We recently published a list of Top 10 Stocks to Watch as Investors Brace for Potential Recession. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other top stocks to watch as investors brace for potential recession.
President Donald Trump’s new reciprocal tariff announcement is hammering stock markets around the world as countries face a new reality and trade dynamics. The rising volatility has increased recession risks. Goldman Sachs recently said that it sees a 35% chance of a recession in the next 12 months, up from 20% previously. The bank also cut its 2025 GDP forecast to just 1% and raised its year-end unemployment rate outlook by 0.3 percentage points to 4.5%.
China and key European countries are beginning to respond to the latest tariffs and will likely impose retaliatory tariffs on US products, causing a further downturn in consumer sentiment. Kara Reynolds, an economist at American University, told ABC News that a pullback in spending from consumers and businesses due to these uncertainties can tip the US into a recession.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
For this article, we picked 10 stocks currently on Wall Street’s radar. With each stock, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Scotiabank recently started covering Microsoft Corporation (NASDAQ:MSFT) with a Sector Outperform rating and highlighted the company’s strong position in the race to develop artificial intelligence.
“Based on our fieldwork, 2025 will be a paradigm-shifting year during which customer investments accelerate in AI on Azure and Microsoft 365 Copilot,” said Scotia Capital analysts, led by Patrick Colville, in a detailed note to investors.
Scotiabank set a $470 price target on the stock, saying about 60% of companies are using foundational models in the public cloud. Azure, they said, is well-positioned to capture spending on generative AI.
“Almost all IT decision makers plan to add additional use cases in 2025,” Colville said. “Microsoft’s partnership with OpenAI, Inc. and pre-existing customer relationships are the key advantage for Azure in AI. Based on our fieldwork, a slow moderation in growth in Microsoft’s traditional public cloud business is the most likely outcome – important for assuaging investor fears that one revenue source is being substituted for another.”
Columbia Seligman Global Technology Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q4 2024 investor letter:
“Within software, the fund maintained an underweight position to Microsoft Corporation (NASDAQ:MSFT), which proved beneficial as share price for the company fell during the fourth quarter. Microsoft’s outlook for its Azure business came down slightly, which hampered the stock price at times during the quarter and, combined with losses on the Open AI business, led to a disappointing end to 2024. The company has guided its capital expenditure spending up slightly and investors continue to wait for additional monetization from the company’s large commitment to AI infrastructure spending. The fund continued to hold an overweight allocation to Oracle as we believe Oracle is positioned to be a major beneficiary of the AI rollout and has the potential to compete with other large cloud providers, such as Amazon, Alphabet and Microsoft. Oracle shares moved lower during the quarter and the stock suffered its worst day of the year in December, as the company narrowly underperformed analysts’ average estimates. Oracle’s business model remains strong as demand for computer power that can handle AI is increasing and the company’s revenues from its cloud infrastructure unit moved higher year over year.”
Overall, MSFT ranks 2nd on our list of top stocks to watch as investors brace for potential recession. While we acknowledge the potential of MSFT, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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