Wall Street’s major indexes closed lower on Monday, December 9th, dragged down by a decline in Nvidia. The plunge pressured the broader technology sector, with investors also turning their attention to an important inflation report due this week.
Investors expect the consumer price index (CPI) data set to be released on Wednesday, while the producer price index (PPI) is anticipated on Thursday, ahead of the Federal Reserve’s meeting on Dec. 17-18.
The plunge, however, seems only temporary, and technology stocks are poised to gain in the future. BlackRock anticipates that infrastructure and cybersecurity investments will “shine” in 2025. Jay Jacobs, the firm’s U.S. head of thematic and active ETFs, considers the artificial intelligence boom as a major catalyst. Jacobs said that AI companies need to build out their data centers and that keeping that data safe is also a sound investment play for the New Year.
“If you think about your data, you want to spend more on cybersecurity as it gets more valuable. We think this is really going to benefit the cybersecurity [and the] software community which is seeing very rapid revenue growth based off of this AI.”
Jacobs further stated that even though technology may seem tangible, it is also heavily reliant on physical infrastructure such as energy, materials like copper, and even real estate. These real-world components are essential for supporting the systems that are used every day. He further went on to say that it’s not just the mega-cap tech names that are winning, other semiconductor companies and other data center companies are benefiting from the rise of this theme.
In this regard, AI ETFs can play a significant role in helping investors gain targeted exposure while mitigating some of the risks associated with investing in individual AI stocks. They are a smart way for investors to invest in a theme for seeking longer-term gains.
“Identifying future winners can be very difficult – it’s not always the obvious names that make it in the long-term”.
-Ben Seager-Scott, chief investment officer at Forvis Mazars
A crowded Wall Street plaza, bustling with people carrying briefcases.
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).
C3.ai, Inc. (NYSE:AI), an enterprise artificial intelligence (AI) software company, is engaged in building and operating enterprise-scale AI applications. On December 9, the company announced its fiscal second quarter ended October 31, 2024. The company reported a loss of 6 cents a share, outperforming Wall Street’s consensus forecast for a 16-cent loss as tracked by FactSet. Revenue came in at $94.3 million, exceeding analysts’ expectations of $91 million. CEO Thomas Siebel said that they had an outstanding quarter with strong top-and-bottom line performance, marking their seventh consecutive quarter of accelerating revenue growth. The company has also announced a new global alliance with Microsoft to accelerate growth in Enterprise AI. The agreement will allow C3.ai solutions to be available for sale by the entire Microsoft Azure salesforce, who will receive commissions on any sales.
“By establishing C3 AI as a preferred AI application provider on Azure and creating a Microsoft-scale go-to-market engine, we’re making it easy for businesses to adopt and deploy C3 AI applications. This is an inflection point for Enterprise AI, driving growth”.
Rubrik, Inc. (NYSE:RBRK) offers data security solutions, heavily utilizing artificial intelligence and machine learning to monitor threats and provide advanced data recovery capabilities. On December 9, Mizuho raised the firm’s price target on Rubrik (RBRK) to $68 from $47 and kept an “Outperform” rating on the shares. The analysts told investors in a research note that the company has had a strong Q3 as well as increased fiscal 2025 guidance for revenue, earnings, and free cash flow. The company’s performance reflects its commitment to data security and resilience, areas that increasingly leverage AI technologies. The firm also believes that Rubrik’s focus on “best-in-class” ransomware defenses which integrate AI-driven tools such as an Anomaly Detection system and generative AI companion Ruby, for the protection and operationalization of data have enabled it to significantly separate from most vendors.
Bloom Energy Corporation (NYSE:BE) develops solid-oxide fuel cell systems for on-site power generation. On December 9, BofA analyst Dimple Gosai raised the firm’s price target on Bloom Energy Corporation (NYSE:BE) to $20 from $7 and kept an “Underperform” rating on the shares. Even though the firm acknowledges Bloom’s success in landing big deals, including those with American Electric Power (AEP) and collaborations with Quanta Computer, it said that revenue remains flat due to lower selling prices. Moreover, the firm is looking for increased momentum on greenfield projects to justify the current valuation. It also added that it sees execution risks that remain.
UiPath Inc. (NYSE:PATH) is a leading enterprise automation and AI software company that provides robotic process automation and artificial intelligence software. On December 6, the company reported its Q3 2025 results, exceeding the high end of its guidance across all key financial metrics. The results demonstrated improved execution and the value of their AI-powered automation platform. It reported a 9% year-over-year revenue increase to $355 million, with annual recurring revenue reaching $1.607 billion, a 17% rise.
The company continues to integrate AI into its automation solutions, exemplified by the launch of UiPath Autopilot™, and a strengthened relationship with SAP. The company also highlighted the launch of Agentic Automation, which has been well-received by customers and more than 1,000 organizations have registered for the private view. The same day, BMO Capital raised the firm’s price target on UiPath (PATH) to $16 from $15 and kept a “Market Perform” rating on the shares. The analyst told investors in a research note that the company had a reasonable quarter, with modest upside in key metrics as well as its new agent tools that provide incremental opportunities despite a competitive market.
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems serving a diverse clientele which includes US government agencies and commercial enterprises. On December 9, Palantir Technologies Inc. (NASDAQ: PLTR) announced that it has expanded its contract with the U.S. Special Operations Command (USSOCOM) for delivering technology solutions in support of enterprise capabilities. Valued at $36.8 million, the one-year delivery will position Palantir as a lead software integrator for USSOCOM’s Mission Command System (MCS) while expanding the technology solutions supporting U.S. Special Operations Forces (SOF) globally. The new contract will speed up software development, enabling pilot projects that bring Palantir’s AI technology to the U.S. Special Operations Command (USSOCOM).
