1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holdings: 309
Software giant Microsoft Corporation (NASDAQ:MSFT)’s shares are down by 4% over the past year and by 18% year-to-date. The stock is down by more than 19% since the firm reported its fiscal second-quarter earnings. While Microsoft Corporation (NASDAQ:MSFT)’s revenue and earnings exceeded expectations, the firm’s cloud business came back to haunt it once again as growth was insufficient to satiate investor expectations, according to media reports. Following the earnings, Stifel downgraded Microsoft Corporation (NASDAQ:MSFT)’s shares to Hold from Buy and cut the share price target to $392 from $540. The firm’s Azure cloud business played a key role in the downgrade as Stifel pointed towards supply challenges and competition from rivals, including Google Cloud and Anthropic. Cramer discussed Microsoft Corporation (NASDAQ:MSFT) after the earnings and outlined that the firm’s Copilot software wasn’t posting strong user base numbers. He shared the belief once again:
“Of the ones that I’ve been talking about, the one that has to do the biggest, refresh, redo, will be Microsoft. They have to come out with something and just say, listen, Copilot was nice. Like remember, Gemini, before that it was, the Bard?
“Microsoft has to do, they ought to step back, figure out what they’re doing. They were proud of 15 million subs. I mean, are you kidding me? Proud of 1.5 million subs? They got 1.5 billion base. Can you imagine if Tim Cook came out and said, you know what, we have 15 million people who take Apple, I don’t know, the insurance.”
Sands Capital Technology Innovators Fund discussed Microsoft Corporation (NASDAQ:MSFT) in its Q4 2025 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) shares declined after the company reported its third-quarter results. Azure, its cloud services business, grew revenue by 39 percent year over year, exceeding management’s guidance. However, investor expectations were likely higher, particularly in comparison to recent reacceleration trends at other cloud providers. Growth remains limited by capacity constraints rather than demand across all workloads, which may have dampened the market’s enthusiasm. Microsoft plans to increase its AI capacity by 80 percent through June 2026, a move that reflects strong underlying demand. We believe this investment could help alleviate the current bottlenecks and support a reacceleration of growth in the coming quarters. This expansion also reinforces our view of Microsoft’s positioning for sustained above-average growth as AI adoption broadens across industries.”
While we acknowledge the potential of MSFT to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than MSFT and that has 100x upside potential, check out our report about this cheapest AI stock.
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