The emerging, cost-effective Chinese AI alternatives have prompted US President Donald Trump to say it is a wake-up call to Silicon Valley. He sees the launch of AI models like DeepSeek r1 and Qwen 2.5 as opportunities rather than threats, given that these innovations can help US companies drive down R&D and deployment costs.
However, the ongoing US earnings season continues to showcase strength in the AI space as companies consistently beat consensus estimates driven by revenues from AI segments.
Semiconductor manufacturers, satellite imagery, IT consultation, and cybersecurity firms continue to heavily integrate AI to reduce operational costs, introduce process transparency, offer global connectivity, and fortify data protection technologies for growth and optimal business productivity.
“The biggest lesson learned is we have to take the unintended consequences of any new technology along with all the benefits and think about them simultaneously – as opposed to waiting for the unintended consequences to show up and then address them,” Microsoft CEO Satya Nadella said at the latest World Economic Forum in Davos. “I don’t think the world will put up anymore with any of us coming up with something where we haven’t thought through safety, equity and trust – these are big issues for the world.”
We selected AI stocks by reviewing news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 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).
Close-up shot of a ticker board reflecting the companies stocks in the stock exchange.
10. Planet Labs PBC (NYSE:PL)
Number of Hedge Fund Holders: 8
Planet Labs PBC (NYSE:PL) is an Earth-imaging company with a fleet of imaging satellites that combines proprietary machine learning analytics to offer imagery data and insights to a wide range of companies and government agencies to help with climate monitoring, crop yield prediction, urban planning, deforestation, and disaster response. Planet Labs PBC (NYSE:PL) recently launched the world’s first global-scale AI-powered Forest Carbon Monitoring Product for forest monitoring that will leverage the company’s extensive imagery archive, global library of airborne LiDAR data, and AI processing capabilities to offer 3-meter resolution measurement of forests to support carbon markets, deforestation mitigation, and regulatory compliance.
On January 30th, Craig-Hallum upgraded Planet Labs (NYSE:PL) to “Buy” from “Hold” and raised the stock price target to $7 from $3.50. The brokerage highlighted the company’s 7-year, $230 million win, which it believes is heavily front-loaded and totally incremental. Analysts said this win opens the gateway for potential multiple material upward revisions to the 2025 model. Craig-Hallum added that this win closely follows the launch of the company’s next-gen satellite Pelican-2 on January 14th, which unequivocally validates the Pelican line at the caliber of a $230 million commitment.
9. Lloyds Banking Group plc (NYSE:LYG)
Number of Hedge Fund Holders: 10
Lloyds Banking Group plc (NYSE:LYG) is a leading financial institution offering various banking services across retail, commercial banking, insurance, investments, and pensions. The company has also embarked on a digital transformation journey, including its AI Centre of Excellence to enhance customer experience and trim operational costs.
On January 30th, Lloyds Banking Group plc (NYSE:LYG) named Magdalena Lis as the head of responsible development and use of AI, effective February 3rd. Lis holds a PhD in Computational Linguistics (AI) from the Centre for Language Technology at the University of Copenhagen and has authored research papers on AI systems transparency. With over 15 years of experience in AI, she will focus on using AI to improve the bank’s products while building guardrails and adequate controls for safe use and deployment across the institution. Lis most recently served as the Head of Analytics and Data Science at Toyota Connected Europe.
8. STMicroelectronics NV (NYSE:STM)
Number of Hedge Fund Holders: 18
STMicroelectronics NV (NYSE:STM) is a semiconductor design and manufacturing company that sells communication equipment, computer peripherals, and microchips for use in IoT applications, personal electronics, cloud connectivity, and the automotive and industrial industries. The company’s ST Edge AI suite is a collection of AI tools that enable AI on microcontrollers, processors, and smart sensors. For instance, its proprietary neural processing unit called ST Neural-ART Accelerator delivers impressive efficiency in handling AI tasks, while its online STM32 edge AI tools allow developers to create and deploy ML algorithms on microcontrollers swiftly at relatively lower costs. Elsewhere, its Edge AI ST smart sensors embed ML core to facilitate context awareness in industrial equipment and IoT devices that help in several applications, including reducing power consumption and meaningful data-sharing between microchips.
On January 30th, Craig-Hallum reduced STMicroelectronics NV’s (NYSE:STM) target price to $28 from $36 but retained a “Buy” rating on the stock. The brokerage said that the industrial and the automotive markets continue to soften, with STMicroelectronics NV’s (NYSE:STM) expecting a worse-than-seasonal March quarter. The analysts continued to model ratings for the deterioration of the company’s business and highlighted that gross margins and profitability could markedly drop in 2025.
7. Logitech International S.A. (NASDAQ:LOGI)
Number of Hedge Fund Holders: 18
Logitech International S.A. (NASDAQ:LOGI) designs and supplies software-enabled hardware solutions, including accessories, peripherals, and audio devices, to boost work productivity and provide a superior gaming and streaming experience. The company is delving into AI with new-age products like the recently launched Rally Board 65 video conferencing solution with AI features to elevate hybrid work environments. The company’s Logi AI Prompt Builder is also an emerging productivity tool that leverages ChatGPT to summarize, rephrase, and create custom-made prompts to stream business workflows.
On January 30th, Kepler Cheuvreux upgraded Logitech International S.A. (NASDAQ:LOGI) to “Buy” from “Hold” while raising the stock’s price target to ₣100 ($110) from ₣77 ($84). The analysts highlighted that the company reported a “beat and raise” Q3, showing its potential to grow in difficult markets. The brokerage added that the company is going from an “expensive cash cow to AI-driven grower.”
