On December 4, Jay Jacobs, US Head of Thematics and Active Equity ETFs at BlackRock appeared on CNBC and discussed the significant growth potential for ETFs as we approach 2025, particularly in the context of the accelerating AI infrastructure phase. He noted that while AI adoption is still in its early stages, substantial investments, amounting to around $250 billion annually from major tech companies, are being made to enhance data centers and develop advanced chips. This investment is crucial for making AI more integrated into everyday life and business applications.
Jacobs emphasized that the opportunity in AI extends beyond just mega-cap tech stocks; it encompasses a broader value chain that includes semiconductor and software companies. He mentioned specific ETFs like ARTY (an index-based artificial intelligence fund) and BAI (an actively managed fund) that aim to capture this growth. Additionally, he highlighted the increasing importance of cybersecurity as data becomes more valuable, suggesting that companies will invest more in protecting their data assets. This trend is reflected in ETFs such as IHAK, which focuses on cybersecurity firms benefiting from this heightened demand.
Dave Nadig, an ETF expert and Financial Futurist, added insights on how AI will shape ETF investing by pointing to the infrastructure needs that arise from increased energy consumption driven by AI technologies and electric vehicles. He noted that companies involved in power generation and utilities are becoming increasingly relevant as they adapt to rising electricity demands. Both experts agreed on the critical role of physical infrastructure in supporting technological advancements, emphasizing that real-world resources like energy and materials are essential for the ongoing development of AI technologies.
Dan Ives, Global Head of Technology Research at Wedbush Securities, also believes the tech market is set for significant growth driven by advancements in AI. He expects AI software companies to play a key role in this expansion, as he mentioned in a CNBC interview on November 25. We discussed this in our article about the 12 Best Artificial Intelligence Stocks To Invest In Under $10, here’s an excerpt from it:
“…Ives believes that the consumption model in enterprise AI, driven by advancements from major chipmakers, will lead to underestimated growth rates of 15% to 20% for these software companies.
Ives also addressed the impact of bond yields and currency strength on the tech trade, noting that while these factors could present headwinds, they are already factored into market guidance. He expressed confidence in a strong demand perspective that could propel the NASDAQ to 20,000 in the next two years, with aspirations for it to reach 25,000 thereafter…”
With that context, we’re here with a list of the 10 best AI stocks to buy according to Reddit.
Methodology
We first sifted through Reddit threads to compile a list of the top AI stocks. 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 Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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 Best AI Stocks to Buy According to Reddit
10. POET Technologies Inc. (NASDAQ:POET)
Number of Hedge Fund Holders: 5
POET Technologies Inc. (NASDAQ:POET) is at the forefront of developing advanced optical solutions designed for AI applications. Central to its innovation is the POET Optical Interposer, a technology that integrates electronic and photonic components, and facilitates high-speed data transfer, reduces energy consumption, and enhances computational capabilities.
The company is experiencing significant growth through strategic partnerships. In the third quarter of 2024, it achieved a design win with Foxconn Interconnect Technology, which focuses on the development of 800G and 1.6T optical engines. Additionally, Luxshare Tech, a technology supplier, has incorporated the company’s optical engines into its product offerings. To further solidify its market position, POET Technologies Inc. (NASDAQ:POET) entered into partnerships with Mentech Technology and Mitsubishi Electric, aimed at creating state-of-the-art 800G and 3.2T optical solutions. These partnerships primarily target AI and data center networks.
Recognized for its contributions to AI infrastructure, POET Technologies Inc. (NASDAQ:POET) has received several industry awards. These developments establish the company as a pivotal player in the ongoing AI revolution, positioning it to meet the growing needs of the technology landscape.
9. BigBear.ai Holdings Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 7
BigBear.ai Holdings Inc. (NYSE:BBAI) specializes in AI-driven decision intelligence solutions that are aimed at enhancing operations in areas such as national security, supply chain management, and digital identity. By employing cutting-edge technologies like machine learning and predictive analytics, it empowers organizations to make well-informed decisions in complex environments.
The firm is making strides at the US Navy’s Mission Autonomy Proving Ground (MAPG) exercises, where it is demonstrating its ConductorOS platform. This platform is engineered to orchestrate a variety of AI models, data streams, and sensors from multiple sources. BigBear.ai Holdings Inc. (NYSE:BBAI) leverages ConductorOS to showcase AI’s ability to unify diverse technologies. It ensures seamless interaction between different AI models and sensors, coming from any vendor, while deploying them at the network edge for real-time tasks like predicting enemy ship movements.
