In this article, we will take a detailed look at the 10 Buzzing AI Stocks on Latest News and Analyst Ratings.
Investors are still digesting the Fed’s aggressive rate cut and charting the path forward. Roger Altman, Evercore founder and senior chairman, said while talking to CNBC in a latest program that the Fed was not “behind the curve” but it went with a higher-than-expected rate cut amid labor market concerns.
Asked if he thinks we are headed toward a soft landing scenario, Altman said yes, as he believes growth is “resilient” and corporate profit outlook is good. Altman said equity markets are headed to have their best year since 1960.
“If the landing is finished and the Fed hits its target, Powell will deserve an A and it would be a pretty miraculous achievement,” Altman said.
While the analyst believes currently it’s a “near perfect” overall environment for the market, he did point to “storm cloud” gathering over the international stage including the expanding crisis in the Middle East, Russia’s war on Ukraine and America’s overall fiscal situation.
For this article we chose 10 trending AI stocks based on latest news and analyst ratings. With each company we have mentioned its hedge fund sentiment. 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. Arm Holdings PLC – ADR (NASDAQ:ARM)
Number of Hedge Fund Investors: 38
William Blair analyst Sebastian Naji recently started covering Arm Holdings PLC – ADR (NASDAQ:ARM) with an Outperform rating.
The analyst said the chipmaker is seen as a “critical vendor” of computing intellectual property with “best-in-class” financials. He said the company generates revenue from over 29B chips sold in the mobile, automotive, IoT, and data center markets.
“Arm’s royalty/licensing revenue model drives best-in-class profitability— R&D is the largest expense, 35% of total revenue in fiscal 2024. With expanding royalty rates helping drive better operating leverage (long-term target of 60% non-GAAP operating margin), we see room for sustained EPS and free cash flow growth,” the analyst said.
Arm Holdings PLC – ADR (NASDAQ:ARM) has unveiled its latest processor design, v9, which features significant upgrades like enhanced encryption and vector processing. These improvements have allowed ARM to double its take-rate compared to the previous v8 design, which is expected to boost royalty revenue over the next few years, according to analyst Naji.
The company, led by Rene Haas, is also seeing growth from its mobile CSS and data center Neoverse subsystems, driving new licensing activity. Arm Holdings PLC – ADR (NASDAQ:ARM) is gaining traction in the data center market, traditionally dominated by Intel. With hyperscalers like Amazon, Google, Microsoft, and Meta developing their own chips and Nvidia leading the AI accelerator space, Arm Holdings PLC – ADR (NASDAQ:ARM) is positioned to benefit from this growing sector. Naji estimates ARM’s data center business could account for 15% of its royalty revenue by 2025.
9. Cloudflare Inc (NYSE:NET)
Number of Hedge Fund Investors: 39
Cloudflare Inc (NYSE:NET) is an interesting name in the AI race which often goes unnoticed. Thanks to its inference service for AI called Workers AI, the company is making forays to monetize the AI boom.
How can Cloudflare Inc (NYSE:NET) benefit from AI. Being a key internet and Cloud infrastructure company, Cloudflare is positioned to benefit from the huge spending in AI. For example, Apple is launching a Private Cloud Compute (PCC) infrastructure to integrate AI features into its devices. Apple’s PCC will use its own silicon and employ RSA Blind Signatures for secure connections, relying on third-party providers like Cloudflare Inc (NYSE:NET) for encrypted communication. Morgan Stanley analysts estimate Cloudflare could generate up to $100 million annually from handling Apple’s AI queries.
Last month the company posted strong quarterly results and outlook, prompting Guggenheim to raise its price target.
Analyst John DiFucci of Guggenheim noted that Cloudflare Inc (NYSE:NET) business showed signs of a turnaround after more than a year of slowing momentum. The company reported an 11% increase in adjusted new annual recurring revenue, following declines in the previous two quarters. DiFucci attributed the improvement to changes in Cloudflare’s go-to-market strategy and growth in its enterprise deals, particularly those involving Cloudflare Workers.
