In this article, we will take a detailed look at the 10 AI Stocks to Watch on Latest News and Analyst Ratings.
AI discussion boards online are buzzing with a new development where tech experts are pointing to a possible plateauing of performance in artificial intelligence applications.
CNBC’s Deirdre Bosa in a latest program quoted tech investor Ben Horowitz, who said in a recent podcast that he’s not seeing performance improvement despite increasing GPUs.
“We’re increasing GPUs at the same rate, but we’re not getting the intelligence improvements at all out of it.”
OpenAI is reportedly facing similar problems with its upcoming AI model.
“The Information reports that the quality increase in OpenAI’s upcoming advanced model, Orion, is smaller than the jump seen between the last two flagship models, GPT-3 and GPT-4. In other words, generational advancements may have peaked as the models are essentially running out of data to train on,” Bosa said.
While the next jump in AI performance is far away in the future, the possibilities this technology has unlocked based on the existing data and resources are keeping investors and Wall Street analysts busy.
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In this article we take a look at top AI stocks trending on the back of latest news and analyst ratings. 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).
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10. Bentley Systems Inc (NASDAQ:BSY)
Number of Hedge Fund Investors: 25
KeyBanc’s capital markets research team sees potential upside for software stocks following Donald Trump’s victory in the U.S. presidential election.
“With Donald Trump as president, we see a likely backdrop of lower corporate taxes, which would be broadly positive for high-tax-paying companies within our coverage,” KeyBanc stated.
The firm published a list of stocks it’s watching following Trump’s victory. BSY is part of this list.
Bentley Systems Inc (NASDAQ:BSY) makes software solutions for infrastructure projects, civil engineering, architecture, and construction. Bentley Systems Inc (NASDAQ:BSY) has strong secular growth catalysts. As companies look to cut costs, the demand for Bentley Systems Inc (NASDAQ:BSY)’s software systems is increasing. The global engineering software market was valued at $33 billion in 2022 and is projected to reach nearly $131 billion by 2030, reflecting a robust 18.8% CAGR.
Despite this, the stock’s valuation has been a concern for investors. It’s trading at a forward P/E of about 45 compared with the industry median of 23. The stock has a forward EV/Sales multiple of approximately 12.1x, with an estimated next twelve months (NTM) revenue growth rate of 11.2%. This contrasts with the median implied annual recurring revenue (ARR) growth rate of about 18% from the Meritech SaaS Index. As of June 21, 2024, the median forward EV/Revenue multiple for publicly held SaaS application software companies, according to the Meritech Capital Index, was around 5.4x. This means the stock is currently overvalued based on its growth projections.
Artisan Small Cap Fund stated the following regarding Bentley Systems, Incorporated (NASDAQ:BSY) in its Q2 2024 investor letter:
“We ended our investment campaigns in Bentley Systems, Incorporated (NASDAQ:BSY) and Etsy during the quarter. Bentley Systems is the leading provider of engineering software used to design roads, bridges, tunnels, rail systems and other public works. Construction is one of the economy’s least digitized verticals, and our thesis was based on the view that there are significant opportunities for software to increase productivity within civil engineering projects. We also viewed the company as well positioned to support the infrastructure spending encouraged by the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. After a successful multiyear investment campaign, we decided to exit the position due to the market cap outgrowing our small-cap mandate.”
9. Palantir Tech Inc (NYSE:PLTR)
Number of Hedge Fund Investors: 44
Jefferies recently downgraded Palantir Tech Inc (NYSE:PLTR) to “Underperform” from “Hold,” citing concerns over the stock’s overvaluation and indicating that it is waiting for a more favorable entry point.
The investment firm has set a target price of $28 for the stock.
Analysts, led by Brent Thill, acknowledged that they underestimated the surge in momentum Palantir Tech Inc (NYSE:PLTR) generated following the introduction of its Artificial Intelligence Platform (AIP) boot camps. They also failed to fully appreciate the company’s ability to deliver four consecutive quarters of accelerating growth, both in top-line revenue and remaining performance obligations (RPO), following a series of underwhelming results in the first three quarters of 2023.
