Microsoft Corporation (NASDAQ: MSFT )'s shares have witnessed a major turnaround in 2026. They are up by 2% year-to-date, primarily on the back of 23.7% gain since late July. The shares closed a strong 15.5% higher on July 30th, the day after Microsoft Corporation (NASDAQ:MSFT) reported its fiscal fourth quarter earnings. The results saw the firm beat analyst revenue and earnings estimates, and more importantly, its Azure cloud computing business saw revenue jump by 43% annually to beat even the most optimistic analyst estimates. With investors focused on AI returns, Microsoft Corporation (NASDAQ:MSFT)'s shares were rewarded. On August 17th, Cramer discussed the earnings and their impact:

"Yeah that's gutsy. I think a lot of people hanging their hat on that. Because, they do so much good work. But, of the, of the Magnificent 7, that's the one that, I think is still kind of vulnerable. After Microsoft did that tour de force conference call. The Microsoft conference call was maybe the best conference call in the quarter. Because it turned a huge cohort of people in favor of it versus against it. We didn't see that with Google and we're still waiting for it with Meta. I still believe that if Mark Zuckerberg wanted to, he could take that stock off the near 52 week low. . .and turn it around. But he needs to say, you know what, I've really thought about this. And we're going to rent out. Because we have so much demand and then they name like three companies that need some of their cloud business. I wish they could finish that thing in Louisiana."

Additionally, Microsoft Corporation (NASDAQ:MSFT) shared two key updates for its cloud computing and AI initiatives. The firm guided 45% in Azure growth for the first quarter to beat estimates. CEO Satya Nadella also remarked that Microsoft Corporation (NASDAQ:MSFT) had achieved efficiency gains of as much as 40% through using custom chips and external AI technologies. Overall, the firm's operating margin sat at 45% to fuel the bullish viewpoint of AI profitability and strong execution.Commercial bookings decelerated to 12% as CapEx jumped 35% ($13.87B), driving a 23% drop in free cash flow and signaling margin compression risks.

Commercial bookings decelerated to 12% as CapEx jumped 35% ($13.87B), driving a 23% drop in free cash flow and signaling margin compression risks.

As for Meta Platforms, Inc. (NASDAQ: META ), the shares are down by 15.5% year-to-date. As is the case with MSFT, the debate for the firm is also about AI and whether the spending will yield results. However, unlike MSFT, Meta Platforms, Inc. (NASDAQ:META) does not have a cloud computing business. Therefore, all focus is on its advertising business and the tailwinds it generates courtesy of AI. Naturally, Cramer also discussed this aspect as he commented on the firm renting out cloud capacity. Overall, the firm's Q2 advertising revenue jumped by 27% while its ad impressions jumped by 14% and the firm guided as much as 17% annual growth in revenue.

Yet, for the bulls' worst nightmare, Meta Platforms, Inc. (NASDAQ:META)'s second quarter free cash flow fell a whopping 91% and the firm increased the low end of its capex guidance to $130 billion from $125 billion. Additionally, the prospect of legal troubles lingers, as states have demanded $1.4 trillion in youth social media legal cases.

Looking at the hedge funds, 282 had held a stake in Microsoft as of Q1 2026 which marked a dip from Q4's 312. Meta Platforms, Inc. (NASDAQ:META) had 262 holders, up from 256. MSFT's recent share price gains have also pushed the forward P/E to 24.39 which is higher than META's 18.38. Short percentage of float ranges between 1.10% to 1.43% for both firms.

While Insider Monkey acknowledges the risk and potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than MSFT that has 100x upside potential, check out our report about the cheapest AI stock .