The tech world was already spooked when it got to know AI models could be developed more cheaply and efficiently. However, the landscape is shifting even further now that DeepSeek has revealed some cost and revenue data related to its V3 and R1 models.
Its potential for massive profit margins — up to 545% in ideal conditions — highlights just how effective AI models can be. The new information from DeepSeek reveals the profit margins from less computationally intensive “inference” tasks. This is the stage after training that involves trained AI models making predictions or performing tasks, such as through chatbots.
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In a GitHub post published on Saturday, DeepSeek revealed that if we assume that the cost of renting one H800 chip is $2 per hour, the total daily inference cost for its V3 and R1 models is $87,072.
In comparison, the theoretical daily revenue generated by these models is $562,027, leading to a cost-profit ratio of 545%. In a year, this would add up to just over $200 million in revenue.
However, DeepSeek has cautioned that its “actual revenue is substantially lower” because the cost of using its V3 model is lower than the R1 model. Moreover, only some services are monetized as web and app access is free and developers pay less during off-peak hours.
DeepSeek’s AI models are notably a product of what is known as “distillation”. Distillation, now a buzz word in the tech world, is a technique used to make cheaper and more efficient AI models. This process involves taking a large AI model, called the ‘teacher,’ and allowing it to train a smaller, more efficient ‘student’ model.
Eventually, this helps companies transfer knowledge from big AI systems into smaller, faster, and cheaper versions. Companies such as OpenAI, Microsoft, and even Meta are joining in on the bandwagon to develop such models. Thanks to this model, AI models can be made cheaply and efficiently, allowing businesses to save money while keeping their AI performances high.
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).
Photo by Andrea De Santis on Unsplash
10. SoundHound AI (NASDAQ:SOUN)
Number of Hedge Fund Holders: 11
SoundHound AI (NASDAQ:SOUN) is a voice artificial intelligence company offering voice AI solutions to businesses. On February 25, the company unveiled its next-generation voice AI platform for restaurants, enhancing its Dynamic Drive-Thru solution with seamless Omni channel ordering. The platform is now capable of going beyond drive-thru to incorporate Call-to-Order, Text-to-Order, Scan-to-Order, and In-Car Voice Ordering. Key features of SoundHound’s Dynamic Drive-Thru include an advanced speech recognition model, AI-powered ordering, fully autonomous voice generative AI, AI-driven upselling, smart lane technology, and multilingual support with AI-driven language adaptability.
“AI in restaurants is no longer optional – it’s the new standard. The future is omnichannel, and our advanced platform gives restaurants the flexibility to integrate automation across every customer touchpoint. With over two decades of AI expertise and data, SoundHound has developed the most advanced and comprehensive solution that not only works for the drive-thru but seamlessly integrates across all ordering channels.”
-James Hom, Chief Product Officer at SoundHound AI.
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 28, JPMorgan raised the firm’s price target on the stock to $450 from $418 and kept an “Overweight” rating on the shares. The firm updated targets in security software as part of an earnings preview.
Previously, Barclays raised the firm’s price target on the stock to $506 from $372 and kept an “Overweight” rating on the shares. The rating was issued ahead of the Q4 report on March 4, reflecting the firm’s expectation of potential upside to annual recurring revenue estimates. Other analysts are also optimistic about CrowdStrike based on its ability to sustain momentum as a strategic platform vendor, largely due to its AI-powered security solutions.
8. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 95
AppLovin Corporation (NASDAQ:APP) provides a leading marketing platform powered by AI technology. On February 27, BofA analyst Omar Dessouky kept a “Buy” rating and $580 price target on AppLovin shares. The analyst noted how AppLovin’s CEO has addressed the recent inaccurate claims made by short seller reports who allege that the company has been misrepresenting the benefits of its AI advertising platform. It also highlighted that the company’s profit margins and long-term growth forecast have “handily exceeded almost any of its comparables,” AppLovin remains the analyst’s top pick under coverage, and the firm views multiple catalysts through the first half to “sustain the rally.”
7. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 105
Marvell Technology, Inc. (NASDAQ:MRVL) engages in the development and production of semiconductors. On February 28, Tore Svanberg from Stifel Nicolaus maintained a “Buy” rating on the stock with a price target of $130.00. According to the firm, Marvell’s January quarter results are anticipated to align with or slightly surpass estimates of $1.80 billion in revenue and $0.59 in non-GAAP earnings per share (EPS). The firm analysts also forecast that the guidance midpoint will exceed their estimate of $1.84 billion, an optimistic outlook supported by continued momentum in Data Center and AI initiatives.
6. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 107
Advanced Micro Devices, Inc. (NASDAQ:AMD) develops semiconductors, providing processors and graphics technologies for gaming, data centers, and AI-driven high-performance computing. On February 28, the company unveiled its much-awaited AMD RDNA™ 4 graphics architecture with the launch of the AMD Radeon™ RX 9070 XT and RX 9070 graphics cards as a part of the Radeon™ RX 9000 Series. Supercharged with artificial intelligence, these new graphic cards feature 16GB of memory and significant improvements that deliver enthusiast-level gaming experiences.