6. Maxlinear Inc (NASDAQ:MXL)
Number of Hedge Fund Holders: 18
MaxLinear Inc. (NASDAQ:MXL) is a leading semiconductor firm that designs and builds highly integrated radio-frequency, analog, and mixed-signal chips to enable multi-gig connectivity in broadband communications applications, wired and wireless infrastructure, data centers, and connected home devices. The company’s scalable MaxAI framework uses AI and ML to improve Wi-Fi security and network performance for multi-user applications like gaming, XR, and video conferencing.
On January 30th, Roth MKM increased MaxLinear Inc.’s (NASDAQ:MXL) target price to $21 from $18 and maintained a “Neutral” stock rating. Analysts said the company posted and guided revenue above consensus at the midpoint, implying continued revenue stability and benefit from the optical demand tailwind. The brokerage added that the company could return to profitability in mid-2025 as its optical unit is positioned to grow steadily this year, representing a strong year-over-year unit increase, while non-optical divisions could improve in the intermediate term.
5. CGI Inc (NYSE:GIB)
Number of Hedge Fund Holders: 24
CGI Inc. (NYSE:GIB) offers IT, business consulting, systems integration, automation, intellectual property, and enterprise digitization services to diverse industries, including banking, healthcare, manufacturing, energy, insurance, and logistics. The company’s responsible use of AI methodology and consulting framework in its IP portfolio enables it to offer a suite of AI solutions like the CGI PulseAI, Virtual Service Agent, Accelerate AI360, DigitaTrust360, and Machine Vision for operational efficiencies, cost reductions, legal compliance, and assets monitoring activities.
On January 30th, RBC Capital analyst Paul Treiber increased CGI Inc.’s (NYSE:GIB) stock price target to C$192 from C$178 and maintained an “Outperform” rating. The brokerage highlighted that the IT services provider’s Q1 results were largely in line with consensus. Despite the company missing organic growth expectations, the analyst said M&A could more than offset the softness.
4. Extreme Networks Inc. (NASDAQ:EXTR)
Number of Hedge Fund Holders: 29
Extreme Networks Inc. (NASDAQ:EXTR) designs and builds wired and wireless network infrastructure equipment and offers a host of networking software solutions for various industries. The company’s Extreme AI Expert GenAI solutions help clients optimize network performance, accurately detect security threats, lower operational overheads, simplify network management, and personalize end-user experiences to maintain resilient global networks. Furthermore, the company’s ExtremeCloud IQ CoPilot license ensures enhanced AIOps capability to streamline network activities and offers actionable insights to easily track and troubleshoot connectivity issues.
On January 30th, Lake Street analyst Eric Martinuzzi increased Extreme Networks Inc.’s (NASDAQ:EXTR) price target to $16 from $15 while maintaining a “Hold”. The brokerage hiked the target price after it was “pleased with the solid execution in 1H25” and the full-year guidance.
3. Flex Ltd. (NASDAQ:FLEX)
Number of Hedge Fund Holders: 45
Flex Ltd. (NASDAQ:FLEX) is an electronics innovation and manufacturing company catering to diverse industries, including automotive, healthcare, industrial, data center, and communications sectors. It offers next-gen, end-to-end designing, manufacturing, delivery, and product management services to its global clients. The company is using AI to optimize factory lines, carry out predictive machine maintenance, manage inventory, eliminate roadblocks in PCBA testing, improve component inspections to bring down defects, ensure the highest possible quality, and lower operational costs.
On January 30th, Barclays analyst George Wang hiked Flex Ltd.’s (NASDAQ:FLEX) stock price target to $49 from $43 while retaining an “Overweight” rating. The analyst said the company reported a solid quarter, creating a good setup for share prices. For Q3 fiscal year 2025, the firm reported net sales of $6.6 billion and updated full-year revenue guidance to between $25.4 billion and $25.8 billion.
2. Automatic Data Processing Inc. (NASDAQ:ADP)
Number of Hedge Fund Holders: 49
Automatic Data Processing Inc. (NASDAQ:ADP) offers leading online payroll and HR management software and services. The company’s ADP Assist AI tool combines HR data repositories with GenAI to create an easy and smart human capital management experience. The AI tool is built on a human-centric design focusing on ethics and transparency while mitigating bias to ensure clients can access accurate information for easy payroll operations.
On January 29th, Jefferies analyst Samad Samana hiked Automatic Data Processing Inc.’s (NASDAQ:ADP) target price to $305 from $290 while retaining a “Hold” rating. The analysts said the company’s total revenue beat consensus estimates due to healthy demand trends, retention, and favorable timing in the Employer Services and PEO Services segments. The brokerage added that company results were strong and sufficient to lift share prices.
1. Cyberark Software Ltd. (NASDAQ:CYBR)
Number of Hedge Fund Holders: 51
CyberArk Software Ltd. (NASDAQ:CYBR) offers AI-powered identity security solutions to fortify privileged access management, endpoint protection, and multi-factor authentication in dynamic environments with real-time threat response mechanisms and recommendations on the CORA AI platform. The AI tool monitors systems for potential enterprise risks to provide actionable insights and at times implement automated actions depending on threat severity.
On January 30th, Rosenblatt analyst Catharine Trebnick increased CyberArk Software Ltd.’s (NASDAQ:CYBR) stock price target to $415 from $345 while reiterating a “Buy” rating. The brokerage expects the company to post “solid” Q4 results on February 13th. The analyst engaged with five CyberArk Software Ltd. (NASDAQ:CYBR) partners, where four highlighted the cybersecurity firm’s continued leadership in the privileged access management industry. The analyst said that the positive feedback and a “healthy pipeline” signals a potential upside to the share prices.
While we acknowledge the potential of CyberArk Software Ltd. (NASDAQ:CYBR) as an investment, our conviction lies in the belief that 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 CYBR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stock To Buy Now and Complete List of All AI Companies Under $2 Billion Market Cap.
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