The uncertain macroeconomic environment is diminishing investors’ readiness to pay high prices for stocks related to artificial intelligence. Despite the continued buzz around the technology, no one seems interested in buying the falling stocks. Fluctuating tariff policies from the Trump administration have concerned Wall Street and disrupted global supply chains. The cost of AI infrastructure has increased drastically, especially for companies relying on imported components.
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The narrative around AI stocks has also begun to change because investors are critiquing that prices have become too expensive, and because there is intensifying competition from Chinese companies developing their own AI offerings.
In the latest news, seven Republican U.S. senators have also sent a letter to U.S. Commerce Secretary Howard Lutnick. The letter urges him to get rid of a Biden administration rule that restricts global access to AI chips before it kicks in next month. The letter claims that the AI diffusion rule will deter U.S. leadership in artificial intelligence, which is why it demands an “immediate action” to halt it. The rule is set to take effect on May 15.
“Every day this rule remains in place, American companies face mounting uncertainty, stalled investments, and the risk of losing critical global partnerships that cannot be easily regained. We urge you to withdraw this rule and propose an alternative that is effective in preventing Communist China from capturing the world market in leading technology without compromising American advantages.”
-The letter, also signed by senators Markwayne Mullin, Ted Budd, Roger Wicker and Eric Schmitt.
It also noted how the rule puts countries into three tiers, with only 18 nations in the Tier 1 group with the easiest access to American technology. Those in tier 2 have to face “arbitrary purchase limits and a cumbersome licensing process.” Meanwhile, it asserted that Tier 3 countries are already “rightly restricted.”
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).
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10. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 63
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. On April 14, the North Atlantic Treaty Organization (NATO) Communications and Information Agency revealed it had completed an acquisition of Palantir’s AI-powered Maven Smart System NATO (MSS NATO) the previous month. According to NATO, on March 25, it “finalized the acquisition of the Palantir Maven Smart System NATO (MSS NATO) for employment within NATO’s Allied Command Operations (ACO), marking a significant advancement in the modernization of NATO’s warfighting capabilities.” The agency further revealed how the procurement was quite expeditious, taking only six months to complete. It noted that ACO is expected to use the system within thirty days.
9. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 96
Advanced Micro Devices, Inc. (NASDAQ:AMD) develops and sells semiconductors, processors, and GPUs for data centers, gaming, AI, and embedded applications. On April 8, KeyBanc analyst John Vinh downgraded the stock to “Sector Weight” from Overweight without a price target amid escalating tariff risks and price competition. With export restrictions likely to limit demand for AMD’s chips from Chinese hyperscalers, the firm believes AMD could face greater competition from Nvidia and a slowdown in the China business.
“China AI demand may not be sustainable and may be at risk, while NVDA is so far ahead with GB200/NVL. We estimate 2025 MI308 GPUs volumes at 300K and reflect the majority of the growth for AMD. Excluding China, there is very little to no growth in AI GPUs this year.”
Vinh further talked about the limited opportunity to gain additional shares in the PC and server market when compared to Intel.
“We believe AMD will be forced to react to INTC’s aggressive price actions in the range of 20-40% on Lunar Lake in order to maintain/regain lost market share to INTC. While the stock is relatively inexpensive, trading at 13x our 2026 EPS estimate, semiconductor stocks rarely work with risk to GMs, which we are increasingly concerned about given the aggressive price cuts by INTC.”
8. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 120
Vistra Corp. (NYSE:VST) operates as an integrated retail electricity and power generation company. On April 4, Goldman Sachs analyst Carly Davenport initiated coverage on the stock with a “Neutral” rating and a price target of $134.00.
“Although VST boasts a slightly higher quality asset base in our view, given its 6.5 GWs of nuclear capacity, we see less upside at current valuation levels and greater headline risk around behind the meter/colocation deals. Our numbers imply ~8x EV/EBITDA multiple on VST’s Q5-Q8 estimates, which is above the historical average closer to 7x. Given exposure to potential behind the meter deals, we believe VST is more exposed to potential delays or headline risk related to uncertainty around colocation. We see value in VST’s business, especially in the long run as it capitalizes on its nuclear capacity in potential data center deals, but believe the market has priced some of this into valuation which now sits above historical levels.”
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 April 14, Deutsche Bank reiterated the stock as “Buy” and said that it’s sticking with the automaker.
“We continue to view Tesla favorably longer term as an embodied AI secular winner but acknowledge it faces many cross currents for the next quarter or two.”
6. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 161
Broadcom Inc. (NASDAQ:AVGO) is a technology company uniquely positioned in the AI revolution owing to its custom chip offerings and networking assets. On April 11, Citi analyst Christopher Danely maintained a “Buy” rating for the stock and decreased the firm’s price target from $220 to $210. The price target revision comes amid the anticipation of a potential recession as well as the likelihood that certain tariffs, particularly those with China, will persist for an extended period.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology company. On April 14, JPMorgan lowered the firm’s price target on the stock to $245 from $270 and kept an “Overweight” rating on the shares. The firm expressed its relief after Trump recently announced that the reciprocal tariffs will exempt smartphones and PCs. The analyst told investors in a research note how these exemptions will help investors refocus on the company’s medium-term drivers. Regardless, “several concerns” remain from the developments over the last two weeks that will inhibit these very investors from turning to a bull case for Apple stock. The firm further announced that semiconductor tariffs are yet to be announced and could impact Apple.
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, April 14, was for Nvidia Corporation. Bank of America reiterated the stock as “Buy,” stating that the company is somewhat protected from the China-U.S. tariff war.
“Hence companies with large US-based footprints serving China are most negatively exposed, such as INTC and TXN, while companies with overseas fab support such as AMD , NVDA , AVGO , MRVL and others are less exposed to announced China tariffs.”
Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $175 implies a 58% upside, however, the Street-high target of $235 implies an upside of 113%.
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 April 11, Reuters reported that Google is partnering with PJM Interconnection, the largest electrical grid operator in North America. This partnership aims to roll out artificial intelligence technologies that will help gain new power supplies connected faster. With the demand for electricity rising due to more data center build outs, the collaboration marks the first instance that AI will be used to AI would be used to broadly manage an interconnection queue.
“The industry has been talking about building smarter grids for well over a decade, and now with AI, we have a real opportunity to turn discussion into action.”
-Amanda Peterson Corio, Google’s data center energy lead.
2. 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 April 14, Wells Fargo reiterated Microsoft as overweight and lowered its price target on the stock to $500 per share from $515, but says it’s standing by the stock ahead of earnings later this month.
“For better or worse, FQ3 likely centers on 3 key metrics: Azure growth (AI vs non-AI), CapEx (4Q, FY26 expects), and EPS growth. Despite elevated NT debates, still see MSFT among cleanest/most direct ways to play software/AI trends.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 339
Amazon.com Inc (NASDAQ:AMZN) is an American technology company offering e-commerce, cloud computing, and other services, including digital streaming and artificial intelligence solutions. On Monday, investment bank Citi revised its price target for the stock to $273 to $225 while maintaining a “Buy” rating. The firm has reduced projections and price targets across its online advertising and e-commerce coverage due to limited macro visibility and weakened consumer sentiment. It also anticipates a significant slowdown in economic growth and rising inflation despite the temporary 90-day halt on reciprocal tariffs. Amazon is Citi’s second-most-recommended stock in the sector after Meta.
While we acknowledge the potential of AMZN 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 time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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