The race to gain a competitive edge in the generative artificial intelligence industry fiercely continues, and Anthropic is the latest one making a move. On Monday, the artificial intelligence startup announced the launch of its advanced AI model, Claude 3.7 Sonnet, stating that it is its “most intelligent” version yet. This model can produce faster responses or display its step-by-step reasoning process, as reported by Reuters.
READ NOW: 10 Buzzing AI Stocks Dominating Headlines and 10 AI Stocks Surging on News and Analyst Calls
Anthropic’s hybrid model combines multiple reasoning approaches to solve complex problems more effectively. It was launched amid fierce competition in the world of AI. According to the company, the Claude 3.7 Sonnet model is its most advanced version and will be available on all Claude plans, including Free, Pro, Team, and Enterprise. However, it noted that the “extended thinking mode” feature is only available on paid plans.
“This model has all the capabilities wrapped together — we want one coherent AI that can help with everything. There’s an advantage in simplicity for our customers.”
-Anthropic co-founder and science chief Jared Kaplan told CNBC in an interview.
Kaplan further stated that the “hybrid” model, going live immediately, operates like a human brain. While some questions require quick responses, many others require critical thinking, which is why the company is looking to integrate both. Elaborating on the extended thinking mode, the company said that it is a model that “self-reflects before answering,” thereby improving its performance in math, physics, instruction-following, coding, and many other tasks. Notably, the company said that this model has been specifically designed to focus on “real-world” tasks instead of math and computer science problems. This is so that it can reflect how businesses use large-language models.
According to analysts, Anthropic’s move can grant it an edge against OpenAI and other tech companies investing in AI technologies.
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.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Pixabay/Public Domain
10. Quanta Services, Inc. (NYSE:PWR)
Number of Hedge Fund Holders: 67
Quanta Services, Inc. (NYSE:PWR) is an infrastructure company that provides solutions for the electric and gas utility, renewable energy, communications, pipeline, and energy industries. On February 24, Daiwa downgraded the stock to “Hold” from Outperform with a price target of $280, down from $355.
The firm has downgraded Quanta as it sees challenges in both the company’s renewable energy infrastructure order growth and artificial intelligence-driven power infrastructure spending. The firm doesn’t see any significant positive catalysts for the stock either. The analysts further told investors in a research note that Quanta’s 2025 guidance is “unappealing”.
9. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Number of Hedge Fund Holders: 77
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a leader in AI-driven endpoint and cloud workload protection. On February 24, TD Cowen analyst Shaul Eyal raised the firm’s price target on the stock to $450 from $380 and kept a “Buy” rating on the shares. The rating update follows earnings prints from Palo Alto Networks and CDW which showed positive signs for the first quarter.
Eyal has expressed optimism regarding the company’s first-quarter performance in fiscal year 2025, stating that he anticipates Crowdstrike to maintain strong net retention rates and revenue growth momentum. He further expects that the management will project the fiscal year 2026 revenue growth forecast slightly above the current market consensus of 19%, anticipating encouraging commentary related to clearer pipeline visibility. Eyal’s research also contends that the July 19 incident hasn’t altered customer opinions about the efficacy of the company’s AI-powered cybersecurity platform called Falcon.
8. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 107
Alibaba Group Holding Limited (NYSE:BABA) is an internet giant that offers e-commerce services in China and internationally. One of the biggest analyst calls on Monday, February 24, was for Alibaba Group Holding Limited. Morgan Stanley upgraded the stock to “Overweight” from equal weight with a price target of $180, up from $100.
The firm said that the Chinese e-commerce company is now its preferred pick. It also admitted that it had underestimated the surge in the company’s AI-driven cloud demand and the strength of its core Taobao and Tmall Group business. The firm further forecast Alibaba’s cloud revenue to double in three years.
“As the market shifts focus from weak consumption to technological breakthrough in China, we believe China Internet offers superior exposure to AI enablers / adopters.”
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 February 24, Wedbush analyst Daniel Ives reiterated an “Outperform” rating and $550.00 price target on the stock. Ives noted that he is sticking with his rating and price target because he is optimistic about the company’s autonomous and robotics future. The firm has pointed out Tesla’s upcoming vehicle and product launches.
“Tesla is gearing up for a new mass market vehicle launch in 1H25, making major product developments around autonomous/Optimus across its global production ecosystem, Austin unsupervised FSD launch set for June, and a host of other growth EV/battery catalysts on the horizon.”
Wedbush analysts led by Ives also wrote that Musk is capable of balancing his many roles.
“The worry of the Street is that Musk dedicating so much time (even more than we expected) to DOGE takes away from his time at Tesla in such a crucial moment and year for the company”. But, they noted, “Musk has always been able to balance his countless initiatives better than any other CEO we have seen.”
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 the launch of its AI-powered platform called Agentforce. On February 24, TipRanks reported that Monness analyst Brian White maintained their neutral stance on the stock, giving a “Hold” rating on February 19. White’s rating comes from both Salesforce’s current market position and future prospects.
