In this article, we will take a detailed look at 10 AI Stocks to Watch Amid DeepSeek Impact.
The launch of DeepSeek is drawing new battle lines in the AI competition and many analysts believe the technology investment landscape won’t be the same again after the Chinese breakthrough. Talking to CNBC, Databricks CEO Ali Ghodsi said that DeepSeek would result in “distillation” where companies will make smaller, more efficient models based on the technology:
“So we’re going to just see distillation happening left and right. It’s already happening—like, there’s so many versions of DeepSeek that have been reproduced and redone just in the last week as we speak. So this distillation is going to just create so much competition at the LLM or the AI layer.”
In the coming days, it would be interesting to see how American AI companies tackle this challenge and come up with new products or breakthroughs to maintain their dominance.
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For this article, we picked 10 AI stocks that are trending on the back of latest news. With each stock we have mentioned the number of hedge fund investors. 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).
10. Leidos Holdings (NYSE:LDOS)
Number of Hedge Fund Investors: 34
Shana Sissel from Banríon Capital Management said in a latest program on Schwab Network that Leidos Holdings (NYSE:LDOS) is a promising under-the-radar tech stock for 2025.
“It’s kind of the outlier of the group. It’s a government contractor—defense, healthcare, commercial airlines, cybersecurity, things of that nature. Smaller player in the space, it doesn’t get as much of the headlines as some of its larger peers, but it’s really well-run, has a really solid balance sheet, good leadership, and it just kind of keeps trucking along. I don’t know that most people think of Leidos as a household name, but it should be. If you fly, you go through their machines every time you go through the TSA checks.
So, it’s a very interesting company. I think the number one concern that investors may have with the company has to do with Elon Musk and the Doge team, and how that will affect defense spending. But Leidos has an interesting niche in that a lot of the services they provide are much more critical outside of just general defense. I think that it is actually going to do quite well even in an environment where there’s increased scrutiny on defense spending. But the stock has come back a little bit as a result of those concerns.”
9. Intel Corp (NASDAQ:INTC)
Number of Hedge Fund Investors: 68
Oliver Blanchard from The Futurum Group in a latest program on Schwab Network said that Intel (NASDAQ:INTC) is a wait-and-see play despite the company being a major player in the industry. The analyst said we should not “bet against” Intel (NASDAQ:INTC) but recommended investors to wait.
“Intel’s going through some things right now. There’s a change of leadership. I have full confidence in the leadership team now—I think they’re in really good shape—but they have some decisions to make. They kind of fell behind on a few things; there have been some misses that they’re still catching up on. So, for me, Intel is kind of like a “wait and see.” Never bet against Intel. I think they’re a really strong company, they’re vital to this ecosystem, and they’re doing some really great things. I think they’re caught up when it comes to the AI PC race, and they moved a lot faster than a lot of people expected them to. But it’s—we’ll see. Let’s wait and see what happens in the next three months with Intel.”
It would take years for Intel to make a comeback. The company has scrapped its plans to launch Falcon Shores, its next-generation AI GPUs. A few months back it was a key catalyst expected to debut in late 2025. Intel’s Clearwater Forest AI data center server CPUs, which were set to use its 18A chip (similar to TSMC’s 3nm nodes), have had their launch delayed from FY2025 to FY2026. These setbacks are likely to affect Intel’s already struggling Data Center & AI business segment. Consensus expectations suggest the company won’t see positive free cash flow for at least the next three years.
Invesco Growth and Income Fund stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter:
“Intel Corporation (NASDAQ:INTC): The chipmaker reported weaker-than-expected quarterly results as revenues declined and earnings were below expectations. Management also provided weaker guidance going forward; the stock fell on the news. We sold the position during the quarter.
The chipmaker’s quarterly earnings report was weaker than anticipated as revenues declined and earnings were below expectations. Management also provided weaker guidance going forward. Given that a potential recovery appears to be further in the future than we originally anticipated, we sold the position.”
8. Marvell Technology Inc (NASDAQ:MRVL)
Number of Hedge Fund Investors: 70
Shana Sissel from Banríon Capital Management explained in a latest program on Schwab Network why she likes Marvell Technology Inc (NASDAQ:MRVL) stock as an AI play:
“Marvell, in particular, gets a bad rep. The stock does really well, and I was looking at some of the Street research and expectations for the stock. It’s really mixed—there are people who love the stock or really hate the stock. The company has, you know, a bit of leverage on their balance sheet, but overall it is taking advantage of trends in the industry, particularly as it pertains to 5G and custom silicon for AI. That should do really well, and if you look at its data center business, it’s just done remarkably well—really performed at a high level. So, it’s a stock that I really like because not a lot of people pay attention to it, but it is an AI play.”