By actively participating in MAPG, BigBear.ai Holdings Inc. (NYSE:BBAI) is positioning itself as a pivotal contributor to the advancement of AI technologies within the Navy and the broader defense sector. Its emphasis on AI-based solutions is anticipated to significantly enhance maritime domain awareness, and improve decision-making processes.
8. SoundHound AI Inc. (NASDAQ:SOUN)
Number of Hedge Fund Holders: 11
SoundHound AI Inc. (NASDAQ:SOUN) specializes in voice AI, which is dedicated to enabling businesses to deliver outstanding conversational experiences. Its products include voice assistant platforms, natural language understanding systems, and speech recognition technologies, which serve industries like automotive, television, the Internet of Things (IoT), and customer service.
An illustration of the company’s impact is its Amelia AI Agents. By November 2024, these AI-driven virtual assistants had successfully managed over 100,000 customer calls for Apivia Courtage, which is a leading insurance broker in France. The automation of routine tasks and the provision of efficient customer support by Amelia AI Agents have resulted in a ~20% reduction in the workload for human agents, allowing them to concentrate on more complex issues.
The company’s emphasis on AI has led to remarkable growth, highlighted by an 89.13% year-over-year revenue increase in the third quarter of 2024. As SoundHound AI Inc. (NASDAQ:SOUN) continues to innovate and expand the horizons of AI technology, it is well-positioned for success.
7. Lantronix Inc. (NASDAQ:LTRX)
Number of Hedge Fund Holders: 14
Lantronix Inc. (NASDAQ:LTRX) specializes in providing connectivity solutions that are tailored for the Internet of Things (IoT) and Remote Environment Management (REM). It offers products and services like Software as a Service (SaaS), intelligent hardware, and engineering services. It’s focused on integrating AI and edge computing into its offerings, enabling advanced applications like video collaboration and machine learning.
In October, the company announced the introduction of 5 new System-in-Package (SiP) solutions powered by Qualcomm Technologies, for accelerating AI-driven applications. These SiPs are designed to bring advanced AI and ML capabilities to the edge, targeting industrial and enterprise applications, offering features like high-performance AI and ML processing, robust and scalable computing, advanced connectivity options, and secure and reliable operation. The IQ9 series, for example, is designed for applications like robotics and automation, while the Open-Q series is ideal for video surveillance and other AI-powered devices.
By providing these powerful SiP solutions, Lantronix Inc. (NASDAQ:LTRX) aims to accelerate the development of AI-driven applications at the edge, enabling businesses to improve efficiency and gain valuable insights from data.
180 Degree Capital Corp stated the following regarding Lantronix, Inc. (NASDAQ:LTRX) in its Q2 2024 investor letter:
“More recently, we have been working behind the scenes with the management and board of Lantronix, Inc. (NASDAQ:LTRX) on ways to solidify the strong foundation of the company and set it up for success and significant value creation for stockholders in the future. We believe LTRX’s new CEO, Saleel Awsare brings an interesting and successful background to LTRX. What we believe he needed to be in the best position for success were board members who have experience navigating the challenges unique to microcapitalization companies. Following multiple discussions, we introduced Saleel and his board to Narbeh Derhacobian, the former Chief Executive Officer and founder of our former portfolio company, Adesto Technologies, Inc., and one of Adesto’s board members, Kevin Palatnik, who has significant experience as a CFO at multiple related businesses. We were pleased to see that LTRX’s board saw the same value that we do in these individuals, in terms of helping Saleel and his team to have the best opportunities to achieve multiple catalysts that could lead to material increases in value for LTRX and its stockholders.”
6. Rocket Lab USA Inc. (NASDAQ:RKLB)
Number of Hedge Fund Holders: 16
Rocket Lab USA Inc. (NASDAQ:RKLB) is a space technology company that uses AI to optimize its end-to-end space solutions. It also has a semiconductor division that is focused on compound semiconductors, poised to accelerate AI advancements. The company has received a boost from the US government with a $23.9 million grant. This funding will be utilized to enhance its compound semiconductor manufacturing capabilities at its Albuquerque, New Mexico facility. These semiconductors are crucial for developing advanced space-grade solar cells that power satellites.
