The moment of reckoning has arrived: China’s artificial intelligence industry has almost caught up with the US. Moreover, it is more open and efficient too. This is unlike the US’s strategy towards the nascent technology, which it wants to keep largely within its borders. To recap President Donald Trump’s first week in office, it is safe to say that the message towards the community has been simple: Build, build, and build.
When he came to office, Trump immediately rescinded Biden’s sweeping executive order on AI. While AI with fewer guardrails may be terrifying for some, it may be a possible way to expand into new territories and win the race toward AI. In light of this, Trump has recently signed an executive order related to AI to “make America the world capital in artificial intelligence”.
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The President has also announced a joint venture led by SoftBank Group Corp., OpenAI, and Oracle Corp. The “Stargate initiative” will fund billions of dollars worth of AI infrastructure. On the eve of taking office, President Trump said that he would allow “people with a lot of money” to invest in so-called “AI plants” that power data centers for artificial intelligence.
Trump’s actions signal the direction AI policy is going to take under his reign, particularly when it comes to competing with China. Meanwhile, both China and the US are doing everything in their power to win the AI race. Back in September, OpenAI released the world’s first reasoning model, o1, which used a “chain of thought” to answer difficult questions. Other companies soon followed suit. Google developed its own reasoning model called “Gemini Flash Thinking” in December and a few days later, o3 was born.
Keeping a close tab on these developments, China has recently made a mark of its own, igniting panic in Silicon Valley along the way. An AI lab, known as DeepSeek, unveiled a free, open-source large-language model in late December. According to the lab, it took only two months and less than $6 million to build the model, using reduced-capability chips from Nvidia called H800s.
Third-party benchmark tests have revealed how DeepSeek’s model outperformed Meta’s Llama 3.1, OpenAI’s GPT-4o, and Anthropic’s Claude Sonnet 3.5 in accuracy ranging from complex problem-solving to math and coding. If this wasn’t enough, DeepSeek, last Monday, released r1, a reasoning model that has outperformed OpenAI’s latest o1 in several of these third-party tests.
“To see the DeepSeek new model, it’s super impressive in terms of both how they have really effectively done an open-source model that does this inference-time compute, and is super-compute efficient. We should take the developments out of China very, very seriously”.
-Microsoft CEO Satya Nadella
DeepSeek’s r1 is particularly remarkable considering it also had to navigate the strict semiconductor restrictions that the U.S. government has imposed on China. These restrictions had cut the country off from access to the most powerful chips, like Nvidia’s H100s. The development also implies how the AI lab either found a way around the rules or, the controls were simply not as effective as anticipated. Does this mean that Trump’s stance toward fewer guardrails is the way to go? We are yet to find out.
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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A close-up view of a computer motherboard with integrated semiconductor chips.
10. Arbe Robotics Ltd. (NASDAQ:ARBE)
Number of Hedge Fund Holders: 3
Arbe Robotics Ltd. (NASDAQ:ARBE) is a radar solutions provider for driver-assist systems and autonomous driving. On January 13, Roth MKM raised the firm’s price target on Arbe Robotics to $5 from $4 and kept a “Buy” rating on the shares. The rating, issued after meeting with management, demonstrated that the firm is bullish on the stock considering its recent partnership with Nvidia. The said partnership aims to augment Arbe Robotics’ AI-driven radar capabilities, progressing safety and autonomy in the automotive industry. Besides the partnership, the firm stated that Arbe Robotics has completed a registered direct offering and has strengthened its funding position “significantly”.
9. DigitalOcean Holdings, Inc. (NYSE:DOCN)
Number of Hedge Fund Holders: 22
DigitalOcean Holdings, Inc. (NYSE:DOCN) is a public cloud provider that can support AI workloads. On January 22, Cloudways, part of DigitalOcean Holdings, Inc., announced a suite of AI solutions known as Cloudways Copilot. The solutions aim to bring intelligent managed hosting to small and medium-sized businesses (SMBs). Cloudways Copilot will be helping digital businesses address website-related problems through the automatic detection, diagnosis, and support of the resolution of site issues in real time. Working up to four times faster, the solution reduces diagnoses and resolution times from over 45 minutes, to under 10 minutes as compared to manual intervention.
