“Artificial Intelligence is the new frontier for Big Tech”, notes Rachna Dhanrajani when speaking to CNBC about tech spending on artificial intelligence. Tech giants have pledged to spend over $200 billion on AI-related capital expenditures this year, marking an all-time high. To add to the equation, the US presidential elections have drawn to a close and Donald Trump has emerged as the winner. Silicon Valley should brace for a starkly different relationship with the US government than it had with its predecessor.
READ ALSO: 10 AI News You Shouldn’t Miss and Top 10 Trending AI Stocks to Watch in November
Wedbush Securities analyst Daniel Ives anticipates that the Trump Administration will focus on strengthening the US’ position in artificial intelligence.
“We would expect significant AI initiatives from the Beltway within the U.S. that would be a benefit for tech players…Under a Trump Administration, we would expect major AI initiatives within the U.S. government including the Department of Defense that would also be a major tailwind (for) AI players”.
-Ives said in a client note Wednesday.
The Latest Developments in AI
No matter how the future unfolds, artificial intelligence is already reshaping industries and businesses at an unprecedented pace. While robots are already part of the landscape, AI is poised to propel them into the mainstream. Physical Intelligence, a startup developing foundational software for robots, has raised $400 million in early-stage funds from big names such as Jeff Bezos and OpenAI. The company is seeking to make software that can work on any robot. The company has previously showcased how one of its software enables robots to do tasks such as folding laundry and bagging groceries.
Another Singapore-based startup is making waves in the culinary space. ProfilePrint uses patented digital fingerprint technology for analyzing the quality and identity of ingredients, thereby helping agribusinesses save time.
“ProfilePrint digitalizes food ingredients so that buyers and sellers no longer need to ship samples physically, allowing us to have a significant reduction in logistics costs, overheads as well as carbon footprint”.
– Alan Lai, CEO and founder of ProfilePrint, speaking to CNBC’s “CNBC Tech: The Edge.”
In other news, Sam Altman, founder of OpenAI, recently took to Reddit to answer all the pressing questions users have had surrounding ChatGPT and OpenAI. While ChatGPT-5 isn’t going to come around this year, another user asked a primarily important question: Is AGI achievable with known hardware? Answering in the affirmative, Altman responds that he believes it is possible with current hardware. AGI, or artificial general intelligence, is the type of AI that would possess the ability to perform any intellectual task that a human can. It is known to be a quantum leap beyond the AI systems that are known today.
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. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 9
BigBear.ai Holdings, Inc. (NYSE:BBAI) is an artificial intelligence specialist that provides decision intelligence solutions for national security, digital identity, supply chain and logistics, enterprise operations, and manned-unmanned teaming in autonomous systems.
On November 6th, H.C. Wainwright reiterated a Buy rating on BigBear.ai Holdings, Inc. (NYSE:BBAI) with a price target of $3.00. Despite slightly missing third-quarter revenue expectations, the management’s disciplined approach to cost control and maintenance of full-year revenue guidance demonstrates resiliency in BigBear.ai’s business model, noted the analyst.
Another key factor contributing to the buy rating is the company’s recent $165 million contract with the US Army. The contract will require BigBear.ai to deliver the U.S. Army’s Global Force Information Management – Objective Environment (GFIM-OE), an enterprise-wide intelligent automation platform that will help senior leaders and combatant commanders to man, equip, train, ready, and resource the Army more effectively. The contract is expected to begin revenue production in Q4 2024.
9. Lumen Technologies, Inc. (NYSE:LUMN)
Number of Hedge Fund Holders: 18
Lumen Technologies, Inc. (NYSE:LUMN) is a facilities-based technology and communications company connecting people, data, and applications. Its AI-driven fiber deals and other digital services are helping it ride the wave of AI growth.
On November 5, Lumen Technologies, Inc. (NYSE:LUMN) announced a partnership with Google Cloud to improve its operations using advanced AI technology. The partnership will allow Lumen to leverage Google Cloud’s infrastructure and databases to create an AI-driven network technology called Lumen® Digital Twin. The Lumen Digital Twin will provide proactive insights across the Lumen network, helping it detect and resolve network issues before they reach its customers. Moreover, Google Cloud’s Vertex AI platform and Gemini models will help the company develop applications to reduce unnecessary technician visits, improve customer support, and enhance website search functionality.
“We’re transforming our operations top to bottom to deliver outstanding customer service and operate a more efficient business. Google Cloud’s expertise and AI technologies are key enablers for our company, allowing us to use our Lumen Digital Twin network technology to test new capabilities and improvements before we deploy them”.
– Dave Ward, Lumen Chief Technology and Product Officer.
