Microsoft Corporation’s (MSFT) AI Investment Gained Confidence Amid Operational Discipline

Meridian Funds, managed by ArrowMark Partners, released its “Meridian Hedged Equity Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. US equity markets rebounded in the quarter, rising 23% from intra-period lows to close at record highs. The fund gained 4.86% (net) in the quarter compared to the S&P 500 Index’s 10.94% return and its secondary benchmark, the CBOE S&P 500 Buy/Write Index’s 1.90% return. 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, Meridian Hedged Equity 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 -1.62%, and its shares gained 21.85% of their value over the last 52 weeks. On August 25, 2025, Microsoft Corporation (NASDAQ:MSFT) stock closed at $504.26 per share, with a market capitalization of $3.748 trillion.

Meridian Hedged Equity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its second quarter 2025 investor letter:

“Microsoft Corporation (NASDAQ:MSFT) is a global technology leader offering productivity software, cloud infrastructure (Azure), and enterprise AI tools. We own Microsoft for its unparalleled enterprise software ecosystem and growing AI monetization potential through its integration with OpenAI. The diversity of its revenue streams—from productivity software to gaming to cloud infrastructure—provides both growth optionality and defensive characteristics that make it a core portfolio holding. Additionally, we believe the company’s portfolio of assets creates a network effect where each business segment strengthens the others. The stock outperformed during the period after delivering strong earnings and operating margin expansion to 45.7%. The market was also relieved by growing evidence that Microsoft can invest heavily in AI infrastructure while maintaining operational discipline.”

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Microsoft Corporation (NASDAQ:MSFT) is in second position our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 294 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the first quarter compared to 284 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 hot AI stocks to keep on your radar. 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.