Here's the 1 Stock Hedge Funds Are Buying Hand Over Fist

In January, hedge funds and institutional investors were buying one stock more than any other -- Amazon (NASDAQ: AMZN).

The cloud computing and e-commerce giant ranked as the large-cap stock that most hedge funds owned in January. That's according to the monthly Hazeltree Crowdedness Report, which tracks the stocks owned by the 600-plus hedge funds it covers.

Crowdedness simply refers to how many hedge funds own it. Hazeltree, which provides treasury and liquidity management software for the alternative investment industry, calculates a crowdedness score for each stock by sector and region, using its own methodology.

Image source: Getty Images.

In January, Amazon had a long crowdedness score of 99, which essentially means its was owned in the most portfolios. Microsoft (NASDAQ: MSFT) was second in North America with a score of 82, followed by Nvidia (NASDAQ: NVDA) with a crowdedness score of 80. Meta Platforms was fourth with a score of 72, while Broadcom was fifth at 68.

Why hedge funds are buying Amazon

The January Hazeltree report shows that institutional investors are looking to take advantage of the tech sell-off that occurred in the latter part of 2025 and into 2026.

Amazon, for example, is down almost 20% from its October highs and is trading at a reasonable valuation, roughly 28 times forward earnings. The stock price is down about $11 year to date and that is primarily over concerns about the massive $200 billion it plans to spend on capital expenditures this year -- roughly 50% more than it spent last year.

Many investors viewed this as a negative, fearing that Amazon was spending too much on AI infrastructure with uncertain return on investment. After all, Amazon Web Services has been losing market share to both Microsoft and Alphabet.

But it appears that most hedge fund managers see this is as a long-term positive; that Amazon will need to step up its AI infrastructure and capabilities to maintain its lead and keep its rivals at bay.

Some 92% of Wall Street analysts rate Amazon as a buy, with the other 8% saying it's a hold. It had a median price target of $285 per share, which would be about a 39% return over the next 12 months. This shows that Wall Street is also bullish on Amazon.

Microsoft and Nvidia are also in the buy zone

The same can be said for both Microsoft and Nvidia, the second- and third-most invested-in stocks by hedge funds. Microsoft's forward P/E ratio dropped to 30 at the end of 2025, prompting investors to buy at a lower valuation. It has continued to decline, down some 20% year to date.

Wall Street analysts see it as a screaming buy, with 92% saying buy. It has a $600-per-share median price target, suggesting 55% upside.

Nvidia's P/E ratio is still high at 55, but its forward P/E is just 29 and its long-term five-year PEG ratio is just 1, making it a good long-term value based on future earnings expectations.

Investors should do their own research and not take the word of hedge funds and analysts, but Amazon, along with Microsoft and Nvidia, should be on your radar.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.