Famously known as the “godfather of artificial intelligence”, British-Canadian computer scientist Professor Geoffrey Hinton has recently warned that the pace of technological change today is much faster than was initially anticipated. As a result, there is a 10% to 20% chance that artificial intelligence will wipe out humanity within the next three decades. Previously, he had said there was only a 10% chance of technology doing so.
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Despite such warnings, companies are racing to lead the AI arms race. OpenAI, for instance, which is also known as the company that started the race itself, has recently outlined plans to revamp its structure. The company said that it would create a public benefit corporation so that it would make it easier to raise more capital.
Reuters reported the news back in September, which had sparked debate among corporate watchdogs and tech moguls regarding whether the company would be able to allocate its assets to the nonprofit arm fairly, and whether the company would be able to strike a balance between making a profit and breeding public good as it develops AI.
“We once again need to raise more capital than we’d imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness. The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission”.
-OpenAI
The company plans to turn its for-profit branch into a Delaware public benefit corporation (PBC), aligning its structure with rivals such as Anthropic and Musk’s xAI, which use a similar structure and have recently raised billions in funding.
“The key to the announcement is that the for-profit side of OpenAI ‘will run and control OpenAI’s operations and business. This is the critical step the company needs to make in order to continue fund raising,” Luria said, although he added that the move did “not necessitate OpenAI going public”.
-DA Davidson & Co analyst Gil Luria.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
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A computer screen showcasing Artificial Intelligence and Machine Learning algorithms at work.
10. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 43
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. On December 26, Wedbush analysts issued an “Outperform” rating on the stock with a price target of $75. According to analyst Dan Ives, companies will be spending more on artificial intelligence in 2025, and since Palantir is already a very strong government business, it is going to be a big winner when it happens. This is because the company’s software can take complex data and helps enable “data-driven-decision-making…with expanding use cases for its marquee products leading to a larger partner ecosystem with rapidly rising demand across the landscape for enterprise-scale and enterprise-ready generative AI,” Ives wrote.
9. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 51
AppLovin Corporation (NASDAQ:APP) provides a leading marketing platform powered by AI technology. One of the leading stock performers of the year has been AppLovin Corporation. The company’s market value surpassed the $100 billion milestone and its shares are up more than 780% so far. On December 19, UBS analyst Chris Kuntarich highlighted key points related to AppLovin’s e-commerce ads offering. Speaking to an executive at a beauty and cosmetics brand with $70 million in advertising spending in 2024, Kuntarich said that the executive “was bullish on spending with AppLovin,” based on encouraging results. This is because the company’s e-commerce beta program likely includes “a few hundred” advertisers. Its e-commerce beta program leverages its AI-driven Axon engine for optimizing ad targeting and delivery, allowing efficient and personalized ad placements based on user behavior and data. The analyst maintains a “Buy” rating and a price target of $145.
8. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders: 58
Lam Research Corporation (NASDAQ:LRCX) is a semiconductor stock that offers semiconductor equipment and services used in the making of integrated circuits. On December 10, the company introduced the industry’s first collaborative robot (cobot) for optimizing maintenance on semiconductors and increasing efficiency. Dextro is already being used in multiple advanced wafer fabs around the world to reduce downtime and production variability.
“Dextro is an exciting leap forward in semiconductor manufacturing equipment maintenance. Built to work side-by-side with fab engineers, it executes complex maintenance tasks with precision and repeatability that are beyond human capability alone, enabling higher tool uptime and manufacturing yield,” said Chris Carter, group vice president of the Customer Support Business Group at Lam Research. “It is a powerful addition to Lam’s extensive portfolio of tools and services designed to help chipmakers optimize their fabs for cost and productivity”.
7. Arista Networks, Inc. (NYSE:ANET)
Number of Hedge Fund Holders: 70
Arista Networks, Inc. (NYSE:ANET) develops, markets, and sells cloud networking solutions. On December 27, Goldman shared its top stock picks heading into 2025, one of which is Arista Networks. According to the firm, AI data center equipment demand will remain robust heading into next year, benefiting companies such as Arista Networks which sell to hyperscalers. Its Buy rating and $120 price target signify another 4% upside to the stock.
“We are selectively positive on ANET and DELL as beneficiaries of the AI infrastructure demand because of their early market share leadership in AI servers and switching”.
