We recently published a list of the top 10 AI stocks based on the latest analyst ratings and news, and Microsoft Corp (NASDAQ:MSFT) ranked #1 on the list, so it's worth taking a closer look.
AI shares have fallen significantly in recent weeks, and analysts believe this is exactly the healthy correction long-term investors have been looking for. Rob Slymer, technical strategist at RBC Wealth Management, said AI shares are stabilizing at levels they can sustain for the rest of the year, according to Bloomberg. The analyst said technical indicators show AI shares have moved from overbought to oversold territory.
“Now that positions are being unwound, traders have an opportunity to get into positions,” Slimer was quoted as saying.
Many others have agreed with Slimer. On CNBC's latest show, Wedbush's Dan Ives reiterated his view that the AI bull market is still in its early stages.
“What we've seen so far, from the AI revolution to technology in general, has been positive on the bottom line, and the growth worries we've seen are simply bumps in the road as the Fourth Industrial Revolution unfolds,” Ives said.
In this article, we've highlighted 10 AI stocks that are making waves on the back of their latest earnings, analyst ratings, and important industry news. For each company, we've noted the number of hedge fund investors. Why are we interested in stocks that hedge funds are flocking to? The reason is simple: our research shows that you can outperform the market by mimicking the top picks from the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks each quarter, and has returned 275% since May 2014, beating the benchmark by 150 percentage points (more here).
Is Microsoft Corp (NASDAQ:MSFT) an AI stock to watch, according to the latest analyst ratings and news?
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Microsoft (NASDAQ:MSFT)
Number of hedge fund investors: 279
Wedbush analyst Dan Ives recently wrote in a note that Microsoft's (NASDAQ:MSFT) latest results should be enough to ease market concerns about AI monetization.
“Through conversations with customers and partners over the past few weeks, we've also seen an acceleration of enterprises and CIOs moving down a strategic AI path. It all comes down to the use cases and ROI for these budgets,” analyst Dan Ives wrote in a note to investors.
Ives believes the results from Microsoft (NASDAQ:MSFT) and a few others “add further credibility to the AI monetization phase.”
Microsoft Corp. (NASDAQ:MSFT) shares have fallen recently following its latest quarterly earnings report which showed growth in the company's cloud business fell short of expectations. For the current quarter, Microsoft Corp. (NASDAQ:MSFT) expects revenue in the range of $63.8 billion to $64.8 billion, versus estimates of $65.07 billion. Microsoft Corp. (NASDAQ:MSFT) Azure revenue is expected to grow 28% and 29% year over year.
The story continues
So what about AI? Microsoft didn't mention specific AI figures, but analysts believe Copilot is already playing a key role in the company's growth in several areas. Microsoft Corp. (NASDAQ: MSFT) Office sales to business customers soared to $48 billion, up from a 10% increase last year, likely due to Copilot Pro subscriptions. Office sales for consumer users also grew, reaching $6.2 billion. Up 4% from a 2% increase last year, indicating accelerating growth from Copilot integration. Dynamics ERP and CRM software sales were $6.3 billion, up 19%, up from a 16% increase last year. The rise was likely due to customers switching to Dynamics for the Copilot integration of the Dynamics Contact Center platform, which offers automated customer service chatbots and significant cost savings. Bing sales increased 3% year over year as more users switched from Google search to the search engine, thanks to its AI capabilities.
Microsoft Corp. (NASDAQ:MSFT) expenses are expected to remain high, but the company's investments are paying off and will pay off in the long term. The company's shares have fallen about 11% in the past month. It trades for 26 times next year's earnings. MSFT could be an attractive buy for long-term investors on the dip.
Polen Focus Growth Strategy said the following about Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“The top contributors were Alphabet, Microsoft Corp. (NASDAQ:MSFT), and Amazon. Microsoft was also one of the top contributors in the quarter, signaling growing appreciation for all the ways the company can monetize GenAI, including its Office suite and Azure cloud business. In the latter case, it contributed 7% to Azure revenue growth in the most recent quarter. Despite its massive scale, we believe Microsoft remains a highly favored business for the foreseeable future, with many secular tailwinds driving its long-term growth.”
Overall, Microsoft Corp (NASDAQ:MSFT) ranks #1 on Insider Monkey's “Top 10 AI Stocks Based on Latest Analyst Ratings and News” list. While we acknowledge the potential of Microsoft Corp (NASDAQ:MSFT), we believe AI stocks have a better chance of delivering higher returns in a shorter time frame. If you're looking for AI stocks that are more promising than MSFT but still trade for less than 5 times earnings, check out our report on the cheapest AI stocks.
Read next: Analysts see a new $25 billion “opportunity” for NVIDIA, and Jim Cramer recommends these stocks.
Disclosures: None. This article was originally published on Insider Monkey.