“USSOCOM continues to be at the forefront of adopting emergent technology and we are looking forward to this new stage of our long-time partnership. Palantir’s Mission Manager is positioned to innovate the Defense industry by providing software to enable and operationalize commercial capabilities for U.S. Government missions. USSOCOM understands that commercial software can be the differentiator in the battlespace and we are steadfast in our commitment to supporting USSOCOM forces around the world.”
-Akash Jain, President, Palantir USG.
5. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 56
International Business Machines Corporation (NYSE:IBM) is a multinational technology company offering AI consulting services and a suite of AI software products. On December 9, the company announced that it has unveiled revolutionary research in optics technology that has the potential to improve how data centers train and run generative AI models. The process would enable co-packaged optics (CPO), the next generation of optics technology, to enable connectivity within data centers at the speed of light through optics that would complement existing short-reach electrical wires. The research innovation would enable various benefits including lower costs for scaling generative AI, faster AI model training, and increased energy efficiency for data centers.
“As generative AI demands more energy and processing power, the data center must evolve – and co-packaged optics can make these data centers future-proof. With this breakthrough, tomorrow’s chips will communicate much like how fiber optics cables carry data in and out of data centers, ushering in a new era of faster, more sustainable communications that can handle the AI workloads of the future.”
Oracle Corporation (NYSE:ORCL) is a database management and cloud service provider hosting immense data that AI applications need to process. On December 9, the company posted its fiscal 2025 second-quarter results with slight revenue and profit miss due to tough competition among database and cloud services providers. The company earned an adjusted $1.47 per share, with revenues rising 8.6% year-over-year to reach $14.1B. Meanwhile, analysts expected the company to earn an adjusted $1.48 per share on $14.12B in revenue. Cloud revenue, including infrastructure and applications, totaled $5.9 billion, slightly under the $6 billion estimate. Meanwhile, infrastructure revenue surged by 52% year-over-year, reaching $2.4 billion, and application revenue increased by 10% year-over-year to $3.5 billion.
“Record level AI demand drove Oracle Cloud Infrastructure revenue up 52% in Q2, a much higher growth rate than any of our hyperscale cloud infrastructure competitors. Growth in the AI segment of our Infrastructure business was extraordinary—GPU consumption was up 336% in the quarter—and we delivered the world’s largest and fastest AI SuperComputer scaling up to 65,000 NVIDIA H200 GPUs. With our remaining performance obligation up 50% to $97 billion, we believe our already impressive growth rates will continue to climb even higher. This fiscal year, total Oracle Cloud revenue should top $25 billion.”
Vertiv Holdings Co (NYSE:VRT) offers digital infrastructure technology and services for data centers, communication networks, and commercial and industrial facilities. On December 9, Citi raised the firm’s price target on Vertiv Holdings (VRT) to $155 from $141 and kept a “Buy” rating on the shares. The firm said that it is “selectively bullish” on multi-industry companies since divergent market trends among industrial verticals could continue for the time being. The firm’s alignment with secular growth themes, such as Vertiv’s focus on data center infrastructure, energy-efficient solutions, and next-generation cooling technologies, positions it to benefit from emerging market tailwinds. The firm views companies such as Vertiv as a beneficiary of long-term growth trends and other opportunities.
Alibaba Group Holding Limited (NYSE:BABA) is an online retailer that leverages AI in its e-commerce business. On December 8, it was announced that Alibaba is driving AI enhancements across different industries in Asia. Alibaba Cloud’s robust “Cloud + AI” development strategy has enabled it to achieve substantial growth in external client revenue. The growth includes double-digit increases in public cloud services and notable triple-digit growth in AI-related product revenue for the fifth consecutive quarter, as per the latest September quarter earnings. Collaborations with companies such as Japan’s Lightblue, Malaysia’s Pictureworks, Singapore’s Atlas, and China’s Drunk Elephant demonstrate the diverse applications of Alibaba Cloud’s technologies.
“We are thrilled to witness our robust cloud infrastructure and AI offerings empowering organizations across a diverse range of industries to further drive transformation in 2024 with our partners together. As the leading cloud service provider in Asia, we remain committed to helping our customers enhance their operations and deepen their connections with consumers, while collaborating with our ecosystem partners to unlock the full potential of AI and cloud technologies for businesses of all sizes”.
– Selina Yuan, President of International Business, Alibaba Cloud Intelligence.
Apple Inc. (NASDAQ:AAPL) is a technology company that has made its mark in the AI realm with the launch of Apple Intelligence, its personal intelligence system. On December 10, DBS analyst Jim Hin Kwong Au downgraded the rating on Apple to “Hold”, setting a price target of $243.00. Hin Kwong has assigned the hold rating based on Apple’s current market position and future prospects. Despite the introduction of promising innovations such as the AI-powered iPhone and the Vision Pro XR device, the analyst stated that the recent surge in Apple’s stock price signifies how the advancements are already factored in its valuation, thereby limiting immediate stock gains.
Moreover, Apple’s technological breakthroughs, particularly in semiconductor design, bolsters its competitive edge but comes with its fair share of challenges. The analyst highlighted how delays in the Apple Intelligence launch could hurt consumer sentiment and iPhone sales both. Apple indeed has strong user loyalty and product quality which suggest long-term growth potential, but the current factors call for a cautious short-term outlook.
While we acknowledge the potential of AAPL 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 AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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