China is aggressively working to close the AI competitiveness gap with the United States. According to CEO of Chinese startup 01.AI Lee Kai-fu, the country is now as close as three months in some areas. This is because companies such as DeepSeek have figured out how to use chips and apply algorithms more efficiently.
Lee has told Reuters that startup DeepSeek has said that China has pulled ahead in areas such as infrastructure software engineering, severely challenging the US’s attempts to hold back China’s AI sector through its sanctions.
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“Previously I think it was a six to nine month gap and behind in everything. And now I think that’s probably three months behind in some of the core technologies, but actually ahead in some specific areas.”
-Lee Kai-Fu
At the same time, a report by MIT Technology Review reveals how 80% of China’s newly built computing resources remain unused.
“The growing pain China’s AI industry is going through is largely a result of inexperienced players—corporations and local governments—jumping on the hype train, building facilities that aren’t optimal for today’s need.”
-Jimmy Goodrich, senior advisor for technology to the RAND Corporation.
That said, energy is being wasted, data centers have become “distressed assets,” but the country is doing all it can to stay ahead in the AI arms race.
While sanctions from the US had been successful in curbing China’s progress toward AI, they were only successful in the short term. The country has now learned to operate under constraints, developing its own algorithms and open-sourcing technologies to reduce reliance on Western technology.
Some experts even assert that China’s open-sourcing strategy may become strong enough to challenge the West’s model of AI monetization.
“The fact that DeepSeek are able to figure out the chain of thought with a new way to do reinforcement learning is either catching up with the U.S., learning quickly, or maybe even more innovative now.”
-Lee
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. The hedge fund data is as of Q4 2024.
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10. Pony AI Inc. (NASDAQ:PONY)
Number of Hedge Fund Holders: 20
Pony AI Inc. (NASDAQ:PONY) specializes in autonomous mobility, offering AI-driven robotruck and robotaxi services, intelligent driving software, and vehicle integration solutions. On March 26, Analyst Ming-Hsun Lee of Bank of America Securities reiterated a Buy rating on the stock with a price target of $17.70. Despite facing hurdles such as declining revenues and increased R&D expenses, the firm is optimistic about Pony AI based on its growth potential.
In particular, the analysts believe that the company is poised for significant expansion in its Robotaxi fleet, which is anticipated to drive significant growth in service sales. In addition, the launch of Pony AI’s 7th-generation autonomous driving system is expected to enhance profitability, while partnerships with major auto manufacturers to develop new Robotaxi models will further enhance growth. All in all, Pony AI’s strategic initiatives, as well as its proprietary Virtual Driver technology, underpin the Buy rating.
9. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 63
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. On March 25, the company announced a strategic partnership with Everfox, a leader in cross-domain technology solutions. The partnership will provide enhanced cross-domain solutions for seamless connectivity and secure data sharing, where customers can improve joint command and control capabilities in classified network environments.
The partnership, tested and deployed already with existing customers, will now be extending to additional clients with complex network and operational environment needs. Everfox will apply cross-domain solutions to Palantir’s AI capabilities so that warfighters can rapidly process, decide, and react to real-time intelligence streamed from multiple sensors, platforms, and networks. It will also leverage Palantir’s Mission Manager along with its cross-domain solutions so that customers can maneuver different software across complex classified networks.
“We’re proud to partner with Everfox to enhance the warfighter mission. Our combined efforts will provide our customers with transformative operational efficiency, ensuring they remain at the forefront of technological advancements in defense.”
-Akash Jain, President of Palantir USG.
8. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Fund Holders: 64
Palo Alto Networks, Inc. (NASDAQ:PANW) is a leader in AI-powered cybersecurity. On March 26, the company announced a multiyear North American partnership with the National Hockey League (NHL®) to ensure maximum cybersecurity for the league, including NHL arenas. NHL has been using Palo Alto’s cybersecurity solutions since 2009, leveraging its next-generation firewalls (NGFWs), cloud security, and AI-powered security operations. Meanwhile, League employees have been browsing securely with Prisma® Access Browser and safely using AI apps with AI Access Security.
Through the new partnership, the company will provide NHL with exclusive marketing rights and designations that will connect the Palo Alto Networks brand with the NHL and its fans through the NHL’s vast marketing, digital, and social media channels. NHL will be able to improve the number of threats blocked per month, enhance security for IoT devices, reduce mean time to respond (MTTR) to security alerts, and provide a secure user experience.
“Like us, the NHL is always innovating, and we are thrilled to embark on this partnership evolution. Through our platformization approach, we are committed to helping keep the NHL secure. We are proud to stand alongside the NHL as their trusted cybersecurity partner and look forward to continuing to deliver value to the NHL’s business while seizing the opportunities of this deepened relationship.”
-KP Unnikrishnan, Chief Marketing Officer from Palo Alto Networks.
7. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 126
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 March 25, New Street analyst Pierre Ferragu stood by his “Buy” rating with a price target of $465.
Due to the controversies surrounding the role of CEO Elon Musk within the Trump administration, Tesla shares have had a rough couple of months. The company is also expected to report a rough first quarter, due to an expected decline in deliveries for the period on a year-over-year basis.
However, Ferragu asserts that headwinds facing the stock are largely on the supply side, with demand in China remaining strong. Nevertheless, he is optimistic that the electric car maker will be able to rise above these challenges. “Some good reasons to buy the bottom,” he said.
6. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 162
Salesforce, Inc. (NYSE:CRM) is a cloud-based CRM company that has gained popularity after it unveiled its AI-powered platform called Agentforce. On March 26, Kirk Materne from Evercore ISI maintained a Buy rating on the stock with a price target of $420.00. The analyst stated that even though Salesforce continues to evolve its pricing model, many customers are waiting for more predictable pricing for the offering. The Agentforce platform enables clients to deploy artificial intelligence-powered agents that are capable of performing various tasks across an enterprise.
“While we understand the trepidation regarding usage pricing in terms of visibility/CRPO, our customer discussions indicate the vast majority of enterprises are going to want pricing that is more predictable (i.e. pre-buy or up-front commit).”
-Evercore analysts, led by Kirk Materne, in a Wednesday investor note.
Data cloud and AI annual recurring revenue totals more than $900M, with about $600M stemming from Data Cloud and the rest from Agentforce, Slack AI, and Assisted Agents.
“On the agent front, see customers experimenting across a number of vectors in terms of traditional front office competitors (i.e. MSFT), start-ups, and LLM vendors (DIY route). Believe that the time to value offered by Agentforce ultimately wins out against DIY at most enterprises.”
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology company. On March 25, UBS told investors in a research note that Apple’s ecosystem remains “sticky.” However, service growth could moderate as users hold their iPhones for longer. The firm has a “Neutral” rating on the stock with a $236 price target. The stock has been facing pressure due to the lack of an AI-driven iPhone upgrade cycle.
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 223
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services. On March 26, Melius reiterated Nvidia as “Buy,” stating that it’s bullish on the partnership between Nvidia and Cisco.
“However, Cisco’s latest 2 announcements with Nvidia showcase how its customers can invest in Cisco’s front-end networking gear and its software — and know it will work on the back-end with Nvidia’s [graphics processing units].
3. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 234
Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses. On March 25, Alphabet’s self-driving unit Waymo said that it aims to launch its fully autonomous ride-hailing service in the U.S. capital city next year. The company began moving vehicles to Washington, D.C., in January. It will bring more to the city in the coming weeks so that it can begin paid commercial services as early as next year.
“We will also work closely with policymakers to formalize the legal framework needed to operate without a human behind the wheel, as Washington, D.C. does not currently allow for fully autonomous operations.”
– Waymo.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 317
Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements. On March 26, TD Cowen analysts noted that Microsoft has abandoned data center projects set to use 2 gigawatts of electricity in the U.S. and Europe in the last six months. This is because of an oversupply relative to its current demand forecast.
Analysts led by Michael Elias said in a note that these withdrawals from new capacity leasing have been largely driven by the company’s decision not to support additional training workloads from OpenAI. The firm’s supply checks also reveal that Microsoft’s pullback has led to Alphabet’s Google and Meta stepping in to backfill the capacity in international markets and the U.S., respectively. In response, Microsoft noted that “strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions”.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 339
Amazon.com Inc. (NASDAQ:AMZN) is an American technology company offering e-commerce, cloud computing, and other services, including digital streaming and artificial intelligence solutions. Amazon has been infusing generative artificial intelligence more broadly throughout its e-commerce ecosystem. In this regard, CNBC reported on March 27 that it has recently begun testing a shopping assistant and a health-focused chatbot with some users. The new services being tested by the company appeared on its app or website in recent weeks, with an Amazon spokesperson confirming the features being tested in beta with some customers.
Known as Interests AI, it asks users to describe an interest “using your own words,” and then proceeds to generate a selection of products. Through the feature, consumers can browse for products using more conversational language, separate from the main search bar on Amazon’s website.
“Describe your interest, like ‘coffee brewing gadgets’ or ‘latest pickleball accessories’ — and we’ll find relevant products for you.” Other suggested searches include “children books about persistence and dealing with failure,” and “brain teasers that are not too hard, made out of wood or metal.”
-Amazon Landing Page.
The Interests feature by Amazon uses large language models to translate everyday words or phrases into queries, which traditional search engines can then turn into product recommendations. The company is also testing a chatbot on its website and mobile app known as “Health AI.” Health AI can answer questions related to health and wellness, “provide common care options for health care needs,” and also suggest products.
While we acknowledge the potential of AMZN 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 time frame. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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