OpenAI launched ChatGPT in late November 2022. Although it had zero fanfare when it was launched, the platform has grown exponentially ever since. As of today, it boasts more than 200 million users worldwide, driven by the generative AI craze that has made it a hit.
It can be safe to say that the chatbot had unofficially ushered in the AI era and a race for businesses to capitalize on it. Initially, companies started slowly by integrating artificial intelligence into their offerings to pinpoint what works and what doesn’t.
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As of today, they are taking giant leaps into the AI realm, confident of the fruits they will reap once everything is in place.
“2023 was really a year of industry and businesses wrapping their heads around AI. 2024 is the year we’re starting to see real-scale deployments of our technology”.
– James Dyett, head of platform sales of OpenAI.
Countless innovations in AI prove how the technology continues to be a strong force today. In the latest news, Enfabrica, a California-based startup that aims to make AI chips work more efficiently together at scale, recently announced that it has raised $115 million in funding and plans to release its newest chip early next year.
The startup is tackling one of the biggest technical problems that has emerged in the AI field. The problem is related to tying tens of thousands (or more) of chips together with a network. The chip company strives to allow computing chips to simultaneously talk to more parts of a network.
According to co-founder and CEO Rochan Sankar, current systems can link about 100,000 AI chips before the network slows down. Sankar says chips from Enfabrica could increase this figure to about 500,000 chips, making it possible to train even larger AI models.
“It’s become apparent in the last six to nine months that the attributes of that network really drive the capability of that (computing power), whether it’s bandwidth, resiliency or recovery from loss. All these things matter when you start running at scale.”
In other news, OpenAI has recently launched a free training course for teachers with non-profit partner Common Sense Media. The training will enable teachers to understand artificial intelligence and use it efficiently. The move comes amid OpenAI promoting a positive image of ChatGPT in education. Previously, ChatGPT had been causing a frenzy as it helped students spin-off papers, complete their homework, and even write novels.
“My goal in this role is to put AI into the hands of every student and every teacher… and also give them the skills to learn how to do it responsibly and effectively”.
– Former Coursera executive Leah Belsky.
Belsky revealed that student adoption of ChatGPT is “very, very high,” and parents are generally supportive, realizing that AI skills as essential for future careers.
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.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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10. Penguin Solutions, Inc. (NASDAQ:PENG)
Penguin Solutions, Inc. (NASDAQ:PENG) is a leading company that specializes in enterprise AI solutions.
On Monday, November 18, JMP Securities analyst Trevor J. Walsh initiated a new “Buy” rating on Penguin Solutions, Inc. (NASDAQ:PENG). Walsh’s Buy rating reflects confidence in Penguin Solutions being a promising investment opportunity. No longer just a cyclical memory-focused holding company, Penguin has been undergoing strategic transformation to become a firm that focuses on enterprise AI solutions. The ongoing wave of AI investment offers Penguin the chance to deliver strong results and resolve the bottlenecks in memory shortage and compute that it has been facing. Overall, the company is well-positioned for growth largely owing to its backing from SK Telecom, attractive valuation, and skilled management team despite risks such as market ups and downs and AI industry competition.
9. Informatica Inc. (NYSE:INFA)
Number of Hedge Fund Holders: 22
Informatica Inc. (NYSE:INFA) is a leader in enterprise AI-powered cloud data management.
On November 20, Informatica Inc. (NYSE:INFA) announced the release of three advanced capabilities for Microsoft Azure. The capabilities aim to accelerate the deployment and activation of AI and Analytics-driven innovation. One of these capabilities is the GenAI Blueprint for Azure OpenAI Service, accelerating the development and deployment of enterprise-grade GenAI and copilot experiences. The company has also revealed support for Open Table Iceberg on Azure Data Lake Storage Gen2 for improving data migration and integration. The third advancement is the enhanced SQL ELT for Microsoft Azure which leads to increased performance and scalability.
“These new blueprints and data management innovations are built specifically for Microsoft services to ensure Microsoft customers adopting Microsoft Azure OpenAI Service, Microsoft Fabric and open table format support in Azure benefit from the full range of IDMC data management capabilities to accelerate and scale their AI and analytics initiatives.”
-Pratik Parekh, Senior Vice President and General Manager at Informatica.
8. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 25
Bloom Energy Corporation (NYSE:BE) leverages solid-oxide fuel cell systems for on-site power generation, playing a dominant role in meeting the rising energy demands of AI data centers.
On Tuesday, November 19, HSBC analyst Samantha Hoh downgraded Bloom Energy Corporation (NYSE:BE) from Buy to “Hold” and raised the price target to $24.50 from $17.20. While the firm likes the AI stock on its AI data center and hydrogen secular themes, the recent strong price performance and expectations are reflected already, which is why they view the valuation as “fair”.
“Bloom has plenty of excess manufacturing capacity in the near term but may need to increase capacity at its Fremont facility from c750 MW to the GW scale by late 2025. Our estimates assume the company adds capacity gradually to its existing roofline while working capital continues to be a drag in the near term. However, we forecast Bloom to generate positive free cash flow in 2026 (accelerated from 2027 previously) and are increasing our DCF-derived TP to USD24.50 (from USD17.20), which incorporates a higher long-term/terminal growth rate for a longer and stronger tailwind from AI data center demand. Our DCF-derived TP of USD24.50 implies modest upside of 3.2%; hence we are downgrading the stock from Buy to Hold. We continue to like the Bloom story based on its exposure to strong secular themes of AI data center and hydrogen, but given the recent strong price performance and expectations reflected already, we view the valuation as fair.”
7. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 56
International Business Machines Corporation (NYSE:IBM) is a leading provider of global hybrid cloud and AI, and consulting expertise.
