As artificial intelligence becomes more prevalent in current world affairs, new patterns concerning its research and development strategies are also emerging. Traditionally, academia has focused on basic research and education, while industry concentrated on applied research and commercialization. However, in recent years, the commercial sector’s dominance in AI investment and research has raised concerns about the balance of power. The shift of researchers from academia to industry has also raised questions.
Advanced AI systems increasingly require large amounts of data, compute power, and funding resources that industry actors possess in greater quantities than academia and nonprofits. Hence, AI research, which was originally the domain of academia in the early 2000s is now being taken over by industry.
We recently talked about this division in another article we published, 7 Most Popular AI Penny Stocks Under $5, here’s an excerpt from it:
“A recent study from Stanford University found that businesses train AI models faster than academic institutions. In 2023, the industry-trained AI neared 51 significant machine learning models, while academia managed only 15. This trend persisted in 2024 despite rising training costs. ChatGPT 4, the latest model of ChatGPT, cost about $80 million to train. Google’s Gemini Ultra cost around $191 million.”
A 2021 Stanford report says that the reason behind the blurring roles of academia and industry is that businesses come with affordable cloud computing, open-source libraries, and pre-trained models that incentivize university researchers to pursue commercial applications of their work. More and more industry papers are now appearing at conferences, raising concerns about applied research stifling long-term innovation or being biased toward corporate interests, all while also accelerating solutions for real-world problems.
A 2023 paper in the journal Science states that businesses attract 70% of the top talent with PhDs in AI today, as compared to just 20% 2 decades ago. The number of AI research faculty in academia has stagnated, while industry hiring has surged 8 times since 2006. Industry models being substantially larger (about 29 times), indicating superior computing power, is a huge reason behind this.
In 2021, US government agencies allocated a total of $1.5 billion for academic AI research, while Google spent the same amount on a single project in just one year.
The largest AI models are now developed in industry 96% of the time. Leading benchmarks are also primarily industry-driven, accounting for 91% of the total. Furthermore, the number of published papers with industry co-authors has nearly doubled since 2000.
Yet, there’s another anticipated shift as academic researchers are increasingly able to deploy their inventions in real-world settings. Duolingo, a language learning app developed by academics, is a successful example.
A distinguished MIT professor, Frédo Durand, believes academia can still be a driving force for innovation. He says that 25 years ago, the field of computer graphics in academia faced a similar resource imbalance where the industry created stunning visuals that academia couldn’t match. However, instead of trying to mimic industry, academia took a different path and focused on ideas like advanced lighting simulations, fluid dynamics, and machine learning for animation. These seemingly outlandish ideas eventually became the foundation of modern rendering and graphics hardware.
Durand believes this approach holds valuable lessons for AI research. He emphasizes the importance of academia pursuing unconventional approaches, openly sharing their work, and maintaining a sense of excitement about the field.
However, he recognizes the challenges for academia and suggests potential solutions including increased government funding for academic research, shared research infrastructure, and strategies to keep top AI talent within academia. While industry seems to be taking over AI in general, collaborative partnerships with academia could yield better results. In one way or the other, AI will remain a hot topic in the coming times.
Methodology
To compile our list, we sifted through several active subreddits to compile a list of 15 AI stocks to buy. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 9
BigBear.ai Holdings, Inc. (NYSE:BBAI) uses AI solutions to help businesses make better, data-driven decisions, specializing in areas like supply chain management, cybersecurity, and national security. The company aims to simplify AI adoption in edge networks by 2025, allowing customers to deploy AI closer to IoT devices. It was held by 9 hedge funds at the close of Q2 2024.
The company relies heavily on just 3 customers (49% of 2023 revenue). These long-term contracts (5+ years) expire between 2024-2026, and renewal is not guaranteed. Revenue growth could stall if it fails to expand its customer base before then.
In Q2, the company partnered with Heathrow Airport to develop advanced technologies to improve security and overall operations. It also acquired a new $7.7 million, 7-month contract with the US Army, and an $8.5 million, 6-month extension to continue another project, solidifying the company’s role as a prime contractor for the US Army.
In July, BigBear.ai Holdings, Inc.’s (NYSE:BBAI) Troy™, an AI-driven workflow engine designed to accelerate the process of binary reverse engineering in cybersecurity achieved “Awardable” status and is now available for procurement on the Chief Digital and Artificial Intelligence Office’s (CDAO) Tradewinds Solutions. It is one of the 6 largest products of the company.
