We recently compiled a list of the 10 Best Cloud Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Microsoft Corp (NASDAQ:MSFT) stands against the other cloud stocks.
Based on a report by MarketsandMarkets, the global cloud industry in 2025 is projected to grow by 15.1% to $1,256.8 billion. While 2024 was marked by high adoption by the BFSI sector, the year ahead should see applications being developed that meet the unique specifications of each industry. North America and Europe should capture the bulk of the market size but APAC is expected to register the fastest growth. The integration of AI with cloud platforms accompanied by new service models is another key development expected to shape this industry.
Cloud ETFs have generated generous returns of 2.74%, 28.54% and 11.00% for 1-month, 6-month and 1-year tenors. One would assume that the underlying stocks would continue to perform well, propelled by strong industrial tailwinds.
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For this article we picked 10 cloud stocks trending on latest news. With each stock we have mentioned the number of hedge fund investors. 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 Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Microsoft Corp (NASDAQ:MSFT) has the second largest market share in the cloud computing niche with Azure having a market share of 23-25%. This segment has been growing by over 20%, driven by the increasing acceptance of AI services on the cloud platform. The revenue should reach $200 billion by 2028 and serves 85% of the Fortune 500 companies.
MSFT has entered into a revenue-sharing deal with OpenAI that would enable Azure to access OpenAI till 2030. This deal should benefit the Azure customers by providing them access to leading models. The estimated capex for supporting cloud systems and AI workload is $80 billion for the next fiscal. Half of this will be done in the US. Other key investments include a $3 billion investment in India to expand Azure cloud and AI capacity and major capacity expansion in the Middle East. While earnings in the next quarters are expected to slow, the investment in cloud and AI business should bear results from 2025.
Overall MSFT ranks 2nd on our list of the best cloud stocks to buy according to hedge funds. 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.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
