What Makes Microsoft (MSFT) a Strong Investment?

Fred Alger Management, an investment management company, released its “Alger Spectra Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter, the equities rebounded significantly following a challenging first quarter. In this environment, the fund’s Class A shares outperformed the Russell 3000 Growth Index. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Alger Spectra 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 2.47%, and its shares gained 19.87% of their value over the last 52 weeks. On September 22, 2025, Microsoft Corporation (NASDAQ:MSFT) stock closed at $514.45 per share, with a market capitalization of $3.824 trillion.

Alger Spectra Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its second quarter 2025 investor letter:

"Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. The company operates through three segments: Productivity and Business Processes (Office365, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). We believe company fundamentals remain attractive because Azure’s scale—and the rollout of Copilot AI tools—deepens customer lock-in and expands high-margin subscription revenue. During the quarter, the company reported strong fiscal-fourth quarter earnings, driven by a reacceleration in Azure cloud sales that beat analyst estimates. Management also noted that AI-related sales growth exceeded expectations, accounting for 16% of Azure’s quarterly growth. While data center capacity eased, it did not eliminate AI-related supply constraints, and traditional enterprise cloud migrations re-accelerated, defusing worries that AI spending was crowding them out. Management also guided next quarter Azure sales growth higher than expected, citing sustained demand for both AI and core cloud services. With renewed enterprise cloud migrations easing fears that AI budgets were crowding out traditional workloads, the company’s share appreciated during the quarter, contributing to performance."

Microsoft Corporation (NASDAQ:MSFT) is in the second position on 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 second 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 potential of Microsoft Corporation (NASDAQ: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.

In another article, we covered Microsoft Corporation (NASDAQ:MSFT) and shared a list of stocks buzzing after important analyst calls. 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.