3. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Shareholders: 292
Robinhood Popularity Ranking (Q1 2021 – Q2 2023): T-7th (18 points)
Stock Performance (January 1, 2021 – June 6, 2023): +51%
Microsoft Corporation (NASDAQ:MSFT) is hedge funds’ single-most popular stock ticker and hit an all-time high in hedge fund ownership during Q1. It also consistently ranks among the top ten of Robinhood investors’ holdings. Those bullish positions have worked out very well for both money managers and retail investors alike in recent years, as MSFT shares have gained 50% since the end of 2020.
Microsoft Corporation (NASDAQ:MSFT) continues to deliver strong growth across its offerings both old and new, including Office and Cloud, which both grew revenue and EPS at a double-digit rate in Q1. The tech giant is also incorporating AI into both of those products through its partnership with ChatGPT creators OpenAI, which could further bolster their utility and drive greater adoption. Customers are rapidly latching onto its integration of AI into Azure, as the number of customers utilizing the platform’s OpenAI language models increased ten-fold quarter-over-quarter in Q1.
The Alger Spectra Fund believes Microsoft Corporation (NASDAQ:MSFT) has a first-mover advantage when it comes to its investments in AI, as the fund discussed in its Q1 2023 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. Microsoft’s CEO expects technology spending as a percent of Gross Domestic Product (GDP) to jump from about 5% now to 10% in 10 years and that Microsoft will continue to capture market share within the technology sector. The company operates through three segments: Productivity and Business Processes (Office. LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services. Azure, and Enterprise Services), and More Personal Computing (Windows Devices, Gaming, and Search). While the company reported decent fiscal second quarter results, their investment in OpenAl’s ChatGPT captured the attention of investors. contributing to positive performance. Throughout the quarter. Microsoft surprised investors with continual rollouts of new Al capabilities across the company’s portfolio (e.g., Bing, GitHub. Teams, Office 365). Furthermore, the company announced Microsoft 365 Copilot, which leverages GPT-4, a large language model, combined with the Microsoft Graph of data to provide Al virtual assistance. We believe Microsoft’s investment in OpenAl provides a first-mover advantage in the Al transformer model space. Despite challenges in the early days of Al-powered applications, the pace of Al innovation is faster than any other enterprise technology previously observed, in our view.”
