Corporation (NASDAQ:MSFT)’s $64 billion in revenue during fiscal Q4. The firm has sought to retain its advantages in the enterprise computing market by establishing a close partnership with OpenAI for artificial intelligence. Through AI, Microsoft Corporation (NASDAQ:MSFT) offers Copilot and other software to its consumer and enterprise users to improve productivity and conduct other operations. However, unlike Meta, Microsoft Corporation (NASDAQ:MSFT) does not develop its foundational AI model and relies on technology from OpenAI instead. This separates the control that the firm has over foundational AI, but CEO Satya Nadella has assured investors that his firm possesses all the AI tools that it needs. Additionally, due to the billions of dollars it has invested in AI, Microsoft Corporation (NASDAQ:MSFT)’s narrative is also dependent on its ability to generate profits from AI.
Baron Opportunity Fund mentioned Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 investor letter. Here is what the fund said:
“Microsoft was traditionally known for its Windows and Office products, but over the last five years it has built a $147 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. Shares gave back some gains from strong performance over the first half of this year. For the fourth quarter of fiscal year 2024, Microsoft reported a strong quarter with total revenue growing 16%, in line with the Street; Microsoft Cloud up 22%; Azure up 30%; 43% operating income margins; and 36% free cash flow margins. Core Azure growth came in one point shy of expectations, however, due to a soft European market and continued constraints on AI compute capacity. In the same vein, while Microsoft reiterated its fiscal 2025 targets of double-digit top-line and operating income growth, quarterly guidance called for Azure growth to slow a bit before accelerating in the back half of the fiscal year, as capital expenditures increase, yielding an expansion of AI compute capacity. We believe this investment is a leading indicator for growth, with more than half of the spend related to durable land and data center build outs, which should monetize over the next 15-plus years. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes, and we remain investors.”
MSFT is UBS’ top tech based disruptive stock for 2030. 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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