We recently published a list of the 10 Best Growth Stocks To Invest In Now. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other best growth stocks.
What Does the Santa Claus Rally Mean for Stocks?
Is a December rally in store for stocks in 2024? Some investors are expecting a surge in stocks from the 24th of December to the 3rd of January, 2025, also referred to as the Santa Claus Rally. On December 17, Ryan Detric, Chief Market Strategist at Carson Group, Joined Catalysts on Yahoo Finance to discuss whether he expects December to be a record-breaking month for the stock market.
Historically, the first half of December is usually slow for the stock market, while the second half is faster, suggested Detric. He also added that compared to election years in the past, this December has been very “flattish” so far. He also suggested that the Fed is going to continue the easing cycle and with the CPI declining, the current market conditions are favorable. Detrick then added that despite macroeconomic conditions and the performance of the Dow Jones index recently, he expects to see a record surge this month and expects “Santa Claus” to make an appearance this year.
“It’s a Bullish Environment for Big Tech”
Since the elections, stocks have been rallying with high hopes for the future. On December 18, Dan Ives, Managing Director at Wedbush Securities, joined Market Domination on Yahoo Finance to discuss his outlook on Big Tech and the new administration. Ives emphasized that the autonomous robotics and disruptive technologies sectors are going to benefit strongly from the new administration and its policies, despite concerns over tariffs. He also discussed the growing relationship between the new administration and Elon Musk, and how the two parties “need each other” to thrive, suggesting that Musk’s company has solid growth potential in the coming year and AI innovation will strengthen the collaboration immensely.
He also added that the environment is extremely bullish for Big Tech and expects growth in the coming year. Ives shared that while there are a few road bumps, especially from the Chinese market, the environment in retrospect is positive. Speaking of the electric vehicle market, he emphasized that new policies in the US coupled with international consolidation, especially in Europe and Asia, will benefit EV makers in the United States immensely.
The expectations from growth stocks are immense as the AI revolution takes precedence.
Our Methodology
To come up with the 10 best growth stocks to invest in now, we went over multiple rankings on the internet to compile an initial list of growth stocks. We then examined the hedge fund sentiment of each stock and picked the most popular ones. Our list is in ascending order of the number of hedge fund holders as of Q3 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).
Photo by Microsoft 365 on Unsplash
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Recently, Microsoft Corporation (NASDAQ:MSFT) partnered with Accenture and Avanade to help businesses transform their functions using artificial intelligence and Microsoft Copilot. In addition to that, the company also launched new and improved adapted AI models for various industries, addressing the particular AI needs of organizations.
Speaking of MSFT’s position on AI, on November 19, the company reported on the global impact of its artificial intelligence applications. According to the report, more than 85% of the companies in the Fortune 500 are now using Microsoft AI and almost 70% are using Microsoft 365 Copilot. Overall, the company saw widespread adoption of its AI tools and products by prominent names across the globe. These partnerships and advancements helped Microsoft Corporation (NASDAQ:MSFT) report solid financial results, giving it a strong head start to the fiscal year 2025.
Microsoft Corporation (NASDAQ:MSFT) is showing solid performance in the AI domain. On October 31, RBC Capital Markets software equity analyst, Rishi Jaluria, appeared on Yahoo Finance to discuss the competitive position of MSFT in the AI sector. Jularia suggested that while the overall business is accelerating, Azure AI has been performing exceptionally, which in his opinion is very encouraging. He also added that despite the hefty capital expenditure, MSFT is in an “enviable” competitive position.
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 2nd on our list of the best growth stocks to invest in. While we acknowledge the potential of MSFT to grow, 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.