“Our customers have been at the heart of our AI adoption journey. When starting the process, we worked closely with them to understand their web hosting challenges, which uncovered a need for simplification. Our purpose-driven AI solution efficiently helps to solve the repetitive and time-consuming problems that distract clients away from managing their core business”.
– Suhaib Zaheer, SVP of Managed Hosting at Digital Ocean
8. Atlassian Corporation (NASDAQ:TEAM)
Number of Hedge Fund Holders: 44
Atlassian Corporation (NASDAQ:TEAM) is a global software company that designs, develops, licenses, and maintains various software products worldwide. On January 24, Analyst Michael Turrin of Wells Fargo maintained a Buy rating on Atlassian Corporation (NASDAQ:TEAM) with a price target of $350.00. The firm’s buy rating is based on several positive factors favoring Atlassian, particularly its ability to sustain over 20% growth for multiple years. The company has also received positive feedback for its pricing strategies, tier upgrades, and progress with its Jira Service Management product, which is an AI-powered product designed to improve support and operations. All of these have exceeded expectations.
The company has also been implementing significant price hikes for its Data Center products and has also made progress in achieving the FedRAMP Moderate status. Both of these factors position the company for future growth. According to the firm, this progress is further underscored by favorable market anecdotes, particularly with small customers already utilizing its Rovo product. Rovo is Atlassian’s “AI teammate”, a GenAI product that enables teams to take action on organization knowledge. Lastly, the company’s valuation metrics also support the Buy rating.
7. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 56
International Business Machines Corporation (NYSE:IBM) is a multinational technology company offering consulting services and a suite of AI software products. On January 23, BofA analyst Wamsi Mohan raised the firm’s price target on IBM to $260 from $250 and kept a “Buy” rating on the shares. According to the firm, IBM is anticipated to meet and possibly exceed street expectations for fiscal year 2025. Mohan also expects revenue growth to be driven by robust performance in software, particularly favorable AI trends and strategic acquisitions such as that of HashiCorp. The firm also highlighted IBM’s consulting segment to improve in the latter half of 2025. This is going to be backed by an enhanced discretionary spending environment and backlog conversion. Another factor contributing to a stronger revenue outlook this year is the infrastructure segment benefiting from the new Z17 mainframe cycle. Citing an attractive dividend yield, a defensive portfolio, and strong growth potential, Mohan reiterated a Buy rating on the stock.
6. Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 60
Accenture plc (NYSE:ACN) offers strategy and consulting services. On January 23, BCC Iccrea Group, Italy’s largest cooperative banking group, and Accenture announced that they have signed a partnership agreement to support the Group’s IT transformation. The agreement will provide improved services to 114 BCC member banks and other subsidiaries, helping customers and members receive secure, efficient, innovative, and user-friendly services. The new Group IT plan involves modernizing key banking applications, products and services expansion through IT channels, and the acceleration of its artificial intelligence strategy program. Accenture will be focusing on digital platforms, core systems such as customer records and current accounts, and BCC’s data platform. It will also improve BCC’s infrastructure and develop a new service model for improving its security and resilience levels.
“This alliance with the BCC Iccrea Group reinforces our position as a preferred partner for innovation in the banking sector. By implementing cutting-edge technologies such as cloud computing, artificial intelligence and advanced data analytics, and by leveraging human expertise, we are enabling a profound transformation of the Group’s core systems. This will enhance operational efficiency and accelerate process automation. This project highlights our long-term commitment to the Italian market, a journey that began over 60 years ago and continues to focus on innovation and sustainable growth”.
