Here’s What Sent Microsoft Corporation (MSFT) Higher

Baron Funds, an investment management company, released its “Baron Opportunity Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund posted solid returns, rising 23.27% (Institutional Shares), exceeding the Russell 3000 Growth Index’s (the Benchmark) 17.55% gain and the S&P 500 Index’s 10.94% gain. The Fund appreciated 8.52% for the first half, compared to 5.80% and 6.20% returns for the indexes. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its second-quarter 2025 investor letter, Baron Opportunity Fund highlighted stocks such as Microsoft Corporation (NASDAQ:MSFT). Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops and supports software, services, devices, and solutions. The one-month return of Microsoft Corporation (NASDAQ:MSFT) was 0.77%, and its shares gained 20.19% of their value over the last 52 weeks. On August 19, 2025, Microsoft Corporation (NASDAQ:MSFT) stock closed at $509.77 per share, with a market capitalization of $3.789 trillion.

Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its second quarter 2025 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 $160 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud delivered applications. Shares outperformed on the back of a strong March quarter, driven primarily by its Azure business accelerating 400 basis points to 35% constant-currency growth, well ahead of expectations. For the June quarter, management guided Azure growth to hold at the 34% to 35% level, again above expectations of 31% to 32%, commenting that “whereas they hoped to have supply demand in balance by end of the fiscal year, they now expect to be AI constrained past June as planned demand is growing a bit faster,” Microsoft remains well positioned across the overlapping software, cloud computing, and AI landscapes.”

Microsoft’s (MSFT) Focus on Innovation Supports its Dividend Stability

A development team working together to create the next version of Windows.

Microsoft Corporation (NASDAQ:MSFT) is in second position our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 284 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the first quarter compared to 317 in the previous quarter. In the fourth quarter of fiscal year 2025, Microsoft Corporation (NASDAQ: MSFT) reported revenue of $76.4 billion, representing an 18% increase, or 17% when adjusted for constant currency. While we acknowledge the risk and potential of Microsoft Corporation (NASDAQ:MSFT) as an investment, our conviction lies in the belief that some 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 Microsoft Corporation (NASDAQ:MSFT) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Microsoft Corporation (NASDAQ:MSFT) and shared the list of trending AI stocks in focus. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.