The solar cells produced by the company leverage optoelectronic technology, enabling them to perform computations using light instead of electricity. This makes them highly efficient for powering AI-intensive applications in space. This technological advancement aligns perfectly with the growing demand for AI-powered solutions in various sectors, including space exploration.
This investment will also create 100+ new manufacturing jobs in New Mexico, contributing to local economic growth and workforce development. With the increasing demand for satellite applications across various sectors, including military, surveillance, scientific research, and commercial endeavors, Rocket Lab USA Inc. (NASDAQ:RKLB) is well-positioned to grow.
5. IONQ Inc. (NYSE:IONQ)
Number of Hedge Fund Holders: 17
IONQ Inc. (NYSE:IONQ) is dedicated to building the world’s most powerful quantum computers. By leveraging advanced trapped-ion technology, it aims to unlock the potential of quantum computing in order to revolutionize industries such as healthcare, materials science, and AI.
The company reported a strong third quarter in 2024, exceeding revenue expectations with a 102.09% year-over-year revenue improvement. It secured $63.5 million in new contract bookings, including a significant $54.5 million contract with the US Air Force Research Lab (AFRL). The AFRL contract will focus on developing quantum networking technologies, which include compatibility with existing infrastructure, interoperability with various quantum devices, and deployment in diverse environments.
IONQ Inc. (NYSE:IONQ) and the University of Maryland have partnered to advance quantum computing research. The $9 million agreement will provide the University with access to the company’s advanced quantum computers at the National Quantum Lab (QLab). This will help foster innovation and develop a skilled quantum workforce. This company is therefore at the forefront of the quantum computing revolution. With a strong focus on research and development, and strategic partnerships, it’s poised to shape the future of technology.
4. SoFi Technologies Inc. (NASDAQ:SOFI)
Number of Hedge Fund Holders: 31
SoFi Technologies Inc. (NASDAQ:SOFI) is a fintech company that uses AI to enhance its financial services offerings. It utilizes AI-driven fraud detection systems to protect its platform and its customers, in order to provide secure financial solutions.
The company’s tech platform has been a key driver of its strong Q3 performance. Overall revenue at the company rose by 29.91% to $689.45 million as compared to the year-ago period. The tech platform’s net revenue alone increased by 14% year-over-year to nearly $103 million. This growth was fueled by several factors, including increased adoption of products and services, expanded partnerships, enhanced product offerings, and improved fraud prevention.
A lot of new product sign-ups came from existing members. 32% of new products were opened by existing SoFi Technologies Inc. (NASDAQ:SOFI) members and 20% of new members opened a second product within 30 days. This demonstrates the effectiveness of its one-stop-shop approach. These advancements have not only contributed to revenue growth but have also strengthened SoFi Technologies Inc.’s (NASDAQ:SOFI) position as a leading financial technology company.
Patient Capital Opportunity Equity Strategy stated the following regarding SoFi Technologies, Inc. (NASDAQ:SOFI) in its first quarter 2024 investor letter:
“SoFi Technologies, Inc. (NASDAQ:SOFI) fell in the first quarter despite delivering strong 4Q results and 2024 guidance supported by their non-lending businesses. The company continues to gain share in the digital lending and neo-banking space, consistently growing deposits at $2B a quarter. What differentiates the company is their focus on prime and super-prime customers (average FICO 749). Sofi is early in its life cycle, currently being a small player in a very large total addressable market (TAM). With their strong management team, we believe the company will continue to deliver on their guidance of strong growth and expanding margins.”
3. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 34
Snap Inc. (NYSE:SNAP) is a technology company known for popular products like Snapchat, Spectacles, and Bitmoji. Snapchat, in particular, uses AI to enhance user experiences.
The company is also investing in GenAI to empower developers to create more sophisticated AR experiences. For instance, the introduction of AI-powered tools in Lens Studio enables developers to easily generate full 3D characters and animations. Additionally, its AI-powered chatbot, My AI, provides personalized responses and assistance to users, leading to increased user engagement, which is evident by the tripling of Snaps sent to My AI in Q3.
