We recently published a list of Top 10 AI Stocks on Investors’ Radar These Days. In this article, we’ll take a look at where Microsoft Corp (NASDAQ: MSFT) stacks up to the other top AI stocks on investors’ radar these days.
The debate around the “data wall” or plateau of AI systems is intensifying in the technology industry, with many claiming that the performance of AI models shows no signs of further improvement due to a lack of of quality inputs, leading to scaling issues in the industry.
CNBC’s Deirdre Bosa recently discussed this debate on a show and said:
“All we’re talking about right now in tech is this debate about scaling laws and the data wall, which continues to rage in Silicon Valley. It’s the idea that more data and bigger models will always lead to better AI, with some arguing that progress has peaked or is starting to plateau. In other words, this is a debate about a fundamental hypothesis of AI that could have massive implications for the industry, from valuations to the GPUs that power it, and of course, the history of Nvidia. I was at the Newcomer AI conference yesterday here in San Francisco. That was the theme of the day, with everyone from Alexander Wang of Scale AI to Dario Amodei of Anthropic to Ali Ghodsi of Databricks participating.
Jensen Huang was also asked about the problem of AI systems hitting a data wall and possible scaling issues during a final earnings call. This is what he said:
“A basic model of scaling before training is intact and continuing. As you know, this is an empirical law, not a fundamental physical law, but it is evident that it continues to evolve. What we are learning, however, is that it is not enough that we have discovered two other ways to evolve. One is post-training scaling. Of course, the first generation of post-training was reinforcement learning through human feedback, but now we have AI feedback through reinforcement learning and all forms of synthetic data generated that make scaling easier. post-training scale.
Bosa mentioned other tech leaders who oppose the idea of AI hitting a data wall and said:
“….. also recognize that this alone is not enough to push AI further, and that progress will come from post-training scaling, i.e. application development of AI on top of existing models. He and others say it will still require enormous amounts of computing power.
For this article, we’ve selected 10 currently hot AI stocks based on the latest analyst ratings and news. For each stock, we have mentioned the number of investors in hedge funds. Why are we interested in stocks that hedge funds are piling into? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Analyst Highlights ‘Unique Opportunity’ for Microsoft Search and Advertising Amid Google Lawsuit
manaemedia / Shutterstock.com
Number of hedge fund investors: 279
Barclays recently highlighted what Microsoft Corp (NASDAQ: MSFT) could gain from the search market under certain outcome scenarios in the DoJ’s lawsuit against Google.
“With Bing accounting for only a small portion of Microsoft’s revenue (5% of total revenue in FY24), the ramifications of any developments here appear to have been largely overlooked based on our discussions with investors, especially when many software investors don’t have the context. of the ongoing trial,” wrote analyst Raimo Lenschow in a note to clients. “However, following the Department of Justice’s long-proposed final judgment, we believe Microsoft investors should pay closer attention to any final decision emerging from the case.”
Lenschow, who has an overweight and $475 price target on Microsoft Corp (NASDAQ: MSFT), noted that whether solutions include ending revenue sharing agreements between Google and other parties, or if Google starts by syndicating its search offering, Bing could benefit from it. market share. This could require Google to make part of its technology stack available to its partners and offer search text ads for a year to its US partners while retaining only 10% of its gross revenue.
“Along with this, Google is only allowed to syndicate 25% of search text ads, meaning partners (like Apple) would have to fill their remaining search ads either through their own tech stack or through a new partner like Bing,” Lenschow added. “In theory, this would open up a unique opportunity for Microsoft to capture market share for a period of time.”
“Microsoft Corporation (NASDAQ: MSFT) benefits from the transformative digitalization of American businesses. The company operates through three segments: productivity and business processes (Office, LinkedIn and Dynamics), intelligent cloud (server products and cloud services, Azure and enterprise services) and more personal computing (Windows, devices, gaming and search). . During the quarter, stocks detracted from performance after Microsoft reported weaker-than-expected fourth-quarter revenue growth in its Azure cloud segment. Additionally, management’s Azure revenue guidance for Q1 2025 was slightly below estimates. Despite this deficit, management highlighted that AI contributed 7% to cloud growth, compared to 6% last quarter and 3% a year ago. We remain confident that Microsoft is well-positioned to maintain a leadership role in the AI space, given its innovative approach and significant growth potential.
Overall, MSFT ranks 1st on our list of top AI stocks on investors’ radar these days. While we recognize MSFT’s potential, our conviction lies in the belief that, under the radar, AI stocks hold more promise in terms of higher returns in a shorter time frame. If you’re looking for an AI stock that’s more promising than MSFT but trades at less than 5x earnings, check out our report oncheapest AI stock.