While the analysts recognized the achievement of 30% year-over-year revenue growth (on a 17% comparison) and 59% year-over-year RPO growth (on a -21% comparison), they cautioned that Palantir Tech Inc (NYSE:PLTR) will face more challenging comparisons in the upcoming quarters. They believe it will be increasingly difficult for Palantir Tech Inc (NYSE:PLTR) to sustain or accelerate its growth as it moves into the latter part of 2024 and 2025.
Argus also downgraded Palantir to “Hold,” noting that while Palantir Tech Inc (NYSE:PLTR) posted strong results in the third quarter, with accelerating revenue and margin expansion, it may be facing a stock price that has outpaced its underlying fundamentals.
8. AppLovin Corp (NASDAQ:APP)
Number of Hedge Fund Investors: 54
AppLovin Corp (NASDAQ:APP) shares are trending after the company posted strong quarterly results and received praise from Wall Street.
Daiwa Securities raised its price target after the mobile technology company posted stronger-than-expected third-quarter results.
Analyst Jonathan Kess upgraded AppLovin Corp (NASDAQ:APP) to “outperform” from “neutral,” citing management’s effective execution since the introduction of Axon 2.0 in the first quarter of 2023. “Growth of 20-30% is achievable in the mobile gaming sector alone as AppLovin Corp (NASDAQ:APP)’s AI continues to improve, driving company and market expansion,” Kess noted, adding that recent tech upgrades from Q3 2024 have long-term growth potential. He pointed to fresh opportunities in e-commerce and connected TV, expected to contribute revenue in fiscal 2025, while Street estimates remain conservative, suggesting further upside. AppLovin Corp (NASDAQ:APP)’s position as a market leader stands out as its peers face distractions or a lack of focus on mobile gaming, alleviating prior concerns about growth peaking.
Kess raised his price target on AppLovin Corp (NASDAQ:APP) significantly to $280 from $80, highlighting the company’s expanding market, rising profitability, and increasing free cash flow despite the stock’s strong year-to-date performance.
Some believe despite the latest bull run the stock has more room to run. AppLovin Corp (NASDAQ:APP) primarily focuses on helping game developers attract and monetize users. Game developers promote their games as advertisers when they seek to acquire users. AppLovin Corp (NASDAQ:APP)’s AppDiscovery program supports these developers in running user acquisition (UA) campaigns. After securing app installs, developers turn to revenue generation. AppLovin Corp (NASDAQ:APP)’s MAX platform serves as a monetization tool for mobile apps, where developers can act as publishers by offering ad space for programmatic auctions, with advertisers bidding on these spots. AppLovin Corp (NASDAQ:APP) earns a percentage of the ad spending revenue that publishers receive through the MAX platform.
If AppLovin Corp (NASDAQ:APP) meets its fourth-quarter 2024 revenue forecast midpoint of $1.25 billion, this would reflect 31% year-over-year growth for the quarter. This forecast exceeded analysts’ expectations, who estimated $1.18 billion in fourth-quarter revenue. If AppLovin Corp (NASDAQ:APP) hits the midpoint of its Q4 adjusted EBITDA guidance at $750 million, adjusted EBITDA would grow 57.5% compared to the same period last year.
AppLovin Corp (NASDAQ:APP)’s one-year forward PEG (price-to-earnings-to-growth) ratio currently stands at 1.78, based on a forward P/E of 54.78 and an estimated EPS growth rate of 30.65%. Typically, growth stocks are seen as overvalued at a PEG ratio above 2.0. At a one-year forward PEG of 2.0, AppLovin Corp (NASDAQ:APP)’s stock price could reach $324.28—an 11.81% gain from its November 9 close.
ClearBridge Mid Cap Strategy stated the following regarding AppLovin Corporation (NASDAQ:APP) in its Q3 2024 investor letter:
“Stock selection in the IT sector was the greatest contributor to relative performance, driven by AppLovin Corporation (NASDAQ:APP), which operates a software-based platform for advertisers to enhance the marketing and monetization of their content, particularly in mobile apps. We believe the company is one of the best examples of an AI beneficiary in the mid cap market, as it has already incorporated AI capabilities into its platform, translating into more effective take rates on clients’ mobile games and transactions. We believe mobile games represent only the tip of the iceberg of AppLovin’s potential for its AI-enabled platform and that it has a strong growth trajectory over the next few years.”