Marvell Technology Inc (NASDAQ:MRVL) is rapidly positioning itself as an AI-first company, with its custom silicon business accounting for 73% of Q3 revenues, up from 39% during the same period last year. Marvell has a five-year agreement with Amazon (AMZN) AWS, helping Amazon design its Trainium and Inferentia ASICs, and providing a range of optical interconnect products.
Marvell Technology Inc (NASDAQ:MRVL) is now focusing on the AI opportunity, as evidenced by the recent restructuring charges, and is progressing through the design phase of its 2nm platform.
Carillon Eagle Mid Cap Growth Fund stated the following regarding Marvell Technology, Inc. (NASDAQ:MRVL) in its Q4 2024 investor letter:
“Marvell Technology, Inc. (NASDAQ:MRVL) is a leading provider of semiconductor chips for data centers. This past quarter, management highlighted very strong orders coming from customers in the artificial intelligence (AI) space as well as design wins for future AI-related chips. Management shared a long-term view for a revenue target that was above expectation.”
7. Qualcomm Inc (NASDAQ:QCOM)
Number of Hedge Fund Investors: 74
Oliver Blanchard from The Futurum Group in a latest program on Schwab Network said he likes Qualcomm Inc (NASDAQ:QCOM) as an AI play.
“I think that on the device side—so basically anything that’s Edge and device, so endpoint, that’s mobile, PC, XR, automotive—I really like Qualcomm, always, just because they’re so good at the ARM-based, low-power, high-output AI chips in all of these segments.”
Fidelity Dividend Growth Fund stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q3 2024 investor letter:
“At the stock level, QUALCOMM Incorporated (NASDAQ:QCOM) was a major detractor, returning about -14% the past three months. The firm develops and manufactures semiconductors, software and services used in mobile phones, and other wireless technologies. On July 31, the company reported second-quarter results, and issued guidance for Q3, both of which solidly exceeded expectations. The stock slid, however, on concerns about a slow recovery for smartphones. Additionally, shares dipped this quarter in step with other semiconductor-related names.”
6. Vertiv Holdings (NYSE:VRT)
Number of Hedge Fund Investors: 91
Shana Sissel from Banríon Capital Management explained in a latest program on Schwab Network why she likes Vertiv (NYSE:VRT) as an AI play for 2025:
“Vertiv is another AI play that you don’t hear about, but it’s critical data—data center infrastructure that is absolutely critical as we grow and build our AI capabilities. Because you need these cooling systems that they provide to maintain the computer systems to be able to do the machine learning that takes up so much computing power. So, it’s critical infrastructure. And it’s really, as AI goes, so does the stock. It is the leading player in the space, and so it’s one that I really like and that I think people should be taking a look at.”
Baron Small Cap Fund stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its Q3 2024 investor letter:
“Vertiv Holdings Co (NYSE:VRT) is a leader in data center equipment, with significant share in both power and cooling applications. The stock rebounded off recent weakness, as investors gained confidence that a massive build out of AI data centers globally was on the horizon. Vertiv’s strong relationship with chip manufacturers and involvement in the necessary technology roadmap for solutions as the energy density of server racks increases were catalysts. Vertiv’s orders were up 57% year-over-year in the second quarter, backlog was $7 billion, a record, and 2024 operating profit margin and EPS guidance was raised.”
5. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
Seth Goldstein from Morningstar said in a latest program on Schwab Network that Tesla Inc (NASDAQ:TSLA) shares are priced for perfection even after the pullback from the stock’s 52-week high.
“There’s still a lot of positive scenarios that are priced into shares with regards to vehicle delivery growth in 2025 and beyond, from the new, more affordable vehicle that’s set to launch and from the success of self-driving, ultimately translating to Robo-taxis by a management timeline. And I think both of those are realistic. So, I think there’s still a lot of optimism priced in the current stock.”
The analyst was asked what would be the fair value of Tesla Inc (NASDAQ:TSLA) shares. Here is what he said:
“My fair value is 210, so I see a pretty significant decline from the current levels around 390 to get back down to 210. But, you know, I think that once management comes in with their first and second-quarter production and delivery numbers, we’re likely to see that. 20 to 30% seems a little optimistic, which is what Elon Musk was guiding to with the last earnings call. So, I don’t think 2025 is going to see the growth that management guided to. I think that will have some negative market sentiment.”
Analysts are still trying to look beyond Elon Musk’s claims and find out the specifics on the company’s EV and robo-taxi plans.
Tesla Inc’s (NASDAQ:TSLA) product lineup is showing signs of stagnation, with over 95% of sales still coming from the Model 3 and Model Y. Meanwhile, competitors are rolling out more advanced models. According to Reuters, Tesla’s market share in Europe is slipping as legacy automakers like BMW post stronger sales. Chinese competitor BYD is also gaining ground in Europe, despite talk of tariffs.
