It seems that major tech companies in Silicon Valley are forging relationships with the defense industry these days. In the latest news, prominent artificial intelligence company OpenAI has entered a partnership with Anduril, a defense startup that produces missiles, drones, and software for the United States military.
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The companies said that this partnership will emphasize on the improvement of the United States’ counter-unmanned aircraft systems (CUAS) as well as their ability to deal with potentially lethal aerial threats in real-time. The CUAS will enable defense against drone strikes by detecting and intercepting them while they are airborne.
According to Brian Schimpf, cofounder and CEO of Anduril, OpenAI’s AI models will be used to improve systems used for air defense. The technology will be used to “assess drone threats more quickly and accurately, giving operators the information they need to make better decisions while staying out of harm’s way”, revealed a former OpenAI employee.
“OpenAI builds AI to benefit as many people as possible, and supports US-led efforts to ensure the technology upholds democratic values… Our partnership with Anduril will help ensure OpenAI technology protects US military personnel, and will help the national security community understand and responsibly use this technology to keep our citizens safe and free.”
-Sam Altman, OpenAI’s CEO.
Last month, OpenAI rival Anthropic also entered a partnership with a famous defense contractor to provide “US intelligence and defense agencies” access to its AI models. Regardless of its competitors’ actions, OpenAI shows no signs of slowing down anytime soon. After months of tender offers and a soaring valuation, the company has reached a new record of 300 million weekly active users. The announcement was made by Sam Altman during an appearance at The New York Times’ Dealbook Conference on Wednesday, December 4th. The company is reportedly targeting 1 billion active users by next year.
These strategies aim to strengthen OpenAI’s position against competitors Anthropic and Elon Musk’s xAI, the latter of which Sam Altman considers a “fierce competitor”. Besides that, it is also striving to gain a larger slice of the generative AI market, which may top $1 trillion in revenue by the next decade. Altman also revealed that his company hasn’t asked investors not to invest in its competitors. However, those who decide to wouldn’t have access to OpenAI’s “information rights,” like the company’s roadmap and other materials.
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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10. SoundHound AI (NASDAQ:SOUN)
Number of Hedge Fund Holders: 11
SoundHound AI (NASDAQ:SOUN) is a conversational artificial intelligence company offering voice-based AI solutions to businesses. On December 5, the company announced that it has teamed up with Torchy’s Tacos, a popular taco chain known for its “Damn Good Tacos”, to launch soundhound’s advanced voice AI Smart Ordering product. The advanced AI ordering product is now live at all 130 Torchy’s locations and is trained on their entire menu. This enables the ordering system to understand even the most customized orders. The customers will speak naturally as if they are speaking to another person, which the system will recognize “instantly” and “accurately”.
“As we continue to scale our AI-powered restaurant solutions, we have seen the impact they have in redefining how restaurants engage with their customers, adding an entirely new layer of convenience and efficiency. We’re excited to work with Torchy’s Tacos to transform how guests order and experience their meals, from the first call to the first bite”.
– said James Hom, Chief Product Officer of SoundHound AI.
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 December 4, at the AWS re:Invent annual conference, the company revealed an innovation agenda to enhance its GenAI, Open Table, and analytics capabilities which are all built on AWS. Customers will be able to use these capabilities for building and deploying a new generation of generative artificial intelligence (GenAI) and analytics applications. Highlights include blueprints for enterprise-grade GenAI apps, automation recipes for Amazon Bedrock, and a partnership with Amazon SageMaker Lakehouse.
“We’re thrilled about the possibilities for customers with our innovation solutions built on AWS. Particularly, integration with Amazon SageMaker Lakehouse and Open Table support will help customers build next generation data architectures and enhance the reach and breadth of IDMC’s platform capabilities across data warehouse, data analytics and AI. With AWS PrivateLink integrations, customers can use serverless deployment architectures while keeping their current workflows. These new developments will allow customers to accelerate GenAI application development and new analytics use cases by ensuring that data is AI-ready”.