On November 19, International Business Machines Corporation (NYSE:IBM) revealed in its newsroom that Dun & Bradstreet, a leading global provider of business decisioning data and analytics, has announced the availability of D&B Ask Procurement, its generative artificial intelligence (Gen AI) assistant. The Gen AI assistant has been built in collaboration with International Business Machines Corporation (NYSE:IBM), analyzing large amounts of data to generate intelligent recommendations that in turn help procurement teams make faster data-driven decisions, reduce risks, and improve efficiency across the supplier network. The D&B Ask Procurement also leverages an agentic AI framework, enabling users to expand insights that help them reduce costs, increase productivity, and de-risk their supply chain.
“One key point of entry for Gen AI adoption is AI assistants, and together IBM and Dun & Bradstreet are collaborating to bring clients new innovations within the procurement domain. With D&B Ask Procurement, an AI assistant built on the foundation of watsonx Orchestrate, users can seamlessly complete tasks and automate complex processes with natural language, helping drive efficiency, cost-savings and higher productivity.”
– Parul Mishra, Vice President of Product Management, Digital Labor at IBM.
6. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 60
Cisco Systems, Inc. (NASDAQ:CSCO) is an American multinational digital communications technology company, integrating AI-powered capabilities across its entire product and customer service portfolio.
On November 19, Cisco Systems, Inc. (NASDAQ:CSCO) announced findings from its second annual AI Readiness Index. Almost 80,000 organizations took part in the report, unveiling a significant gap between the urgency to deploy AI and their readiness to do so. Global AI readiness across enterprises has declined since last year, from 14% to 13%. The decline signifies how businesses are facing challenges adapting to AI’s rapid evolution.
“Eventually there will be only two kinds of companies: those that are AI companies, and those that are irrelevant. AI is making us rethink power requirements, compute needs, high-performance connectivity inside and between data centers, data requirements, security and more. Regardless of where they are on their AI journey, organizations need to be preparing existing data centers and cloud strategies for changing requirements, and have a plan for how to adopt AI, with agility and resilience, as strategies evolve.”
-Jeetu Patel, Chief Product Officer at Cisco.
5. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Fund Holders: 64
On Monday, November 18, JPMorgan raised the firm’s price target on Palo Alto Networks, Inc. (NASDAQ:PANW) to $449 from $387 and kept an “Overweight” rating on the shares. According to the firm, Palo Alto’s platformization strategy, i.e. the company’s efforts to leverage AI within a unified platform to deliver more robust and efficient cybersecurity for customers, seems to be working. As quoted by the analyst “Code to Cloud to SOC could emerge as a competitive differentiator.” A positive sign for the otherwise soft quarter is that industry discussions are reflecting strong deal activity across the Palo Alto platform and incentives to consolidate shares seem to be working. Recent peer multiples and sustainability of free cash flow growth through fiscal 2026 are also attributable to the target increase.
4. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 71
Snowflake Inc. (NYSE:SNOW) is an AI-driven data cloud company that enables customers to create generative AI applications and build large language models.
On Tuesday, November 19, Mark Murphy from J.P. Morgan assigned a “Buy” rating on Snowflake Inc. (NYSE:SNOW) with a price target of $175.00. Murphy’s buy rating on Snowflake is based on the company’s strategic advancements in the AI sector and strong market position. Snowflake’s strong structured data capabilities have enabled it to capitalize on AI-driven opportunities. Some areas, such as unstructured data, are dominated by competitors such as Databricks, but the company’s ongoing development indicates a promising future. Moreover, the strong demand for large language models has enabled Snowflake’s AI tools such as Cortex AI to gain traction. Its potential is also noticed through expanding partnerships with tech partners. Overall, strength in AI demand, as well as innovation and market adaptability, have led to a positive outlook and rating.
3. Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Holders: 91
Vertiv Holdings Co (NYSE:VRT) is a global provider of digital infrastructure technology and services for data centers, communication networks, and commercial and industrial facilities.
On November 18, Mizuho raised the firm’s price target on Vertiv Holdings Co (NYSE:VRT) to $145 from $125 and kept an “Outperform” rating on the shares. The price target update follows the attendance of Mizuho analysts at Vertiv’s 2024 Investor Day in Atlanta, Georgia. Vertiv presented its financial and strategic goals, extending till year 2029. The firm highlights that the company’s long-term plans include higher-than-expected profit margins and organic growth. In particular, the analyst report suggests that Vertiv’s unique algorithm and ongoing momentum in artificial intelligence will continue to offer it a competitive advantage.
2. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Holders: 116
Salesforce Inc (NYSE:CRM) stock has gained significant attention after the launch of Agentforce, its AI-powered platform.
On Monday, November 18, Scotiabank initiated coverage of Salesforce Inc (NYSE:CRM) with an “Outperform” rating and a $425 price target. The firm contends that Salesforce is a “top pick” in the software sector. After the sector had a “choppy year”, followed by a strong three months, owning “clear market winners” and companies with re-rate potential on the benefits of artificial intelligence is the way to go to generate alpha. Stock picking has become more crucial than ever, and while investors are focused on semiconductors, there are questions on the future of the software business and whether they will stay relevant in five years.
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) has emerged as a significant player in the AI space after the launch of Apple Intelligence.
On November 19, KeyBanc maintained its “Underweight” rating on Apple Inc. (NASDAQ:AAPL) and a $200 price target. According to a firm by the survey, iPhone 16 sell-throughs during October came in higher than expected, increasing 8% year over year. The firm noted that the greatest demand is seen by the iPhone 16 Pro Max, followed by Pro due to its camera upgrades. Apple Intelligence, however, caught little consumer interest.
“Apple AI remained a non-factor, as consumer interest in the new AI features was low, and there were only a few inquiries about these advancements”.
While we acknowledge the potential of APPL 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 APPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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