The company is positioned for growth as it continues integrating AI in all of its businesses and remains dominant in the defense space. Management sees its target market tripling by 2028 (from $80 billion to $272 billion) due to AI adoption in security, supply chain, and digital identity. Despite being in its early growth stages, this is one of the best AI stocks under $50 to buy right now.
9. C3.ai Inc. (NYSE:AI)
Number of Hedge Fund Holders: 18
C3.ai Inc. (NYSE:AI) helps businesses use AI to solve real-world problems by building tools for challenges in areas like supply chain management. These challenges look like fraud detection in finance and predictive maintenance in manufacturing. Its GenAI products are deployed across 15 industries and had 50,000+ inquiries in FQ4.
The company closed 47 agreements, including 34 new pilots, and continued to diversify across industries in this quarter. It entered into new agreements with ExxonMobil, A.P. Moller-Maersk, General Mills, Quest Diagnostics, Flextronics, BASF Petronas, Worley Limited, Thales Group, the U.S. Navy, the U.S. Intelligence Community, the U.S. National Science Foundation, The Secil Group, Cargill, Nucor Corporation, and Dow, among others.
The company recorded a 20% year-over-year growth in FQ4 2024 and was held by 18 hedge funds by the end of this quarter. The largest shareholder was Citadel Investment Group, with a position of $85,964,864.
C3.ai Inc. (NYSE:AI) was recognized by Constellation Research as a leader in AI and ML platforms. Its platform was included in the ShortList for both Best-of-Breed and Cloud categories, acknowledging its capability for building and running large-scale Enterprise AI applications.
C3.ai Inc. (NYSE:AI) is a leading player in enterprise AI with a head start in the market (90+ applications). It sees AI value transitioning from hardware to software, positioning the company well for long-term growth. Analysts and hedge funds view it as a top AI stock due to its strong market position and successful execution.
Bireme Capital stated the following regarding C3.ai, Inc. (NYSE:AI) in its fourth quarter 2023 investor letter:
“Our final new short position is in a company called C3.ai, Inc. (NYSE:AI). Originally named “C3 Energy,” C3.ai has changed its name multiple times based on whatever hot new trend they were supposedly capitalizing on. The “energy” theme was about smart grid and cap-and-trade. Then the firm changed its name to “C3 IoT” to attempt to capitalize on the Internet of Things buzz. After that trend fizzled out, the moniker was altered once more, with the company capturing the “AI” ticker in December 2020 – a savvy move if it wants to sell stock to credulous investors, but irrelevant to its business prospects. As Kerrisdale put it, the company is a “minor, cash burning consulting and services business masquerading as a software company.”
8. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 44
Palantir Technologies Inc. (NYSE:PLTR) helps organizations use AI to make better, data-driven decisions. It builds software that can understand, visualize, and analyze large amounts of complex data. The company’s stock is held by 44 hedge funds, as of June 30. The largest shareholder is Renaissance Technologies, with a position worth $1,000,922,777.
In its 27% year-over-year improvement for Q2 2024, US commercial revenue was a big contributor. The sector alone rose 70% year-over-year, coming from existing customers signing expansion deals. US government business grew around 8% in Q1 and Q2 together. At this time there was a production contract from the Department of Defense to deploy an AI-enabled operating system, with an initial order of $153 million.
In August, it partnered with Wendy’s to use AI for supply chain optimization. It also partnered with Microsoft to bring AI to US national security. The companies will integrate Microsoft’s Azure OpenAI Service into Palantir’s AI Platform, allowing for AI adoption and innovation for national security missions. Towards the end of the month, it also partnered with Sompo, a Brazilian insurer.
Palantir Technologies Inc. (NYSE:PLTR) is a leading AI company with strong positions in infrastructure and oncology. With the GenAI market expected to reach $1.3 trillion by 2032, its growing government and commercial businesses make it a promising AI investment. The company’s focus on digital transformation and market share gains positions it well for growth.
Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its first quarter 2024 investor letter:
“The top contributor to return for the quarter was Palantir Technologies Inc. (NYSE:PLTR). Sentiment improved on Palantir after it reported stronger than expected commercial customer revenue and free cash flow. U.S. commercial growth was especially encouraging, as U.S. commercial revenue was up by a large percentage year over year for the fourth quarter and U.S. commercial customer count grew nearly as much. We expect Palantir to become one of the premier artificial intelligence (AI) software providers, built on its Foundry and AIP platforms.”
