Determined to lead the AI frontier, China is deploying every resource at its disposal and mobilizing every tool in its arsenal. In the latest news, Reuters has reported how the country is now planning to expand its undergraduate enrollments to prioritize what it called “national strategic needs” and develop talent in areas such as artificial intelligence (AI).
Several of China’s top public universities have announced these plans of expansion following the launch of artificial intelligence courses in February. The country recently experienced a “Sputnik moment” after an AI startup from within the country, DeepSeek, launched a cheaper and more efficient AI model which it claimed outperforms its Western counterparts.
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According to analysts, DeepSeek’s success is largely backed by researchers from elite domestic universities. This fact reflects how Beijing’s investment in building a large homegrown STEM talent pool and recent U.S. restrictions on Chinese student visas have enabled the country to catch up on the AI race.
“Scientific and technological innovation has contributed to China’s economic growth, with investment in high-tech industries increasing by 11.1 percent year-on-year from January to October 2022”.
– A report by People’s Daily
Innovation has also opened up new areas for China’s economic development, such as renewable energy vehicles, lithium batteries, and photovoltaic products. The country’s scientific and technological innovations have helped it garner global attention, and it looks like it is neck to neck in competition with its competitor, the United States.
Noting the country’s need for further advancement, Peking University recently said it would add 150 undergraduate spots in 2025, focusing on areas of “national strategic importance”, fundamental disciplines and “emerging frontier fields”. Meanwhile, Renmin University said it would add more than 100 places in areas such as AI to improve innovation.
Shanghai Jiao Tong University will also be adding 150 spots concentrating on “cutting-edge technologies” and emerging industries “urgently needed”, in AI, integrated circuits, biomedicine, healthcare and new energy.
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).
A portfolio manager in front of their computer screen, evaluating a variety of mid-cap stocks.
10. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 13
BigBear.ai Holdings, Inc. (NYSE:BBAI) is an artificial intelligence specialist that provides decision intelligence solutions. On March 7, Cantor Fitzgerald lowered the firm’s price target on the stock to $6 from $8 and kept an “Overweight” rating on the shares after it assumed coverage of the name. The analyst told investors in a research note that BigBear.ai’s top-line growth for Q4 has been “underwhelming”. It has also provided a lower-than-expected guidance, and federal uncertainty further adds as a reason to the lowered price target.
However, certain catalysts are driving a bullish outlook on the stock, such as the Pangiam acquisition to boost vision AI and the switch to target higher-margin commercial customers. An adjusted EBITDA gain and enhanced balance sheet flexibility are some other positives for the stock. To conclude, the firm believes BigBear.ai is well-positioned to establish itself as a leading AI/ML platform provider in the intelligence space, despite recent adjustments to the financial outlook.
9. XPeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 17
XPeng Inc. (NYSE:XPEV) is a leading Chinese Smart EV company. On March 10, Citi upgraded the stock to “Buy” from Neutral with a price target of $29, up from $13.70. The firm upgraded the Chinese EV company due to robust volume growth for Xpeng. It lifted the company’s 2025 and 2026 volume forecasts from 260,000 and 330,000 units to 480,000 and 580,000 units, respectively, quoting strong order intake in February. The rating is also influenced by XPeng’s consistent efforts in the AI/Robotics field.
“Xpeng has expressed its commitment to the AI/Robotics field, and we see some upside risk to Xpeng if it achieves decent progress.”
Other factors have also led to a Buy.
“Upgrade to Buy considering strong volume growth in 2025/26E on robust order intake and new model launches, 2026E earnings turnaround and potentially extra growth drivers on AI/Robotics.”
8. 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 March 7, the company reported that it has rolled out its first two artificial intelligence-enabled systems to the U.S. Army. The Tactical Intelligence Targeting Access Node systems, or TITAN, leverages AI to collect data from space sensors that assist soldiers with warfare strategy and improve strike targeting and accuracy, Palantir noted. During an interview with CNBC’s Morgan Brennan, President and Chief Technology Officer of Palantir USG Akash Jain called the agreement a “leapfrog moment” for the U.S. Army. The company won the $178 million contract last March to build out 10 next-generation, AI-defined ground systems (TITAN).
7. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 95
AppLovin Corporation (NASDAQ:APP) provides a leading marketing platform powered by AI technology. On March 11, Citi kept a “Buy” rating on the stock with a $600 price target. The analyst told investors in a research note how the stock has come under significant pressure due to a few bearish reports that claimed that AppLovin has been misrepresenting the benefits of its AI advertising platform. This was augmented by a broader momentum “unwind”, they noted. Even though consensus revenue estimates “are lofty,” the firm is staying encouraged by AppLovin’s recent disclosures that suggest the e-commerce pilot is performing well.
“Based on peer’s revenue growth rates, EBITDA margins and equity values, AppLovin should be worth $550 a share. The prevailing equity value (of $260) suggests the market is ascribing a ~50% likelihood that AppLovin’s equity is worth $0. That strikes us as remarkably high. We suspect this has less to do with the merits of the bears’ claims. More likely, in our view, it stems from AppLovin’s rapid success, opaque business model and investor’s long-held skepticism about AdTech business models.”
-Citi analysts, led by Jason Bazinet, in an investor note.
6. 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 March 7, TD Cowen upgraded the stock to “Buy” from Hold following a change in analyst coverage. The firm stated that investors should buy the dip.
“We’re also Buy-rated on Tesla post the recent pullback and ahead of potentially consequential catalysts this year.”
5. 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 March 7, Citi analyst Christopher Danely reiterated a “Buy” rating on the stock with a $220.00 price target. The analyst is bullish on the stock post its earnings print, stating that revenue and gross margins have exceeded consensus estimates.
These results have been driven by the strength in AI semiconductor and software sales, the firm noted. With the AI segment poised to continue growth, it will likely offset the potential risks from sanctions on Bytedance and a decrease in wireless market share at Apple as well. Moreover, Broadcom has secured two new AI engagements, strengthening its position in the AI market even further. All in all, the company’s AI engagements are expected to play a critical role in shaping Broadcom’s performance and help it sustain its competitive edge.
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology company. On March 7, the company acknowledged that its promised AI-powered updates to the Siri digital assistant are delayed for the foreseeable future. According to the company, the features that were introduced last June at its Worldwide Developers Conference, such as Siri’s ability to tap into a user’s personal information to answer queries and have more precise control over apps, will now be released sometime in “the coming year.” Key AI upgrades for the Siri voice assistant are taking “longer than we thought,” the company noted.
3. 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 most notable analyst calls on Monday, March 10, was for Nvidia Corporation. Morgan Stanley reiterated the stock as “Overweight”, stating that it is sticking with Nvidia as a top idea.
“There is a persistent industry outlook, that even with general investor skepticism, investment in AI remains the bright spot for semis, while we are looking at a very gradual bottoming process in analog, and company WFE [wafer fab equipment] estimates more optimistic than ours. We reiterate our NVDA Top Pick…”
Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $175 implies a 63% upside, however, the Street-high target of $235.9 implies an upside of 120%.
2. 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 March 6, the company made changes to the web page for its Responsible AI and Human Centered Technology (RAI-HCT) team, which is responsible for conducting research into AI safety, fairness, and explainability.
While the previous version of the page used language such as “marginalized communities,” “diverse,” “underrepresented groups,” and “equity” to describe the RAI-HCT team’s work, this language has now been removed from the web page. Instead, updated language now involves terms such as “varied” and “numerous,” implying a change in how the company publicly addresses its inclusivity goals. The changes made by Alphabet’s Google reflect on shifts being made by tech companies that are scaling back their diversity, equity, and inclusion (DEI) initiatives due to evolving political and legal landscapes.
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 March 7, the company announced a strategic shift in its data center strategy driven by power availability rather than user demand or creating supply. The company calls it a “power first” approach, in which affordable and emission-free power supply is a decisive factor driving investment. Microsoft is considering the Nordic region as a prime location for emission-free capacity to sustain artificial intelligence.
The company is particularly eyeing Finland due to the region’s cold climate that helps cool data centers, reliable power grids and abundant availability of carbon-neutral power, amongst other factors. Intending to become carbon-negative by 2030, the company needs to find emission-free renewable power that will help it sustain the AI-driven expansion of its cloud-based data storage and usage. According to Alistair Speirs, Microsoft’s senior director for Datacentre & AI Infrastructure, Microsoft’s global expansion in the use of artificial intelligence has been creating new workloads that are not tied to a specific location by legislation, allowing the company to build data centers with an abundance of emission-free power.
“There’ll be locations across the world but efficient energy infrastructure is going to be the deciding factor for a lot of these areas.”
Currently, the company is building a dozen new data centres on three sites in Finland and has partnered with local district heating producers, such as utility Fortum.
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 time frame. 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.
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