Its re-vamped raytracing accelerators and powerful AI accelerators ensure cutting-edge performance and exhilarating gaming experiences, delivering up to 40% higher gaming performance than the previous RDNA 3 architecture. The graphics cards will be available at leading board partners including Acer, ASRock, ASUS, Gigabyte, PowerColor, Sapphire, Vastarmor, XFX and Yeston beginning March 6th, 2025.
“Today, we’re thrilled to unveil the AMD Radeon™ RX 9000 Series, a significant leap forward in graphics performance powered by our next-generation AMD RDNA™ 4 architecture. These GPUs are designed to meet the demands of today’s games, delivering enthusiast-class gaming experiences to gamers everywhere, while ready to support tomorrow’s innovations. Through the power of advanced AI and Raytracing accelerators, we’re not just improving frame rates – we’re fundamentally enhancing the gaming experience. Offering incredible performance, AI-powered features, and next-gen display support at competitive price points, the Radeon RX 9000 Series delivers exceptional value for gamers looking to upgrade their systems.”
-David McAfee, CVP and GM, Ryzen CPU and Radeon Graphics AMD.
5. 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 February 28, JPMorgan maintained an “Overweight” rating on the shares, advising investors to buy following the post-earnings selloff. According to the firm, the selloff has been due to the absence of a data center deal and forward guidance uplift. However, the firm contends that these fears are overblown, and that Vistra indeed remains in discussions with hyperscalers and data center developers. The firm is adamant that the current share prices present an attractive entry point.
4. 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 27, Reuters reported that the company has applied for a permit typically associated with chauffeur-operated services, according to California regulators. The move marks the first phase of a series of regulatory approvals that Tesla needs to eventually launch its promised robotaxi service. Currently, the automaker holds the approval to test autonomous vehicles with a safety driver in California. However, it does not have a permit for driverless testing or operations from the state’s Department of Motor Vehicles.
The permit is required to apply for a driverless taxi service in the state. The company has already applied for a transportation charter-party carrier permit from the California Public Utilities Commission (CPUC) in November, authorizing it to own and control a fleet of vehicles. The permit, according to CPUC, is a pre-requisite to receiving authorization to operate an autonomous ride-hailing service. However, the current application doesn’t allow the company to offer any autonomous vehicle rides to the public “in any capacity.”
3. 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 27, Oppenheimer lowered the firm’s price target on the stock to $380 from $415 and kept an “Outperform” rating on the shares. According to the firm, the company’s Q4 results demonstrated minimal upside, and management issued unimpressive guidance for FY26.
On the same day, Baird lowered the firm’s price target on Salesforce (NYSE:CRM) to $400 from $430 and kept an “Outperform” rating on the shares. Similar to other analyst firms, the firm has discussed the company’s mixed Q4 results and guidance, updating its model following the earnings print. However, it remains optimistic about Salesforce’s artificial intelligence technology.
2. 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. On February 27, Susquehanna analyst Christopher Rolland reiterated their bullish stance on the stock, giving a “Buy” rating. The rating follows optimism regarding the company’s robust earnings print and strategic initiatives. Rolland noted how Blackwell’s sales have reached $11 billion, exceeding expectations, and dismissing concerns regarding a slower transition to new platforms.
In addition, the increased demand for inferencing and training models has led Nvidia’s data center segment to outperform estimates by an estimated $2 billion, the analyst noted. Nvidia’s management has also confirmed that Blackwell production is in full swing, with product ramps anticipated in the quarters ahead. The gaming segment is also likely to experience strong growth once supply constraints ease. Rolland also discussed Nvidia’s excellent progress in the automotive division, marking record revenues, as well as how advancements in physical AI with the Cosmos platform are gaining traction. Although operating expenses and gross margin guidance show some concerns, management has assured improvement by the end of the year.
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 February 27, TD Cowen analyst John Blackledge maintained a “Buy” rating on the stock and set a price target of $265.00. According to the analyst, Amazon’s recent launch of its GenAI-powered Alexa+ assistant emphasized its efforts across its Amazon Web Services, eCommerce, and advertising businesses.
With this development, he anticipates AWS’s generative AI revenue of $7.1 billion in 2025 to ascend to $56.3 billion in 2030. The firm’s consumer survey on Amazon, generative AI and Alexa+ has also revealed how consumers were likely to give a positive reaction to the new Alexa due to their extensive usage and engagement with the product. According to the survey, 80% of Echo Device owners interact with Alexa at least once throughout the day, with the Echo Device being Amazon’s smart speaker which connects to Alexa.
“Alexa+ should make it easier to make purchases directly through voice, with capabilities including ‘Experts’ that can complete tasks across partner platforms.”
-Blackledge.
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. 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 the cheapest AI stock.
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