7. Dell Tech Inc (NYSE:DELL)
Number of Hedge Fund Investors: 88
Dell Tech Inc (NYSE:DELL) shares recently rose after Morgan Stanley analyst Erik Woodring increased his price target on the stock citing server sales. Woodring now projects Dell Tech Inc (NYSE:DELL)’s AI server revenue will reach about $20 billion by fiscal 2026, a 56% increase over previous forecasts, which could bring earnings per share up to $10.50—roughly 12% above current Wall Street estimates.
Woodring attributes Dell Tech Inc (NYSE:DELL)’s momentum in the AI server market to steady demand from clients, growing market share, and substantial repeat orders from large Tier-2 cloud providers, including Tesla, xAI, and CoreWeave. In addition to corporate demand, Woodring highlighted rising interest from sovereign funds in the Middle East and U.S. government entities.
While some shipping details for fiscal 2026 and calendar 2025 remain uncertain, Woodring noted Dell Tech Inc (NYSE:DELL)’s solid positioning in the AI server market. Early 2025 is expected to bring the initial delivery of Nvidia’s Blackwell GPUs, which he sees as crucial to Dell Tech Inc (NYSE:DELL)’s sustained growth in AI servers.
The analyst increased his price target on Dell Tech Inc (NYSE:DELL) to $154 from $136.
Dell Tech Inc (NYSE:DELL) boasts a diverse revenue base, with around half generated in the U.S. and the rest from international markets. Of this, the Client Solutions Group (CSG) — responsible for PCs, monitors, and workstations — contributes 55%. However, CSG’s revenue has faced recent challenges, with a 5.5% decline in 2023 and another 12% year-over-year drop in Q2.
Dell Tech Inc (NYSE:DELL)’s Infrastructure Solutions Group (ISG) generates 38% of global revenue and is positioned to capitalize on AI advancements. ISG, already a leader in external RAID storage, could find fresh growth opportunities across data storage, AI servers, and cloud services, with its AI segment having an estimated 18% CAGR total addressable market until 2027, largely driven by AI services. Sales of Dell’s PowerEdge XE 9680 server, a key product, rose by 23% year-over-year in Q2.
With free cash flow projected to reach $7.67 billion by January 2025 and EPS estimated to grow from $7.13 to $9.38, the market may be slow to fully recognize these fundamental improvements despite a 75% year-to-date stock increase. Dell Tech Inc (NYSE:DELL) currently trades at a P/E non-GAAP trailing twelve months of 18x and a forward P/E of 16.6x, which are respectively 25% and 30% below the sector median. Its price-to-sales ratio of 1x also stands out against the sector’s 3x median, while its price-to-FCF at 12x remains well below the sector’s 21x, a 44% discount.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its Q2 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) was a top contributor despite reporting disappointing first-quarter earnings results, because investors looked through the near-term disappointment and expected strong growth from AI-related servers and personal computers. We expect Dell to participate in the growth of artificial intelligence hardware, especially as enterprises invest more aggressively. We like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
6. Adobe Inc (NASDAQ:ADBE)
Number of Hedge Fund Investors: 107
Last month, UBS Global Wealth Management published a bullish report on US stocks and issued a list of its top picks. Adobe Inc (NASDAQ:ADBE) was part of the list. The firm said it now has an attractive view on U.S. equities, supported in part by growing adoption of artificial intelligence technology, and the investment bank has listed its top picks in the market.
The firm sees further gains ahead of the market, whose benchmark, the S&P 500 (SP500), has risen +22% this year, including 46 record-high closes. UBS previously had a neutral view on U.S. stocks, but favorable domestic and global factors, such as China’s recent stimulus measures, prompted UBS’s upgrade.
