We recently published a list of 10 Best Stocks to Buy and Hold For The Next Decade. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other best stocks to buy and hold for the next decade.
Is Nuclear Energy Making a Comeback?
Nuclear plants continue to re-open, but the question stands, will the global supply be able to meet the ever-growing demand for clean energy? On October 1, Aniket Shah, Jefferies’ global head of sustainability and transition strategy, appeared in an interview on Yahoo Finance to discuss his stance on nuclear energy making a comeback amid the AI boom.
Shah shares that the nuclear energy boom is not surprising. Looking back, the United States signed significant partnerships to boost the supply of nuclear energy years ago, indicating that the value this sector holds is not unknown or recent.
He adds that the big tech companies are going to be primary catalysts and will influence the entire market. These companies will invest millions and billions in nuclear energy, making the transition easier for other companies to follow. According to Shah, some key investment areas would be small modular reactors and nuclear fusion.
Shah also acknowledged that the United States held a bipartisan view of the nuclear boom, explaining why regulations and acts in favor of nuclear energy are being passed at notoriously high speeds. While the building blocks of nuclear energy are coming together, Shah remains concerned over the execution. He highlights that the United States does not have enough skilled labor and resources to make the nuclear energy boom a reality and must work extremely hard to make it happen.
Nuclear Energy is Poised for Growth Amid AI Boom
One of the most opportunistic investment themes in 2024 is AI, the other is electrification, and both require a lot of power. The surge in power demand is in turn driving utility stocks. On October 4, Durgesh Chopra, Evercore ISI managing director, appeared in an interview on Yahoo Finance to discuss how utilities could benefit from AI-driven power demand.
Chopra highlights the biggest catalyst for companies like Vistra and Constellation Energy is data centers’ needs for a 24/7 source of clean energy. Therefore, nuclear companies must grab the opportunity and enter into long-term contracts to lock in future growth as soon as possible.
There are multiple projects in the pipeline in the United States, that add up to roughly 1.5 gigawatts of energy, positioning nuclear plants as the next big thing in energy. On the flip side, balancing supply and demand will be a key challenge for companies.
Despite the challenges, he believes that the market is well-positioned for growth in utilities. Utilities have not seen demand growth in the past decade, but things are finally changing for the sector. Overall, with inflation going down, the sector may experience significant tailwinds. Chopra also emphasized that growth in this sector will yield results in five to seven years.
Our Methodology
To come up with the 10 best stocks to buy and hold for the next decade, we sifted through multiple similar rankings and compiled an initial list of 20 stocks. We then ranked the top 10 based on their hedge fund sentiment at the end of Q2 2024.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is one of the biggest technology companies in the world that develops productivity and business suite applications, cloud products, and personal computing products.
Microsoft Corporation (NASDAQ:MSFT) reported revenue worth $64.7 billion in FQ4 2024, up by 15% year-over-year. During the same quarter, Microsoft Cloud had $36.8 billion in quarterly revenue, up by 21% year-over-year, and posted record bookings.
The company is a leading investor in artificial intelligence technology. Its AI-backed cloud service, Azure OpenAI service witnessed an increase in customer base by 60%, reaching 60,000 clients in the second quarter of 2024.
Previously in July, Microsoft and Lumen Technologies signed a partnership to enhance and modernize Lumen’s workloads to Microsoft Azure. Earlier in August, Microsoft Corporation (NASDAQ:MSFT) partnered with Palantir Technologies, a data software company, to deploy Palantir’s suite of products in Microsoft Azure.
In the past few weeks, the company initiated investments in other countries, signed new partnerships, and nurtured existing strategic partnerships. On October 8, Microsoft (NASDAQ:MSFT) announced that Microsoft Azure is the first cloud to be running on NVIDIA’s Blackwell system backed by AI systems, further strengthening its position in AI.
Overall, Microsoft Corporation’s (NASDAQ:MSFT) outlook toward AI coupled with its strong cloud ecosystem makes it one of the best stocks to buy and hold for the next decade. In the second quarter, 279 hedge funds held positions in Microsoft (NASDAQ:MSFT) and their stakes amounted to $89.068 billion.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 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 $135 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. The stock contributed to performance because of continued strong operating results and investor enthusiasm regarding Microsoft’s leadership across the secular megatrends of AI and cloud computing. Recent business momentum continued to show evidence of the strength and attractiveness of Microsoft’s product portfolio among its customer set: (1) Azure OpenAI – its suite of AI services – is now used by 65% of the Fortune 100 and contributed 7% of Azure revenue (an annualized run rate of $5.2 billion); (2) GitHub Copilot – its AI code writing service – is bending the productivity curve for developers (reports of 40%- plus improvements in developer efficiency) and now has 1.8 million paid subscribers, with growth accelerating to over 35% quarter-over-quarter; and (3) Copilot Studio – its AI application service that makes it easier for anyone to build an application, automate a workflow, or create a Copilot using natural language. 30,000 organizations across every industry have used Copilot Studio to customize Copilot for Microsoft 365 or build their own, up 175% quarter-over-quarter. In the March quarter, Microsoft again reported better-than-expected financial results, highlighted by Microsoft Cloud growing 23% year-over-year, with the fastest commercial bookings in six quarters, and Azure accelerating to 31% constant currency growth, up from 28% in the previous quarter. June quarter guidance came in-line with consensus, but the company provided higher guidance for the most important segment, Intelligent Cloud, on the back of continued strong trends across Azure and Azure OpenAI. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes.”
Overall, MSFT ranks 2nd among the 10 stocks to buy and hold for the next decade. While we acknowledge the potential of 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 time frame. 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 the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.