We recently compiled a list of the 8 Stocks That Could 10X Over the Next 3 Years. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other stocks that could 10x over the next 3 years.
The New Presidency and The Future of Big Tech
The new president of the United States is set to take office in January 2025, and investors are concerned about how the new policies will impact big tech. On November 14, Arvind Krishna, Chairman and CEO of IBM, appeared in an interview on Yahoo Finance to share his expectations from big tech as the new presidency takes over the White House. Krishna shares that he expects more innovation and less regulation in the tech sector, with certain “guardrails.” He adds that the business community is particularly excited and expects strong tailwinds to the US economy as we enter 2025.
In the same interview, William Kerwin, an analyst at Morningstar Technology, appeared to discuss the potential future of big tech under the new presidency and how the new policies could impact companies, particularly those trading in China. Kerwin emphasizes that a lot is yet to unfold but the most crucial element is tariffs. With a proposed 60% tariff on Chinese imports, companies reliant on the region will face severe headwinds and may have to seek trade relationships with other regions like India and Southeast Asia. However, he does add that high exposure to China does not necessarily equate to “high investment risk.”
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Speaking of mergers and acquisitions and antitrust regulations, Kerwin is rather optimistic. He expects more merger and acquisition deals to come through over the next four years. In addition to that, he expresses that anti-trust regulations are less likely to be focused on a specific company or a product, and more on the platforms and their respective use cases offered by big tech. Kerwin also adds that he does not expect significant breakups but foresees regulations to be enforced that “erode” the competitive advantages the big tech companies enjoy at the moment.
Kerwin believes that companies well exposed to artificial intelligence are currently overvalued. However, he reiterates that this “does not mean” that there are not any opportunities within the sector. He also shares a couple of names in the chip equipment and semiconductor sectors that are well-positioned at the moment. He suggests that while these sectors are pressed over cyclicality worries and the fear of AI reaching maturity, some companies hold promise and are valuable.
Since investors are excited to see the business opportunities coming over the next four years, there are certain stocks, especially in the realm of technology, most likely to gain significant momentum. That said, let’s take a look at the 8 stocks that could 10x over the next 3 years.
Our Methodology
To come up with the 8 stocks that could 10x over the next 3 years, we sifted through multiple similar rankings and compiled an initial list of 20 stocks. We then ranked the top 8 based on their upside potential, as of November 18, 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).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Analyst Upside as of November 18, 2024: 20%
Microsoft Corporation (NASDAQ:MSFT) is a technology giant that is spending generously on artificial intelligence. As the company ventures into new technologies and AI, it does represent a breakthrough stock that could 10x over the next three years.
Microsoft Corporation (NASDAQ:MSFT) is part of the list because of its strategic investments, positioning it as a leader in AI and autonomous agents. On October 10, the company revealed several breakthrough AI capabilities in healthcare. Previously on October 3, Microsoft Corporation (NASDAQ:MSFT) closed a partnership with Rezolve AI to develop innovative AI-backed online retail solutions.
More recently, on November 14, Microsoft Corporation (NASDAQ:MSFT) partnered with Accenture and Avanade to help businesses transform their functions using artificial intelligence and Microsoft Copilot. Similarly, on November 13, the company launched new and improved adapted AI models expanding its position in various industries. The new models will help organizations address their particular AI needs with greater efficacy. The AI models will readily be available through the Azure AI model catalog, allowing customers to develop custom AI tools and workloads.
Microsoft Corporation (NASDAQ:MSFT) is a long-standing company with solid fundamentals. This coupled with its investments in AI and data position it as a solid investment opportunity, especially in the coming years.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 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 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.”
Overall MSFT ranks 8th on our list of the stocks that could 10x over the next 3 years. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that certain 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.