Infuse Asset Management stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q4 2024 investor letter:
“I’ve been very patient with Tesla, Inc. (NASDAQ:TSLA). Frankly, I’m a big believer in Elon but I also hate investing in companies where the narrative far outweighs any financial evidence. I do see a path to Tesla being one of the world’s largest companies but slight growth in a cyclical industry with very little pricing power is not a recipe for strong forward returns. Though the AI/robotics narrative is strong, I’m not adding at current prices since we haven’t seen much of the narrative translate into the earnings yet. This cognitive dissonance can be an uncomfortable tension but I’m trying to look at the big picture here. So while I fully admit that Tesla may be overvalued in the short run, the long-term destination of the company should not be underestimated.”
4. Advanced Micro Devices Inc (NASDAQ:AMD)
Number of Hedge Fund Investors: 107
Oliver Blanchard from The Futurum Group gave some bullish comments about Advanced Micro Devices Inc (NASDAQ:AMD) in a latest program on Schwab Network. The analyst believes Advanced Micro Devices Inc (NASDAQ:AMD)’s business direction is positive:
“I think AMD is interesting. I’ve seen, you know—unpopular opinion maybe—I’ve seen some financial analysts sort of downgrade them a little bit. I think they have a really good play in data center and also in endpoints, so basically client PC. I like where they’re going with their technology.”
Despite the latest weak data center results from the company, Advanced Micro Devices (NASDAQ:AMD) bulls believe the market should stop comparing the company’s chips with Nvidia. Advanced Micro Devices (NASDAQ:AMD) will continue to benefit from organic growth catalysts in this segment despite the competition from Nvidia. According to Goldman Sachs Research, global data center demand could surge by 160% by 2030. In the U.S., data centers are projected to use 8% of total power by 2030, up from 3% in 2022. McKinsey estimates that adding the required U.S. capacity will need over $500 billion in infrastructure investment by the decade’s end.
White Falcon Capital Management stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q4 2024 investor letter:
“During the year, we sold half of our stakes in Advanced Micro Devices, Inc. (NASDAQ:AMD) and Nu Holdings as they reached their intrinsic values. However, the decline in these stocks toward the end of the year provided us with an opportunity to add to our positions. In AMD’s case, the market has been disappointed by the company’s potential shortfall in AI chip revenues, which were previously forecasted to reach $10 billion in 2025. However, the factors required to justify the investment when the stock is priced at $220 per share are vastly different from those needed when the stock is at $120 per share. Yes, AMD’s AI chips and associated software are not competitive with Nvidia but this is now known and in the valuation. We believe this hyperfocus on AI ignores AMD’s other businesses where they continue to take advantage of Intel’s missteps. Importantly, AMD retains the potential to capture a small share of the AI chip market, which, given the market’s massive size, could be highly impactful for the company.”
3. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 128
Oliver Blanchard from The Futurum Group in a latest program on Schwab Network talked about the growth catalysts of Broadcom Inc (NASDAQ:AVGO):
“I think Broadcom is also kind of like a sleeper in this. We don’t really talk about Broadcom enough, but I think they’ve got some plays coming next year, especially with IoT enabled by AI—so mainly smart cameras and smart drones. I think Broadcom is also going to have an advantage there.”
Munro Global Growth Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q4 2024 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) contributed 94bps to Fund performance for the quarter. Broadcom is a fabless semiconductor company that designs semiconductors for a range of different industries and applications, based in Palo Alto, California. The company plays an important role in providing semiconductors for AI, specifically, they provide hyperscale data centre companies custom silicon chips. Over time, as companies such as Meta, Alphabet, Amazon and Microsoft build out their AI offering, the critical semiconductor content will come from both custom silicon chips, designed by companies such as Broadcom, and merchant silicon chips, designed by Nvidia. Depending on the use case, or workload, the hyperscaler will use either a custom silicon semiconductor or a merchant silicon semiconductor. Therefore, over time we expect AI processes to be driven by both Nvidia designed chips and custom designed chips from Broadcom and its peers.
On their recent earnings call, Broadcom CEO Hock Tan confirmed that the company’s customers are rapidly pursuing the development of a 1 million XPU cluster of chips. To translate what this means for Broadcom, Hock laid out the Serviceable Addressable Market (SAM) opportunity for the company’s AI revenues over the next 3 years to 2027. In 2024, Hock noted that Broadcom’s SAM was $15-20bn USD, of which the company commanded an approximate 70% share. In 2027, that SAM is expected to grow to $60-90bn USD, and assuming Broadcom captures an approximate 60% share, this gives rise to $50bn USD of AI revenue opportunity for the company over the next 3 years. For the company overall, this means that revenue has the potential to double over the next 3 years. We believe the technology road map outlined by Broadcom and the resulting revenue opportunity gives rise to a multi-year runway of earnings growth backed by a large structural change.”
