Money is pouring into artificial intelligence at unprecedented levels, alleviating initial concerns. Soaring investments from big tech companies, national governments, and venture capitalists come amid a technological shift from conventional large language models toward reasoning models and AI agents.
The shift follows the DeepSeek breakthrough that showed it’s possible to reduce the amount of resources needed to run large language models. While DeepSeek did cause panic by showing it could develop an AI model at a fraction of the costs of other models, the same has not stopped capital inflows into AI infrastructure.
That’s evident in the $500 billion Stargate project that promises to enhance US data center capacity. Joining the Fray is Chinese Internet giant Alibaba, which plans to invest $52 billion in AI and cloud infrastructure, an amount that is much more than what the company has spent over the past decade. Major hyperscalers plan to spend $215 billion in capital expenditures collectively in 2025 on AI data centers, affirming that the AI investment spree is alive and growing.
“I think it’s entirely possible that frontier labs need to keep pumping in staggering amounts of money in order to push the frontier forward,” says Chris Taylor, CEO of Fractional AI, a San Francisco-based startup.
Investors of all stripes, from corporates to venture capitalists, are going crazy over the widespread belief that artificial intelligence is the next big thing in technology. According to preliminary PitchBook data for the fourth quarter of 2024, AI-focused companies accounted for 50.8% of global venture capital funding in value terms, nearly doubling the share from the same quarter in 2023.
According to Bill Janeway, a venture capitalist and economist, the VC industry’s herd mentality is reflected in the concentration of investment in AI.
“This is what we see again and again, whenever any of these new technological innovations have a broad range of potential applications. But nobody knows yet [which] will prove to be sustainable on a longer basis,” Janeway said.
The investment spree comes as businesses increasingly use AI models as they learn more about their capabilities. This is causing the demand for processing power to change from training models to using them, or what the AI industry refers to as inference.
According to Tuhin Srivastava, CEO of Baseten, a company that offers AI computing resources to other businesses, this trend toward inference is already well underway. His clients include tech firms that use AI in their services and apps,
By developing ever-more-capable AI models, large AI labs at companies like OpenAI, Google, and Meta continue competing against each other. According to Tomasz Tunguz, a venture capitalist and founder of Theory Ventures, the goal is to take as much of the still-developing AI market share as possible at any cost. Therefore, demand for AI models could increase by a factor of a trillion or more on the development of AI-specific microchips that deliver efficient systems.
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 in Q4 2024.
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10. Hyperscale Data, Inc. (NYSE:GPUS)
Number of Hedge Fund Holders: N/A
Hyperscale Data, Inc. (NYSE:GPUS) is an industrial company providing advanced data center solutions that support the growing artificial intelligence (AI) industry. It offers high-capacity data center services with robust infrastructure designed to handle AI applications’ significant computational power and storage needs. The company partnered with Northland Capital Markets on February 24, to evaluate strategic alternatives for its Michigan data center.
Engaging Northland Capital markets underscores Hyperscale Data, Inc.’s (NYSE:GPUS) commitment to unlocking value for stockholders amid growing demand for data center facilities and capacity amid the AI boom. Having successfully advised on more than $6 billion in high-performance computing data center-related transactions in the last 12 months, Northland brings a wealth of experience to the data center industry. They specialize in helping clients with a bitcoin mining focus move to high-performance computing-related data centres.
William B. Horne, CEO of Hyperscale Data, Inc. (NYSE:GPUS), commented, “We are excited to partner with Northland, a highly respected investment bank with deep industry expertise. We are confident in its ability to help us evaluate and execute the best path forward for our Michigan Facility, which sits on 34.5 acres and currently has approximately 30 megawatts of available power and has reached an agreement in principle with the local utility enabling Alliance Cloud Services, LLC, an indirectly wholly owned subsidiary of the Company, to increase its power capacity to approximately 300 megawatts.”
9. Tempus AI, Inc. (NASDAQ:TEM)
Number of Hedge Fund Holders: 17
Tempus AI, Inc. (NASDAQ:TEM) is a technology company leveraging AI-driven solutions to revolutionize the healthcare sector. Its Intelligent Diagnostics suite leverages advanced AI, including generative AI, to enhance laboratory tests’ accuracy, personalization, and effectiveness. On February 25, the company delivered solid fourth quarter and full year 2024 results that affirm progress in transforming precision medicine through AI.
Strong market adoption of both genomic testing and data services was the catalyst behind 35.87% revenue growth in Q4 to $200.7 million. Tempus AI, Inc. (NASDAQ:TEM) also delivered a 49.7% increase in gross profit, affirming the impact of increased pricing power and operational efficiency.
“We believe our investments in AI have positioned us well for the future, as technologies that seemed unimaginable a few short years ago increasingly allow us to make our diagnostics intelligent, helping patients live longer and healthier lives. We remain on track to achieve our key financial milestones, with expected robust revenue growth and positive Adjusted EBITDA in 2025,” said Eric Lefkofsky, Founder and CEO of Tempus.