The company had strong Q3 2024 financial results, with revenue improving by 15.28% year-over-year to $1.37 billion. This growth was primarily driven by a 16% increase in direct response advertising revenue, which also uses AI for ad targeting and optimization. Snap Inc. (NYSE:SNAP) is enhancing user experience, and unlocking new opportunities for advertising and revenue generation through AI.
RiverPark Large Growth Fund stated the following regarding Snap Inc. (NYSE:SNAP) in its first quarter 2024 investor letter:
“Snap Inc. (NYSE:SNAP): SNAP was our top detractor in the quarter despite reporting fourth quarter results generally in line with or better than expectations. Revenue growth of 5% was roughly in line with investor estimates and at the high end of guidance, and EBITDA of $159 million was $49 million better than estimates. Daily Active Users (DAUs) were also ahead of investor expectations, ending the quarter at 414 million (about 2 million better), driven by continued innovation in Snap’s offerings. Revenue guidance for 1Q24 was also roughly in line with investor estimates, but EBITDA guidance of negative $55-95 million was well below estimates. The company pointed to increased infrastructure costs and a US focused marketing campaign for the lower-than-expected margin guidance.
Although the company continues to face near-term macro headwinds, we believe SNAP can accelerate its revenue growth over the next several years. With 2023 revenue expected to be $4.6 billion (as compared with Meta’s $134 billion), we believe SNAP has a long runway for both revenue growth and expanded profitability as it improves platform functionality, continues to grow its audience (daily active users continue to grow at a double-digit rate), and expands its monetization.”
2. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 43
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading data analytics and AI company that specializes in providing powerful tools to government agencies. Through AI, it enables these agencies to analyze massive datasets, uncover hidden patterns, and make informed decisions.
Its AI-driven solutions are being used to transform several industries, such as defense, healthcare, and finance. For example, the company’s platform has helped organizations reduce underwriting response times from over two weeks to three hours, increase on-time delivery rates from 40% to 90%, and optimize supply chain operations, which has led to a $30 million impact on the bottom line.
The company’s US business achieved an impressive 44% year-over-year revenue growth in Q3 2024, fueled by increased adoption of AI-powered solutions. The overall revenue improved by 29.98%. It closed 104 deals, each of which was over $1 million, together with a 77% year-over-year increase in customer count. By prioritizing AI integration and delivering tangible results, Palantir Technologies Inc. (NASDAQ:PLTR) is well-positioned to maintain its leadership in the data analytics and AI market.
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.”
1. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 71
Snowflake Inc. (NYSE:SNOW) is a leading cloud-based data platform provider that uses AI to enhance its services. It utilizes AI for data management optimization, advanced insights, data security, data engineering automation, and data science capabilities.
With over 1,000 deployed use cases and 3,200 accounts leveraging AI and ML features, the company is solidifying its position as a leader in data and AI. The focus on interoperability and data transformation has proven to be a significant differentiator, with these features generating over $200 million in annual run rate. Partnerships with industry giants like Microsoft and ServiceNow further enhance data interoperability and accelerate application development.
AI is poised to revolutionize data consumption, making structured and unstructured data more interchangeable and influencing areas like business intelligence. The company’s comprehensive product suite, including Cortex AI, a platform that uses AI to provide business insights, automate tasks, and build AI-powered applications, positions it as the preferred data platform for enterprises.
Baron Global Advantage Fund stated the following regarding Snowflake Inc. (NYSE:SNOW) in its Q3 2024 investor letter:
“Snowflake Inc. (NYSE:SNOW) is a leading cloud data platform predominantly used for data analytics. Shares fell 15.2% in the third quarter due to a cybersecurity incident, a shifting competitive landscape, a change in leadership, and general macro complexities which are pressuring customer IT budgets. With generative AI (Gen AI) front and center, both investors and customers are closely evaluating Snowflake’s positioning in the future data ecosystem. Databricks and other competitors whose core users are data scientists who are also key buyers of Gen AI technologies, are benefiting. In addition, while Snowflake’s product innovation push should fuel future growth, it may also lead to short-term headwinds to profitability. Management reported healthy demand for its core data analytics, evidenced by solid growth rates among current customers alongside new go-to-market initiatives that could support growth. We are optimistic the new CEO, Sridhar Ramaswamy, can lead the company towards an AI-centric strategy, and therefore remain shareholders.”
As we acknowledge the growth potential of Snowflake Inc. (NYSE:SNOW), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SNOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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