Microsoft (MSFT) Fell on Investors’ Concerns

Diamond Hill Capital, an investment management company, released its “Long-Short Strategy” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. The market was mixed in the first quarter of 2025, due to the uncertainty caused by the new administration’s avalanche of activity. However, the portfolio outperformed the Russell 1000 Index and the blended benchmark (60% Russell 1000 Index/40% Bloomberg US Treasury Bills 1-3 Month Index) in the quarter. In Q1, both long and short books generated relative tailwinds, with the short book underperforming the index, while the long book was positive, despite the index being negative. In addition, you may look at the fund’s top 5 holdings to learn about its best picks in 2025.

In its first-quarter 2025 investor letter, Diamond Hill Long-Short Strategy 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 7.16%, and its shares gained 8.39% of their value over the last 52 weeks. On June 24, 2025, Microsoft Corporation (NASDAQ:MSFT) stock closed at $490.11 per share, with a market capitalization of $3.643 trillion.

Diamond Hill Long-Short Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q1 2025 investor letter:

“Other bottom individual contributors in Q1 included our long positions in Microsoft Corporation (NASDAQ:MSFT), Alphabet and Taiwan Semiconductor. Software and information technology services provider Microsoft faced some investor caution around the possibility that artificial intelligence- and cloud computing-related spending could decelerate faster than previously anticipated.”

How Microsoft Built a Reliable Dividend Track Record in a Growth-Focused Sector

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 fiscal third quarter of 2025, Microsoft Corporation (NASDAQ:MSFT) reported $70.1 billion in revenues, up 13% year-over-year. While we acknowledge the potential of Microsoft Corporation (NASDAQ:MSFT) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Microsoft Corporation (NASDAQ:MSFT) and shared the list of best wide moat stocks that pay dividends. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of MSFT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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