2. Nvidia Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Dan Niles, Niles Investment Management founder, said in a latest program on CNBC that he believes Nvidia Corp (NASDAQ:NVDA) will see a slowdown in chip demand, especially from major spenders like Microsoft. This would, according to Niles, impact Nvidia Corp (NASDAQ:NVDA)’s revenue growth rates:
“I don’t think there’s any chance that Nvidia, and I’ve said this before, does revenue up 50% this year because, whether it’s Microsoft cutting back on capex, don’t forget they said they’re going to spend 80 billion this fiscal year. Well, if you do the math, they spent 20 billion in September. They said that’s up in December, their fiscal year ends in June, which means the first half of 2025 capex spending is down from the back half of 2024. It’s been growing at 70 to 80% for a year and a half, and that’s a very big change when the largest spender on AI is going from growing 70 to 80% to not growing at all.”
Simply beating earnings estimates is not enough for NVIDIA Corporation (NASDAQ:NVDA) anymore, and the impact of high expectations will continue to weigh on the stock as growth cools.
Nvidia’s forward P/E ratio for the fiscal year ending January 2026 is around 31. An EPS surprise of 8.5% was not able to help the stock. A similar trend occurred following the second-quarter earnings after a 5.6% EPS surprise. It’s difficult to see Nvidia maintaining a mid-70s gross margin by the end of 2026. Over the last two quarters, Nvidia has already reported a drop in its gross margin from 78% to 74.5%.
Then there’s competition. Amazon (AMZN) recently disclosed its Trainium 3 chip, which is set to be released by the end of 2025. The chip is expected to be twice as fast with 40% more power efficiency than the previous generation, manufactured on TSMC’s (TSM) cutting-edge N3 technology.
Infuse Asset Management stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“We do still own some NVIDIA Corporation (NASDAQ:NVDA) as the forward multiple isn’t egregious and it powers over 90% of AI workloads. This company is only becoming increasingly important though the hyperscalers are actively trying to save money through their own ASIC programs. The moat CUDA provides has been underestimated time and time again. While I don’t think Nvidia has quite the upside as some of the other companies in the portfolio, it has a product that the best companies in the world literally can’t get enough of.”
1. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 235
Dan Niles, Niles Investment Management founder, said in a latest program on CNBC that the DeepSeek breakthrough would lower the costs of AI chips and ultimately benefit names like Meta Platforms Inc (NASDAQ:META) who are using this hardware for performance improvement in software:
“You have to look at the stuff this benefits because when you lower hardware costs, it really helps with the software that’s sitting on top of it. And also, guys that use AI—so Meta uses AI to figure out, hey, this is the video that Courtney would like to watch, and oh, these are the ads she’s willing to engage with. They use AI to help with that, which is why their numbers went up so much last year. So, that’s one of the names that I think will benefit.”
Meta crushed expectations with the latest quarterly results but yet again pointed to higher expenses in the future. In 2025, it sees total operating expenses in a range of $114-$119 billion, with 19-25% y/y growth. Capex is expected to rise 61-74% y/y to $60-$65 billion, compared to just $37.3 billion in FY24. Advertising rose strongly but analysts believe it should be seen in the context of higher political ad spend and holiday quarter perspective. In 2025, the company might not be able to keep reporting double-digit growth in ad pricing amid weaker consumer spending and a cautious macroeconomic backdrop.
In the long term, Meta shares are expected to grow because of AI. How?
Meta Platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. Meta Platforms’ (NASDAQ:META) advancements in Reels and WhatsApp are helping manage CapEx growth as the company strives to stay competitive in AI. Meta Platforms (NASDAQ:META)’s substantial user base of 3.3 billion provides a data and distribution edge that could capture a significant share of the GenAI market.
Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q4 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META): Investment Initiated: April 2018: Internal Rate of Return (IRR*): 22% *IRR represents the annualized rate of return on an investment, accounting for the timing and magnitude of cash flows over the holding period.
For META, our 22% IRR aligns closely with the company’s compounded growth in earnings per share (EPS) and free cash flow per share during the 6 years holding period.
Looking ahead, Meta is expected to grow its revenues, earnings, and free cash flow per share at mid-teens rates over the next two years. There’s a good possibility that it could exceed these estimates, considering the breadth of growth initiatives currently in place, such as advancements in Al, monetization of Reels, expansion into business messaging, and the ongoing development of the metaverse…” (Click here to read the full text)
While we acknowledge the potential of Meta Platforms, Inc. (NASDAQ:META), our conviction lies in the belief that under the radar 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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