“From a macro perspective, the combination of slowing but durable economic growth, healthy earnings growth, and continued Fed rate cuts are all supportive,” David Lefkowitz, head of equities Americas at UBS GWM, said in its Equity Compass note. While economic growth is slowing, the country’s labor market is “healthy,” with real wages rising, he said.
AI adoption is broadening, with 5.9% of companies reporting using AI as of Q3, up from 3.7% in Q3 2023, UBS said, citing the U.S. Census Bureau. “From a single stock perspective, we think many of the large U.S. tech companies offer appealing long-term upside, especially those that have leading positions in the AI value chain.”
Adobe Inc (NASDAQ:ADBE) has become a complex case for analysts who are still gauging whether Adobe would be a net beneficiary of the AI boom or a loser. On the one hand, Adobe Inc (NASDAQ:ADBE) is under threat with tons of AI tools good enough to make beginner-level designs, posts and videos for individuals or companies with low or no marketing budget. But on the other hand, the company is launching several AI-powered tools and integrating generative AI tools in its products that could boost its revenue in the future.
Daniel Newman, CEO of Futurum Group, said in a program on CNBC that the latest earnings show the effects of a macro slowdown but Adobe Inc (NASDAQ:ADBE) could benefit if companies decide to use the company’s AI tools to cut its reliance on human workers.
Polen Focus Growth Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q3 2024 investor letter:
“We added to several existing positions in the quarter including Adobe Inc. (NASDAQ:ADBE), Workday, Shopify, MSCI, and Paycom Software. We feel Adobe is poised for re-accelerating revenue and earnings growth partially due to the monetization of its Firefly GenAI product embedded in its creative software.”
5. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 117
The launch of Agentforce, a platform that enables businesses to create autonomous AI agents, could unlock a multi-billion-dollar opportunity for Salesforce Inc (NYSE:CRM), according to Stifel.
“There is still much Stifel doesn’t know – appetite for headcount displacement, timeline of agent adoption, who will be a serious competitor, etc. – so it is refraining from updating its model until it hears more from the company, early users, and more partners,” said Stifel analyst Parker Lane.
“However, Stifel’s math suggests Agentforce Service Agent alone could be a multi-billion-dollar opportunity for Salesforce,” Lane added.
Stifel has reiterated its Buy rating on Salesforce Inc (NYSE:CRM) and increased its price target on the stock to $350 from $320 as it considers Agentforce a catalyst.
“With the stock currently trading at ~18.4x Stifel’s FY26 FCF estimate, below large-cap peers trading at 20x-40x CY25 FCF estimates, it believes Salesforce’s current multiple discounts the potential durability of revenue growth through the new agent model,” Lane noted.
These agents, which can be used in areas such as customer service, sales, marketing, commerce, and healthcare, are designed to handle complex tasks and produce actionable outputs, Salesforce Inc (NYSE:CRM) says.
“Stifel is still uncertain about several factors—such as demand for workforce reduction, adoption timelines, and key competitors—and will hold off on updating its model until it gathers more information from Salesforce Inc (NYSE:CRM), early users, and partners,” stated Stifel analyst Parker Lane.
“Nonetheless, Stifel’s calculations suggest that Agentforce’s Service Agent alone could represent a multi-billion-dollar opportunity for Salesforce,” Lane added.
Stifel reaffirmed its Buy rating on Salesforce Inc (NYSE:CRM) and raised its price target to $350 from $320, seeing Agentforce as a significant growth driver.
“With the stock trading at about 18.4x Stifel’s FY26 free cash flow estimate, below large-cap peers that are trading at 20x-40x CY25 FCF estimates, Salesforce’s current multiple seems to underestimate the potential for sustained revenue growth through its new agent model,” Lane concluded.
Polen Focus Growth Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q3 2024 investor letter:
“In the third quarter, we purchased new positions in Apple and Oracle and eliminated our small positions in Nike and Salesforce, Inc. (NYSE:CRM). We exited our position in Salesforce to fund better opportunities in Shopify and MSCI. Salesforce is seeing slower revenue growth than we would have expected, given the weakening macroeconomic environment. Furthermore, since its core end markets in customer relationship management (“CRM”) and Service are fairly mature, a lower growth level versus our expectations could persist for some time.”
