According to a report from Technavio, the global artificial intelligence (AI) market size is estimated to grow by USD 237.4 billion from 2024-2028. The major factors driving market growth are the prevention of fraud and malicious attacks, with a trend toward cloud-based AI services. The report further noted that a shortage of AI experts may pose a challenge.
Amid these developments, White House press secretary Karoline Leavitt said that the recent emergence of DeepSeek has led US officials to look at the national security implications of the Chinese artificial intelligence app. According to President Donald Trump’s crypto czar, it is possible that intellectual property theft could have been at play.
READ NOW: 12 Must-See AI News and Ratings You Might Have Missed and 10 AI Stocks to Watch Amid the DeepSeek Buzz
According to Leavitt, the National Security Council is reviewing the app’s implications.
“This is a wake-up call to the American AI industry”.
Last Monday marked a significant broad market reaction from investors over the emergence of DeepSeek’s cheaper and more efficient AI models, raising questions on the major investments and power needs of leading tech companies in the US. Here is what White House artificial intelligence and crypto czar David Sacks had to say when he was asked by Fox News about intellectual property theft involved in the emergence of DeepSeek.
“Well, it’s possible. There’s a technique in AI called distillation, which you’re going to hear a lot about, and it’s when one model learns from another model. I think one of the things you’re going to see over the next few months is our leading AI companies taking steps to try and prevent distillation … That would definitely slow down some of these copycat models”.
-David Sacks
Joe Biden, during his administration, had placed several export restrictions to prevent such things from happening. However, the emergence of DeepSeek and Baidu’s AI models reveals how they haven’t been as effective. Donald Trump, who has been at the forefront of AI advancements with the Stargate initiative, noted that it is good that companies in China are coming up with a cheaper and more efficient method of artificial intelligence.
“The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries that we need to be laser-focused on competing to win”.
-Donald Trump.
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).
An overhead aerial shot of a bustling financial trading floor, focused on the buying and selling of stocks.
10. Cloudastructure, Inc. Class A Common Stock (NASDAQ:CSAI)
Number of Hedge Fund Holders: N/A
Cloudastructure, Inc. Class A Common Stock (NASDAQ:CSAI) is a cloud-based video surveillance platform that specializes in artificial intelligence (“AI”) and computer vision analytics. On January 31, the company announced a partnership with a global leader in commercial real estate services and investments that manages tens of thousands of properties worldwide. Cloudastructure has already rolled out its AI-powered surveillance and remote guarding solutions to the first four properties located in the heart of downtown San Diego, California. Not only does its solutions offer superior safety for its clients but also drive significant cost savings. The client, previously using traditional security guards, has not only reduced expenses with the company’s AI solutions but also improved security coverage and efficiency in the process.
“We are delighted to announce this collaboration with one of the most esteemed names in commercial real estate. This partnership not only highlights the unmatched value of our AI-driven solutions but also reinforces our standing as a leader in security innovation. By leveraging our cutting-edge technology, we are transforming security into a strategic asset, providing real-time surveillance that is both more effective and cost-efficient than traditional security guards. Furthermore, our impact extends well beyond this partnership. We are proud to serve five of the top 10 NMHC-ranked multifamily management companies. This milestone highlights the scalability of our business model, positioning us to deliver industry-leading security solutions to clients of all sizes, across every sector and geography.”
– James McCormick, CEO of Cloudastructure.
9. EPAM Systems, Inc. (NYSE:EPAM)
Number of Hedge Fund Holders: 39
EPAM Systems, Inc. (NYSE:EPAM) provides digital platform engineering and software development services, with a strong focus on AI, robotics, and virtual reality. On February 1st, the company announced that it is collaborating with Baker Hughes to transform the energy sector by leveraging advanced AI implementations. The expanded engagement names EPAM as Baker Hughes’ systems integration collaborator for digital and AI implementations. The collaboration will be integrating EPAM’s best-in-class digital engineering and product development capabilities with Baker Hughes’ expertise in energy technology. The end goal is to redefine workflows, improve operational efficiency, and provide innovative solutions for significant environmental benefits. The collaboration also supports Baker Hughes’ goal to expand its digital revenue stream and promote sustainable energy development.
“We are pleased that Baker Hughes has chosen to team up with EPAM, entrusting us with their most complex digital transformation and technology modernization challenges. With our expert orchestration and systems thinking approach, we look forward to bringing world-class solutions to drive significant change across the industry.”
-Balazs Fejes, President of Global Business & Chief Revenue Officer of EPAM.
8. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 43
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. The company is slated to report its Q4 earnings today, February 3rd. While it is true that Palantir’s artificial intelligence platform has positioned the company well in the AI market, analysts note that the hype surrounding it is also partly responsible.
“At 50x NTM rev, PLTR is the most expensive software name and >2x the next highest peer. The 4Q setup will be challenging as PLTR is lapping easy comps and any signs of non-accelerating growth could lead to further multiple compression.”
– Jefferies analyst Brent Thill.
According to Thill, Palantir has gained an advantage from easier year-over-year comps starting in 3Q23, along with growing momentum from its artificial intelligence platform (AIP). This helped drive faster growth through 3Q24. However, the year-over-year comparisons will get much tougher from Q4, making it much harder for Palantir to maintain or accelerate its growth.
7. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 44
Cloudflare, Inc. (NYSE:NET) is a cloud services provider that powers AI workloads through its Workers AI platform. On February 3rd, Baird analyst Shrenik Kothari downgraded Cloudflare Inc. from Outperform to “Neutral” but raised the price target to $140 from $125. According to the firm, Cloudflare is the most expensive stock that they are covering on a relative basis. Its previous 2025 outlook indicated that Cloudflare’s valuation may lead to a pushback from investors. However, the firm has believed that the premium was justified given its strong positioning in artificial intelligence and improved go-to-market execution. Despite these positive developments, the firm has also expressed concern regarding the company. It stated that the stock is now more fairly valued which makes the risk and rewards more balanced. Due to this, they have updated the price target and rating.
6. 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 February 1st, Raymond James analyst Adam Tindle raised the firm’s price target on the stock to $330 from $250 and kept an “Outperform” rating on the shares. The analyst told investors in a research note that Atlassian’s Q2 results demonstrate strong growth in its Cloud business, while guidance above expectations suggests that the growth is likely to be sustained. It further notes that Atlassian’s AI opportunity is gaining momentum, and that there are over 1M monthly active users of Rovo and Atlassian Intelligence features.
5. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 51
AppLovin Corporation (NASDAQ:APP) provides a leading marketing platform powered by AI technology. On February 3, Omar Dessouky from Bank of America Securities reiterated a “Buy” rating on the stock with a price target of $375.00. Dessouky is bullish on the stock considering Applovin’s evolving role as a new e-commerce advertising program. The company’s commerce program utilizes its AI-driven Axon engine heavily for optimizing ad targeting and delivery. This allows efficient and personalized ad placements based on user behavior and data. In light of this, the analyst considers AppLovin a top pick for the coming year, expecting significant growth and investor interest as it transitions to a broader market audience. Dessouky also anticipates software revenue for the fourth quarter to be slightly above guidance with significant contribution coming from its eCommerce pilot. His valuation approach, considering both core gaming ads business and potential e-commerce contributions, indicates an overvaluation relative to expected EBITDA, further leading to the buy recommendation.
4. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 56
International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products. On January 30, Jefferies raised the firm’s price target on the stock to $270 from $245 and kept a “Hold” rating on the shares. The analysts told investors in a post-earnings note that for the fourth straight quarter, software revenue accelerated to 11% year-over-year constant currency growth and that IBM’s GenAI book of business also accelerated. IBM’s AI Book of Business is a combination of bookings and actual sales across various products. Its value stood at more than $5 billion inception-to-date, up about $2 billion from the third quarter. The analyst further added that the calendar 2025 outlook “was positive as well”. IBM’s revenue growth is expected to accelerate to greater than 5% year-over-year in constant currency from 3% in 2024.
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 February 3rd, Barclays reiterated the stock as Equal Weight with a $325 price target, stating that it’s sticking with this rating on Tesla.
“We remain EW as we expect the stock to eventually track fundamentals, yet for now narrative is most critical.”
Having previously reiterated the rating and price target on January 30th, the firm noted how Tesla’s “weak” Q4 results were overshadowed by its “supercharged” autonomous vehicles and artificial intelligence outlook. The company is set to launch the driverless Robotaxi program in Austin, Texas, in June, while its unsupervised full-self driving technology is also going to open to a wide set of markets this year. The firm said that Tesla had the worst quarterly auto gross margin in seven years in Q4, significantly lower than expected. Yet, the stock didn’t drop, implying that the company still controls the narrative with a strong story.
2. Uber Technologies Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 136
Uber Technologies Inc. (NYSE:UBER) is a mobility SaaS and technology company that operates a global platform connecting consumers with service providers. One of the biggest analyst calls on Monday, February 3rd, was for Uber. Oppenheimer reiterated the stock as a top pick, stating that it is best positioned ahead of earnings later this week. The firm maintained its “Outperform” rating on the stock with a price target of $85.00. The firm asserts that recent concerns regarding the development of Robotaxi technology offer a compelling purchase opportunity for investors. Even though there are worries surrounding Robotaxi, the technology is going to act as a market expander for Uber.
“Reiterating UBER as our best idea heading into 4Q results as investor concerns regarding Robotaxi have created an attractive buying opportunity, though we acknowledge headline risk around Robotaxi news.”
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On January 30, Benchmark analyst Mark Zgutowicz upgraded Meta Platforms Inc. (NASDAQ: META) from “Hold” to Buy with a price target of $820.00. Zgutowicz cited a robust 2025 core business outlook as a reason for the rating upgrade. According to him, Meta’s AI infrastructure investments and core ad strength provide multiple growth catalysts for 2025 and beyond. Zgutowicz said he is “intrigued” by the initial development of AI engineering agents. This is because they can code and solve problems like “a good mid-level engineer.” As such, he looks forward to more discussion on how efficient these agents can be. Other firms such as RBC Capital are also bullish on Meta following its fourth-quarter results. According to the firm, Meta had a strong quarter and laid out several new product and monetization drivers into 2026. The company was also successful in defending and reiterating its ambitious AI spending plans amid the recent DeepSeek controversy.
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.
READ NEXT: 20 Best AI Stock To Buy Now and Complete List of All AI Companies Under $2 Billion Market Cap.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get
