1. Microsoft Corporation (NASDAQ:MSFT)
Upside Potential: 41.01%
Number of Hedge Fund Holders: 312
Microsoft Corporation (NASDAQ:MSFT) is one of the best AI stocks to watch in May. On April 30, TheFly reported that Benchmark analyst Yi Fu Lee raised the company’s price target on Microsoft to $525 from $450 while maintaining a Buy rating on the shares, following Microsoft’s announcement of its fiscal year 2026 third-quarter financial performance.
On April 29, Microsoft reported an 18% rise in revenue to $82.9 billion for the quarter ended March 31, 2026. Additionally, the company registered a 23% jump in its net income for the period to $31.8 billion.
“We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era. Our AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year,” Microsoft Chairman and Chief Executive Officer Satya Nadella said.
Microsoft reported 17% revenue growth in its Productivity and Business Processes segment to $35.0 billion, while Intelligent Cloud posted an impressive 30% revenue growth to $34.7 billion. In contrast, revenue from More Personal Computing declined 1% to $13.2 billion.
According to a report by Investing.com on April 30, Goldman Sachs analyst reiterated a Buy rating on Microsoft with a price target of $610. The company highlighted Microsoft’s Azure guidance as a positive, as the technology company is projecting a 39% to 40% constant-currency growth in the fiscal fourth quarter.
On April 27, Microsoft announced that it has amended its agreement with OpenAI to simplify our partnership and anchor it in flexibility. Under the amended agreement, Microsoft will continue to have a license to OpenAI IP for models and products through 2032; however, the company’s license will now be non-exclusive.
Microsoft emphasized that it remains OpenAI’s primary cloud partner and that OpenAI products will ship first on Azure, unless Microsoft cannot and chooses not to support the necessary capabilities. Additionally, OpenAI will be allowed to serve all its products to customers across any cloud provider.
“While this amendment simplifies the partnership, the work we’re doing together remains ambitious. From scaling gigawatts of new datacenter capacity, to collaborating on next-generation silicon, to applying AI to advance cybersecurity, and more, we’re excited to keep partnering to advance and scale AI for people and organizations around the world,” Microsoft said.
In the past year, Microsoft’s stock grew 3.17%, while it posted a 13.78% year-to-date decline. Based on 59 analyst ratings compiled by CNN, 93% rated the stock Buy, while 7% rated it Hold. The average price target on Microsoft is at $575, a 41.01% upside from the current price of $407.78.
Microsoft Corporation (NASDAQ:MSFT) is a technology company that creates platforms and tools powered by AI to deliver innovative solutions that meet the evolving needs of customers.
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 the cheapest AI stock.
READ NEXT: 10 Best Data Center Stocks to Buy for the Long Term and 10 Best Small-Cap Biotech Stocks to Buy According to Hedge Funds.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
