We recently published a list of 10 AI Stocks That Will Skyrocket. In this article, we’ll take a look at where Microsoft Corporation (NASDAQ: MSFT) stands in relation to other AI stocks that are set to skyrocket.
Some investors are closely scrutinizing Big Tech’s spending on AI. Despite this significant spending, Big Tech has enjoyed solid revenue and profit growth. Yung-Yu Ma, Chief Investment Officer at BMO Wealth Management, recently joined Yahoo Finance to shed light on the overall outlook for the AI sector through 2024.
Ma believes that companies are increasing their investments in AI in anticipation of higher returns. He said it makes sense that the market is less enthusiastic about this situation. Ma argued that while AI spending is likely to increase, it is certain that the results will be seen soon, perhaps by the end of 2025.
He added that the market will likely see healthy earnings growth in 2025. Spending will largely drive these earnings, especially AI and its various use cases such as data centers, power grids and other infrastructure. He expects overall valuation growth and said Big Tech is extremely confident and committed to investing in the sector.
2024 has been a busy year for artificial intelligence. Existing startups like Anthropic and Databricks have performed exceptionally well and transformed the industry.
Anthropic is an AI security and research company behind OpenAI rival Claude. On November 24, Anthropic expanded its partnership with AWS, involving an additional investment of $4 billion, bringing the total to $8 billion. The partnership also positions AWS as Anthropic’s primary cloud and training partner. Continuing this partnership, on December 4, Anthropic began optimizing Claude models to run on AWS Trainium 2.
Databricks, the data and AI company, is another AI startup crucial to the AI revolution. Some of Databricks’ products include data management solutions, data warehousing, real-time analytics, data sharing and data governance. The company reaches new heights. On November 6, the company partnered with KT Corporation to drive data and AI innovation in Korea. Following the trend, on November 20, Databricks announced 70% annualized growth in its French business and opened a new office in central Paris.
To suggest AI stocks that will skyrocket, we looked at media reports to select stocks that are expected to perform exceptionally well according to analysts and strategists. After viewing 10 similar rankings across the internet, we looked at each stock’s upside potential and selected those with the highest upside potential, as of December 3, 2024. Our list is ranked in ascending order of the street’s upside potential as of December 3, 2024. 2024. We also mentioned hedge fund sentiment for each stock.
Why are we interested in stocks that hedge funds are piling into? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Microsoft Corporation (MSFT): AI Innovations Fuel Financial Growth
A development team working together to create the next version of Windows.
Street High Upside as of December 3, 2024: 39%
Number of hedge fund holders: 279
Microsoft Corporation (NASDAQ: MSFT) ranks eighth on our list of AI stocks expected to soar. In November alone, the company introduced several key partnerships and products. On November 13, the company launched new and improved adaptive AI models, strengthening its position in various industries. The new templates will help organizations meet their unique AI needs more effectively and will be readily available through the Azure AI template catalog.
Similarly, on November 14, Microsoft Corporation (NASDAQ: MSFT) partnered with Accenture and Avanade to help businesses transform their functions with artificial intelligence and Microsoft Copilot. Most recently, on November 19, Microsoft Corporation (NASDAQ: MSFT) announced that it was building three trusted platforms aimed at maximizing the benefits AI could bring to overall business functionality and efficiency.
Overall, the company is achieving strong financial results from its AI-driven transformation and seeing a significant increase in the number of customers using its AI platforms and tools. Overall, cloud revenue in the first fiscal quarter of 2025 reached $38.9 billion, up 22% year-over-year. Most of the revenue was driven by advances in artificial intelligence, explaining why 279 hedge funds were bullish on the stock at the close of the third quarter of 2024, according to our Insider Monkey database.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ: MSFT) in its Q3 2024 report. investor letter:
“Microsoft Corporation (NASDAQ: MSFT) is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Office products, but over the past five years the company has built a $147 billion cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud applications. Stocks gave up some gains thanks to their strong performance during the first half of this year. For the fourth quarter of fiscal 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 margins; and 36% free cash flow margins. Core Azure’s growth, however, was one point lower than expected, due to a weak European market and continued constraints on AI computing capacity. Along the same lines, while Microsoft reiterated its double-digit revenue and operating profit growth targets for fiscal 2025, quarterly guidance called for Azure’s growth to slow a bit before accelerate in the second half of the fiscal year as capital spending increases. which leads to an expansion of AI computing capacity. We believe this investment is a leading indicator of growth, with more than half of the spending related to the construction of sustainable land and data centers expected to be monetized over the next 15 years. We remain convinced that Microsoft is one of the best positioned companies in the overlapping fields of software, cloud computing and AI, and we remain investors.
Overall, MSFT ranks 8th on our list of AI stocks that will soar. While we recognize MSFT’s growth potential, our belief lies in the belief that certain AI stocks hold more promise in terms of higher returns in a shorter time frame. If you’re looking for an AI stock that’s more promising than MSFT but is trading at less than 5x earnings, check out our report oncheapest AI stock.