According to the analyst, the company is progressing well thanks to its AI-powered Agentforce 2.0 platform and will possibly benefit from ongoing digital media trends. However, there are challenges stemming from a competitive and fragile macroeconomic environment. Another layer of uncertainty arises from ongoing executive changes, with a new President and Chief Operating & Financial Officer set to start soon. The firm further highlighted how Salesforce will meet earning expectations and growth in subscription sales, but internal transitions and market conditions signify a cautious approach.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology company. On February 21, the company announced that Apple Intelligence, Apple’s personal intelligence system, is coming to Apple Vision Pro in April. Apple Vision Pro is a mixed-reality headset by the company. With Apple Intelligence integrated into the product, users will be able to use Writing tools for quick proofreading, summarizing, or rewriting, use ChatGPT to write text from scratch, use Image Playground to develop fun images, and much more.
The company said that Apple Intelligence will be available in beta on visionOS 2.4 with support for U.S. English, while more features and support for additional languages will be rolled out throughout the year. visionOS 2.4 has also introduced new apps and features to allow users to explore spatial computing. The Spatial Gallery, a new app for Vision Pro, comes with a curated collection of spatial photos, spatial videos, and panoramas.
“Apple Vision Pro is helping users communicate, collaborate, and experience entertainment in entirely new ways — and we’re continuing to push the boundaries of what’s possible in spatial computing with visionOS 2.4. With Apple Intelligence, Vision Pro users will be able to take their productivity and creativity to new heights using features like Writing Tools, Image Playground, and Genmoji. And we’re excited for users to discover and share incredible new experiences with Spatial Gallery.”
-Mike Rockwell, Apple’s vice president of the Vision Products Group.
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. One of the biggest analyst calls on Monday, February 24, was for Nvidia Corporation. Morgan Stanley reiterated the stock as “Overweight”, stating that the firm is standing by Nvidia heading into earnings later this week. According to the firm, the demand for the company’s Hopper chips has become more solid, a positive development considering the situation two months prior.
Initially, there were concerns regarding Hopper’s demand and the challenges with the GB200 form factor but now it seems that Nvidia’s quarterly performance will likely align with expectations. Economic concerns have also been alleviated to an extent now that international customers continue to purchase amid fears regarding potential export controls. Moreover, the complex transition to Blackwell chips is progressing well while significant challenges are being addressed alongside.
“We continue to think that near-term fundamentals are strong – more so than 60 days ago as we have seen improvements on multiple levels.”
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 February 24, Google and Salesforce announced that they have expanded their strategic partnership to enhance customer choices and bring Gemini to Salesforce’s AI-powered Agentforce. In particular, Salesforce customers will be able to build Agentforce agents using Gemini and deploy Salesforce on Google Cloud.
This will allow customers to use data bi-directionally from Google BigQuery, and Salesforce via zero copy technology. Another key point from the partnership is that Salesforce Service Cloud will become more firmly integrated with Google Customer Engagement Suite, enabling enhanced AI-enabled contact center capabilities. Salesforce’s Agentforce, Data Cloud, and Customer 360 Apps will run on Google Cloud infrastructure, and that too, with access to new regions and simplified procurement through the Google Cloud Marketplace.
“Salesforce’s selection of Google Cloud as a major infrastructure provider means enterprise customers can now deploy some of their most critical applications on our highly secure, AI-optimized infrastructure — with minimal friction. Our mutual customers have asked us to be able to work more seamlessly across Salesforce and Google Cloud, and this expanded partnership will help them accelerate their AI transformations with agentic AI, state-of-the-art AI models, data analytics, and more.”
-Thomas Kurian, CEO of Google Cloud.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 262
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On February 24, the company announced that it has officially launched Meta AI in the Middle East and North Africa with Arabic capabilities. The launch will allow millions of users across the region to have unlimited free access to some of the most advanced AI assistants located in apps like Facebook, Instagram, WhatsApp, and Messenger. Meta AI, a tool that helps people all over the world learn, create, and engage with things, is completely free and works on any device running the latest version of the company’s apps.
“With this new chapter in our expansion, millions of users across the region now have unlimited free access to one of the world’s most advanced AI assistants conveniently located in the apps you know and love”
-Meta
1. 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 February 21, analysts from leading investment bank TD Cowen reported in a research note that Microsoft has canceled some leases for US data center capacity.
While the move may imply a shift in the company’s AI strategy, it also raises concerns about whether it’s securing more AI computing capacity than it needs in the long term. TD Cowen analysts led by Michael Elias cited channel checks, i.e. inquiries with supply channel providers, to reveal how the company has voided leases in the US totaling “a couple of hundred megawatts” of capacity.
This is the equivalent of roughly two data centers — canceling agreements with at least a couple of private operators. The firm also reported that channel checks further suggest how Microsoft has pulled back on converting so-called statements of qualifications. These are agreements that usually lead to formal leases. Nevertheless, a company spokesperson has revealed that the company’s plans of investing over $80 billion in AI and cloud capacity this fiscal year remain on track.
“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions”.
-Microsoft spokesperson.
While we acknowledge the potential of MSFT 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 MSFT 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 the latest investment ideas from hedge funds’ investor letters by entering your email address below.