– Massimiliano Colangelo, head of Financial Services at Accenture Italy
5. Amphenol Corporation (NYSE:APH)
Number of Hedge Fund Holders: 69
Amphenol Corporation (NYSE:APH) designs, manufactures, and markets electrical, electronic, and fiber optic connectors. On January 23, Baird raised the firm’s price target on Amphenol Corporation to $89 from $85 and kept an “Outperform” rating on the shares. According to the firm, Amphenol is well-positioned, and its AI factors are well-aligned. The firm particularly highlighted Amphenol’s impressive growth in IT Datacomm, both in AI and non-AI applications, in their previous rating upgrade. Bank of America analysts are also bullish on the stock, highlighting the company’s strong positioning in the AI market and the company’s investments to support future growth.
4. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 78
Constellation Energy Corporation (NASDAQ:CEG) is an energy provider specializing in clean, carbon-free energy solutions. On January 23, Guggenheim analyst Shahriar Pourreza named Constellation Energy (CEG) as the analyst’s 2025 “Best Idea” in the utilities sector. The firm retained a Buy rating and a $378 price target on Constellation shares. The title is largely based on the company’s surprise acquisition of Calpine announced on January 10th. Constellation announced to buy Calpine Corp for $16.4 billion, marking it as one of the biggest acquisitions in U.S. power industry history. The deal has been largely driven by the proliferation of AI data centers and the electrification of transportation and buildings.
“If you have to own one name in ’25, it’s CEG”.
-Analyst.
3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 99
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 January 22, Wedbush analyst Daniel Ives raised the firm’s price target on Tesla (TSLA) to $550 from $515 and kept an “Outperform” rating on the shares. The firm has “growing confidence” in Tesla’s demand delivery story for 2025 and said that there are going to be efforts for the fast-tracking of autonomous vehicles under the Trump Administration. The firm, after discussion with some contacts, has become optimistic that the next four years under the Trump administration are going to be total game changers for the company, particularly for Tesla’s autonomous and artificial intelligence sectors. The firm is also quite confident that the AI and autonomous opportunity is worth “at least $1 trillion alone” for Tesla. With its autonomous vision beginning to take shape along with “very solid” delivery demand, the company could reach a $2 trillion market cap by the end of 2025.
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a technology company that has strengthened its mark in the AI realm by launching Apple Intelligence, its personal intelligence system. On January 24, BofA analyst Wamsi Mohan lowered the firm’s price target on Apple (AAPL) to $253 from $256 and kept a “Buy” rating on the shares. The rating has been issued ahead of the company reporting fiscal Q1 results. The company will report its results after market close on Thursday, January 30. Even though the firm expects a “strong report” from Apple due to the iPhone 16’s initial demand, it has also lowered its fiscal Q2 iPhone units estimate to 49M from 56M. The analyst cited two reasons for the lowered outlook: a weak macro environment and the prolonged rollout of generative artificial intelligence features. The firm further said investors already know about the weak iPhone sales, reiterating a Buy rating based on Apple’s strong profit margins, future improvements, and robust cash flow.
“Partly due to the weak macro and partly due to the staggered launch of Apple Intelligence features, which we see as yet to gain widespread adoption, we lower our F2Q (March quarter) iPhone units estimate to 49 million (from 56 million),” Mohan wrote.
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On Friday, January 24, Meta CEO Mark Zuckerberg announced that the company plans to invest an estimated $60 billion to $65 billion in capital expenditures in 2025 to continue building its AI infrastructure. According to Zuckerberg, the company is building a large data center that “would cover a significant part of Manhattan” to power its AI offerings. It plans to bring on around 1 gigawatt in compute and conclude the year with more than 1.3 million graphics processing units. According to Zuckerberg, 2025 is going to be a “defining year for AI”. Adding to these thoughts, he said that Meta AI digital assistant is set to become the “leading assistant serving more than 1 billion people.” The company is also building an AI engineer that will contribute “increasing amounts of code to our R&D efforts,” he added.
“This is a massive effort, and over the coming years it will drive our core products and business, unlock historic innovation, and extend American technology leadership”.
-Zuckerberg wrote in a post on Facebook.
While we acknowledge the potential of META 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 META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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