– Pratik Parekh, Senior Vice President and General Manager at Informatica.
8. MicroStrategy Incorporated (NASDAQ:MSTR)
Number of Hedge Fund Holders: 25
MicroStrategy Incorporated (NASDAQ:MSTR) is an innovator in AI-powered business intelligence (BI) offering business intelligence (BI), mobile software, and cloud-based services. On December 5, the company announced that Zebra Technologies has selected its cloud-native platform, MicroStrategy ONE, for its Workcloud Workforce Optimization Suite. The collaboration will allow Zebra customers to modernize analysis and decision-making across fleet and corporate functions by using MicroStrategy’s self-service reporting and AI capabilities. The platform will also help Zebra customers with access to a modern reporting suite complete with generative AI capabilities, as well as allow access to self-service capabilities, reducing the need for custom report requests while providing direct access to analytics.
“We were the first to release a cloud-native business intelligence platform that integrates generative AI. We’re proud to partner with Zebra to provide their clients with a thoroughly modern platform so they can access the data they need quickly with excellent performance.”
-Saurabh Abhyankar, Executive Vice President & Chief Product Officer MicroStrategy.
7. Booz Allen Hamilton Holding Corporation (NYSE:BAH)
Number of Hedge Fund Holders: 32
Booz Allen Hamilton Holding Corporation (NYSE:BAH) is a military-defense-focused AI stock and the leading provider of artificial intelligence (AI) services to the US government. On December 6, Booz Allen Hamilton (NYSE: BAH) and Palantir Technologies jointly announced a revolutionary co-creation partnership that aims to accelerate defense mission innovation and assist the US in combating its adversaries. The two leading companies will be collaborating to address the need for urgent, ready-to-use solutions that can help the US and its allies in a challenging global security landscape. The two critical components of the partnership include modernizing information infrastructure and boosting integrated warfighting operations with allies.
“America is facing the most challenging national security environment in half a century, and we need to move faster to address these challenges. Combatting our adversaries requires change—starting with activating a whole-of-nation approach that accelerates results, pushes boundaries, and disrupts long-standing barriers. We have seen the positive results of embracing this type of change already,” continued Rozanski. “By working together, Alex and I are creating new mission capabilities that leverage Palantir’s and Booz Allen’s unique technologies and expertise to close mission gaps at the speed of now. Our joint team created a prototype in only 45 days.”
-Horacio Rozanski, chairman, CEO, and president of Booz Allen.
6. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 43
Palantir Technologies Inc. (NASDAQ:PLTR) provides AI-powered software platforms to government and commercial clients which helps them analyze huge data sets. On December 6, Palantir (PLTR) and defense tech company Anduril Industries announced that they have entered into a partnership that uses defense data for artificial intelligence training. The partnership will require Palantir’s AI platform to structure, label, and prepare defense data for training, where the models will then be deployed onto national security systems. On the other hand, Anduril’s systems will support the retention and distribution of government defense data. As of today, companies are increasingly using AI to automate their workflows. However, the application is still budding in the defense industry due to the sensitivity of data needed for training.
“U.S. companies are developing world-leading models but struggling to deploy them at scale with government partners for defense applications”.
-Palantir Technologies and Anduril Industries
5. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 51
AppLovin Corporation (NASDAQ:APP) is a leading marketing platform powered by artificial intelligence technology. On December 5, Stifel raised the firm’s price target on AppLovin to $435 from $250 and kept a “Buy” rating on the shares. The analyst told investors in a research note that the company’s software platform business is benefiting from AXON 2.0, an updated version of Applovin’s AI-powered ad tech software. AXON 2.0 offers a competitive edge by using data from the company’s market-leading mediation platform to improve the accuracy of its predictive algorithms utilized by AppDiscovery. The firm also expressed increased confidence in AppLovin’s expansion into the e-commerce advertising market. As it does so, the company will also focus on controlling costs which is expected to boost its profit margins and increase cash flow.
4. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 56
International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products. On December 3, IBM announced a global collaboration with the recognized defense intelligence company Janes to bridge the gap within defense organizations that exists due to a lack of trust in AI systems and their outputs. The collaboration integrates open-source defense and security intelligence data into IBM’s Watsonx, a trusted AI and data platform. Defense leaders will be able to access high-quality data combined with trusted AI, improving their decision-making abilities.
This will be done by integrating IBM Watsonx AI and data platform, utilizing an IBM Granite model with a Retrieval-Augmented Generation (RAG) pattern with Janes data. In turn, the RAG pattern will allow operational decision support, and assistance in military and intelligence analysts by generating comprehensive, data-augmented reports for situational analysis and decision-making. Moreover, AI-assisted scenario modeling and retrieval-augmented data analysis will allow more informed mission planning.
3. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 70
Marvell Technology, Inc. (NASDAQ:MRVL) engages in the development and production of custom application-specific integrated circuits (ASICs) and other semiconductor solutions that power artificial intelligence applications in data centers and automotive markets. Wall Street has been extremely bullish on the stock after the company reported strong third-quarter results that exceeded sales and earnings expectations. The company’s sales grew 19% due to steady AI demand, particularly in data center end markets. Moreover, the company anticipates exceeding the guide of $1.5B for AI revenue this year and is also optimistic about achieving its $2.5 billion target for FY26.
On December 4, Needham analyst Quinn Bolton maintained Marvell Tech (NASDAQ:MRVL) with a “Buy” and raised the price target from $95 to $120. The company’s latest results and guidance are key indicators that the AI momentum shows no signs of slowing down.
“Next year, both custom AI silicon and electro-optics are expected to grow meaningfully, leading to significant upside to our prior estimates”.
-Needham analyst N. Quinn Bolton wrote in a note to clients.
Bolton further stated that the company’s AI revenue is now expected to top the previous $1.5B target by “hundreds of millions of dollars”. This is because the company’s two lead customers for custom silicon — believed to be Amazon (AMZN) and Google (GOOG) (GOOGL) — are ramping up.
“AMZN remains on track to ramp its next-gen custom silicon compute solutions in CY25, and we believe MRVL will be the ASIC partner”.
-Bolton
2. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 91
Oracle Corporation (NYSE:ORCL) is a database management and cloud service provider. It hosts immense data that AI applications need to process. On December 6, Analyst Derrick Wood from TD Cowen reiterated a “Buy” rating on Oracle and raised the price target to $210.00 from $190.00. Wood has rated the company as a buy due to its strong performance and consistent growth in key areas. Oracle’s cloud services have demonstrated healthy growth levels, with cloud revenue expected to increase by 24% in constant currency, and SaaS growth projected at 12%.
The cloud revenue growth is further supported by Oracle’s strategic moves, such as the release of new AI features and ambitious revenue targets. Additionally, the successful expansion of its data center capabilities and rising interest in its Fusion Data Intelligence platform also support the buy rating. Increased hiring in sales further echoes rising demand and market confidence. All in all, Oracle is an attractive investment owing to its strong fundamentals and strategic focus on cloud and AI.
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) has fortified its mark in the AI realm with the launch of Apple Intelligence, its personal artificial intelligence system. On December 6, Bloomberg reported that Apple Inc. (NASDAQ:AAPL) is gearing up to launch one of its most-awaited projects: the series of cellular modem chips that aim to replace components from long-time partner and rival Qualcomm. Reportedly, Apple’s in-house modem system will debut next spring. This technology is said to be part of the iPhone SE, the company’s entry-level smartphone. The iPhone SE will be updated next year for the first time since 2022.
When the iPhone SE debuts in a few months, it is going to have new features such as Apple Intelligence and the edge-to-edge screen design already used in more upscale models. However, the breakthrough is going to be its in-house modem, code-named Sinope. Currently, the modem won’t be used in Apple’s higher-end products but is set to come to a new mid-tier iPhone later next year, code-named D23. Apple’s entry-level iPads will also witness the chip debut as early as 2025.
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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