8. Tempus AI Inc (NASDAQ:TEM)
Number of Hedge Fund Investors: 18
Tempus AI Inc (NASDAQ:TEM) is a small-cap AI healthcare tech stock that provides AI-enabled precision medicine solutions. The company has been advancing in precision medicine through the practical application of artificial intelligence in healthcare.
On November 5, Needham analyst Ryan Macdonald raised the price target on Tempus AI Inc (NASDAQ:TEM) to $56.00 from $47.00 and maintained his “Buy” rating on the stock. The revised price target stems from Tempus AI Inc.’s third-quarter results, which exceeded expectations. The company delivered a revenue growth of 33%, reaching $180.9 million. In particular, their data and services revenue growth accelerated to 64.4% year-over-year (led by their insights or data licensing business), while genomics unit growth accelerated to 23.9% annually with rising average revenue per clinical test.
The company’s maintained guidance for the rest of the fiscal year is also highly achievable, noted the analyst. Tempus AI has also recently acquired Ambry Genetics, a strategic move for expanding Tempus AI’s testing portfolio. Tempus AI’s Tempus ECG-AF device, which uses artificial intelligence to identify patients at higher risk of atrial fibrillation/flutter, has also received FDA clearance some time back, fueling optimism about the stock.
7. Iron Mountain Incorporated (NYSE:IRM)
Number of Hedge Fund Holders: 24
Iron Mountain Incorporated (NYSE:IRM) is a global leader in storage and information management services. The stock has been benefiting from the surge in AI as the demand for data centers accelerates with enterprise cloud and AI needs.
On Wednesday, November 6, Iron Mountain Incorporated (NYSE:IRM) reported its third-quarter results. The company noted a rise in its funds from operations (FFO) for the third quarter, driven by robust demand for its data centers. Adjusted funds from operations, an important cash flow indicator, increased by 11% to $1.13 per share for the quarter ending September 30, compared to the same period last year. This is certainly the highlight of its report in an otherwise cautious enterprise spending environment.
Even though enterprise spending is weak, companies such as Iron Mountain Incorporated (NYSE:IRM) continue to invest heavily in data centers, driven by the need to manage growing AI workloads and support cloud migration efforts. The company also reported a 12% growth in quarterly revenue to $1.557 billion, slightly surpassing the analyst estimate of $1.554 billion. However, net income fell to a negative $34 million, mainly due to unfavorable currency fluctuations and higher operational costs. Nevertheless, Iron Mountain has maintained confidence in its strategies and reaffirmed guidance that points toward a strong close to the financial year.
6. Digital Realty Trust, Inc. (NYSE:DLR)
Number of Hedge Fund Holders: 44
Digital Realty Trust, Inc. (NYSE:DLR) is a real estate investment trust engaged in the provision of data center, colocation, and interconnection solutions. It serves industries including artificial intelligence (AI), networks, cloud, digital media, mobile, financial services, healthcare, and gaming.
On November 5, Digital Realty Trust, Inc. (NYSE:DLR) announced the continued growth of its service orchestration platform, ServiceFabric™. ServiceFabric™ is a global service delivery platform that seamlessly interconnects workflow participants, applications, clouds, and ecosystems within its global data center network, PlatformDIGITAL®. This new partnership means Asia Pacific businesses now have a collaborative platform to access low-latency, secure connectivity and digital solutions that will enable them to deploy private AI applications efficiently. Over 30 new Asia Pacific partners are now listed on its Service Directory, a marketplace where businesses can expand their reach and connect with Digital Realty’s 5,000 global customers. New partners include StarHub, KINX, and ARTERIA Networks.
“We are delighted with the continued momentum of our ServiceFabric™ platform in Asia Pacific. The open platform, with its versatile and well-connected ecosystem that continues to grow, provides our customers with a dynamic environment that empowers them to innovate more freely, adapt swiftly to global changes, and optimize their AI strategies. By providing choice and global connectivity, we help our customers accelerate their time-to-market and maximize their competitive edge.”
– Govind Choudhary, Vice President, Strategy & Business Development, Asia Pacific, Digital Realty.
5. Super Micro Computer, Inc. (NASDAQ:SMCI)
Number of Hedge Fund Holders: 47
Super Micro Computer, Inc. (NASDAQ:SMCI) is a global technology leader that develops and manufactures high-performance server and storage solutions based on modular and open architecture. It is a leading provider for creating Nvidia-based clusters of servers used for training and deploying AI models.