-Goldman Sachs
6. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 78
Constellation Energy Corporation (NASDAQ:CEG) is an energy provider specializing in clean, carbon-free energy solutions. From global electrification initiatives to accelerating demand for artificial intelligence infrastructure, the utility sector ETF (XLU) has gained nearly 20% in 2024. In particular, one of the strongest performers in the sector has been Constellation Energy, which is up 95% year-to-date. On December 20, Morgan Stanley analyst David Arcaro maintained a Buy rating on Constellation Energy Corporation and set a price target of $321.00. Analysts are bullish on the stock largely because of the company’s strategic position to prosper from the rising energy demand and aspiration from major hyperscalers to land deals with nuclear power for AI data centers. They are also positive about gaining some regulatory clarity regarding placing data centers at nuclear power plants. This is currently not reflected in Constellation’s stock price.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 99
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives. On December 19, Reuters reported that Tesla is in conversation with authorities in Austin, Texas about its autonomous vehicle technology. The report revealed that a Tesla employee has been in touch with the city’s autonomous vehicle task force to establish vehicle safety expectations since May. Back in October, the company revealed a prototype of Cybercab, a driverless and pedal-less vehicle, at its Hollywood Robotaxi event. Elon Musk also announced at the event that they will be introducing the “unsupervised” version of its driverless technology in Texas and California next year. According to industry experts, Tesla would face fewer challenges in less-regulated states such as Texas. This is because there are almost no restrictions and the regulation of driverless vehicles by cities is explicitly prohibited.
4. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 107
Micron Technology, Inc. (NASDAQ:MU) is an innovative memory and storage solutions provider. With the demand for high-performance memory growing with AI advancements, the company is well-positioned to benefit considering its DRAM and NAND flash products are critical for AI applications. On December 16, JPMorgan reiterated its “Overweight” rating and $180.00 price target for Micron Technology (NASDAQ:MU).
“Despite the near-term weakness, we continue to believe the down-cycle in memory will be short-lived and expect market conditions to improve in the latter part of 2025 as leading-edge DRAM supply remains tight and strong AI server demand continues to drive growth in HBM/ DDR5,” the 5-star analyst summed up. “In this regard, we maintain a positive view on the stock in 1H 2025 as the market starts to discount a recovery in revenue/pricing/GMs in 2H 2025.”
-J.P. Morgan analyst Harlan Sur.
3. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 115
Alibaba Group Holding Limited (NYSE:BABA) is an online retailer that leverages AI in its e-commerce business. On December 26, Alibaba Cloud, the cloud computing arm of China Alibaba Group Ltd., announced that it has launched QVQ-72B-Preview. The QVQ-72B-Preview is an experimental AI model that can perform actions such as reviewing images and drawing conclusions. Marking a significant advancement in AI’s visual understanding and problem-solving capabilities, the company said that this model is displaying promising capabilities at visual reasoning by solving problems. It is doing so by thinking them through step by step similar to other reasoning models such as OpenAI’s o1 and Google LLC’s Gemini Flash.
“Imagine an AI that can look at a complex physics problem, and methodically reason its way to a solution with the confidence of a master physicist”.
-Qwen Team
2. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 128
Broadcom Inc. (NASDAQ:AVGO) is a technology company known for its custom chip offerings and networking assets. With only a few trading days left this year, investment bank William Blair is bullish on some stocks that may be poised for major gains in 2025, as reported by CNBC on December 24. One of these stocks is Broadcom Inc. After all, Broadcom made it big by topping the $1 trillion in market cap for the first time on the back of the company’s fourth-quarter adjusted earnings beating expectations as well as CEO Hock Tan’s announcement that the company is developing custom artificial intelligence chips with three large cloud customers. With an Outperform rating, the firm anticipates “steady growth” with Broadcom’s existing partnerships and additional revenue from potential new customers such as ByteDance, OpenAI, and Apple.
“We see incremental room for expanding margins in 2025 as the company continues with its VMware integration and scales its custom chip business”.
-William Blair
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a technology company that makes personal computers, mobile devices, and software. Its recent innovation is Apple Intelligence, Apple’s AI-driven personal system. On December 23, Reuters reported that Apple is fiercely close to reaching the $4 trillion stock market valuation. The company’s AI enhancements have been proving to be significant in revitalizing iPhone’s otherwise slow-moving sales. LSEG data also shows that analysts expect revenue from iPhones to rebound in 2025. According to Tom Forte, an analyst at Maxim Group who has a “Hold” rating and a $178 price target on the stock, the latest rally in Apple shares reflects “investor enthusiasm for artificial intelligence and an expectation that it will result in a super cycle of iPhone upgrades”.
While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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