On November 6, Mizuho Securities equity analyst Vijay Rakesh suspended coverage of Super Micro Computer, Inc. (NASDAQ:SMCI). The analyst noted that “Despite a white-hot AI server market where demand well exceeds supply”, SMCI has lowered its sales targets for the upcoming quarters, blaming the cut on a shortage of Nvidia’s (NVDA) latest AI processors, called Blackwell. The company’s auditor, Ernst & Young, has also resigned due to governance and transparency concerns, adding to its woes. It also disclosed that it had still not filed a 10-K annual report, previously pushed back in late August, and with uncertainty about its filing.
“Due to lack of full financial detailed and audited statements, we are suspending our rating and price target for SMCI. While SMCI is growing its top line 100%+ year over year as an AI leader positioned to ramp on Nvidia Blackwell, near term there are uncertainties with (the) Nov. 16 Nasdaq approval and audited 10-K filing.”
-Mizuho Securities analyst
4. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 69
Snowflake Inc. (NYSE:SNOW) is an American cloud-based data storage company that develops database architecture, data warehouses, query optimization, and parallelization solutions. The company is benefiting from the AI growth wave as data warehouses are a critical component in making AI useful for enterprises.
Monness, Crespi, Hardt & Co., Inc. analyst Brian White upgraded Snowflake Inc. (NYSE:SNOW) to “Buy” from Neutral and set a price target of $140. The upgrade follows a challenging year that Snowflake has had, with a 41% drop in stock value year-to-date and a 73% decline from its high in late 2020. The analysts view the current valuation as an opportunity, especially with the company’s increased pace of innovation. The firm said Snowflake is well-positioned for AI.
“Unsurprising to us, the gen AI propaganda of 2023 has proven to be a revenue illusion for the software complex in 2024; however, we believe the industry, and Snowflake, will begin to derive incremental activity from this long-term secular trend over the next 12-18 months.”
3. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 71
Constellation Energy Corporation (NASDAQ:CEG) is an American energy company that generates and sells electricity in the United States. The company is an AI power play, supplying the energy needed to power data centers and AI infrastructure.
On November 5th, analyst David Arcaro from Morgan Stanley maintained a “Buy” rating on Constellation Energy Corporation (NASDAQ:CEG) and kept the price target at $323.00. The buy rating comes from the energy company’s strong financial performance and strategic initiatives. The company has been actively seeking data center deals at its nuclear power sites, demonstrating its commitment to capitalization and expansion.
Morgan Stanley also believes that the negative reaction and weakness in stocks such as in Constellation following the rejection of Talen Energy’s proposal to sell power directly to Amazon’s data center (by the Federal Energy Regulatory Commission) is an “excellent buying opportunity”. The firm considers this as a path toward more nuclear data center deals.
2. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 92
Vistra Corp. (NYSE:VST) is a Fortune 500 integrated retail electricity and power generation company. The stock is powered by the huge demand from AI data centers.
On November 6, Jefferies analyst Julien Dumoulin Smith maintained a “Buy” rating on Vistra Corp. (NYSE:VST) and raised the price target to $143.00 from $137.00. The buy rating comes despite the cautious regulatory environment stemming from a recent FERC decision. Talen Energy’s proposal to sell power directly to Amazon’s data center by the Federal Energy Regulatory Commission was rejected, leading to negative market reactions and implying challenges in future data center contracts.
Regardless, the company’s diversified asset base and its strong position in Texas (ERCOT) are acting as modest buffers. There is also an upside with potential data center contracts that are expected to boost capacity utilization. The stock’s value has also been positively revised largely owing to data center deals. Together, all of these factors highlight Vistra’s growth potential and financial stability, hence resulting in the buy rating.
1. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Holders: 117
Salesforce Inc (NYSE:CRM) offers cloud-based customer relationship management (CRM) software. The company offers AI solutions that deliver autonomous, generative, and predictive capabilities built directly into one’s CRM (Customer Relationship Management) software.
On November 4, Salesforce Inc.’s MuleSoft integration platform, an easy-to-use platform that helps IT teams automate processes and workflows, introduced support for a new tool that helps businesses create artificial intelligence agents that work with real-time data. The event-driven application programming interface tool, known as AsyncAPI, lets the AI agents respond quickly to changes in internal and external systems such as modifications to data or business rules. The new standard will let businesses build reliable event-driven systems that access real-time data, allowing the agents to work asynchronously, implying that they do not need to ask for an update and wait.
“AI is shaking up how we think about modern architectures, but keeping things connected remains at the forefront. Integration is still foundational to business success. By supporting a wider range of integrations like event brokers via AsyncAPI, we’re strengthening our commitment to providing a robust, agile platform for our customers to thrive in today’s complex digital landscape”.
-Andrew Comstock, VP of Product, Integration
While we acknowledge the potential of CRM 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 CRM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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