“We’ve always respected Cloudflare Inc (NYSE:NET) vision and product lineup but questioned if its product-led approach was right as it targeted larger markets,” DiFucci wrote. He added that while this quarter’s results are positive, it’s too early to call it a lasting trend.
However, DiFucci maintained a Sell rating on the stock but raised the price target from $50 to $57.
Baron Fifth Avenue Growth Fund stated the following regarding Cloudflare, Inc. (NYSE:NET) in its Q2 2024 investor letter:
“Cloudflare, Inc. (NYSE:NET) provides content delivery network services, cloud cybersecurity, denial-of-service mitigation, Domain Name Service, and ICANN-accredited domain registration services. Shares fell 14.4% during the quarter on remarks from the CEO about worsening macro conditions, citing the negative impact of geopolitical uncertainties on customer buying behavior. On the positive side, the company posted strong quarterly results with revenue growth of 30% year-over-year, showing evidence that the changes to the company’s go-to-market strategy were resonating with solid growth across its large customer cohorts (revenues from customers spending over $100,000 represented 67% of the total, up from 62% in the first quarter of 2023), double-digit improvement in sales productivity, and new pipeline attainment ahead of plan. Cloudflare reiterated revenue guidance for the year on resilience in cybersecurity spend. While we fine-tuned our model on the back of the company’s increased macro headwind commentary, pushing out revenue reacceleration estimates from the second quarter of 2024 to the first quarter of 2025, this is still ahead of guidance. We retain conviction in the long-term thesis: a strong founder-led business with a unique global network and significant pricing advantages powering a disruptive multi-product growth story with improving margins. We therefore remain shareholders.”
8. Applovin Corp (NASDAQ:APP)
Number of Hedge Fund Investors: 54
Citi has increased its estimates on APP, citing increased confidence in hitting revenue growth of 20% or more.
“We see multiple paths for AppLovin to achieve its targeted software revenue growth of 20% to 30% including incremental share gains of mobile gaming ad spend, higher take rates, and a likely expansion into ecommerce ad budgets,” analyst Jason Bazinet wrote in an investor note.
Ankur Crawford, Alger executive VP, while talking to CNBC in a latest program said that in about 3 to 5 years AI is going to provide us with superhuman intelligence.
“All of the CapEx being spent today is whole-heartedly justifiable because the opportunity to monetize that AI by that time is beyond what anyone has contemplated in the market so far.”
Ankur Crawford believes Applovin Corp (NASDAQ:APP) is one of the top underappreciated AI stocks.
She said that AppLovin is a gaming advertising platform.
“They are using AI to basically make you download more games and they can monetize inventory better than anyone else can. They have 70% market share, and they are going into ecommerce as well. So, instead of serving you up a game, they will serve you up a product and monetize their inventory better than they were able to before,” the analyst said.
Crawford said Applovin Corp (NASDAQ:APP) is “interesting” because their cost structure is already “embedded.”
“For every dollar they get, they get a almost a 100% fall through on the margin line. So, massively cash-flow generative. The Street has $6 in earnings (estimate) in 2026,” the analyst added.
Carillon Scout Mid Cap Fund stated the following regarding AppLovin Corporation (NASDAQ:APP) in its Q2 2024 investor letter:
“AppLovin Corporation (NASDAQ:APP) was another top contributor. The advertising technology platform, focused on mobile applications, reported strong earnings results in early May. Its AI-driven Axon 2.0 mobile advertising platform continues to produce strong returns for customers, which is leading to more than expected spending on the platform. Although the one-year anniversary of Axon 2.0’s release occurs this year, the company is already working to expand beyond mobile applications with opportunities in e-commerce and connected television. We believe AppLovin’s valuation, free cash flow, and leading market share remain attractive.”
7. Marvell Technology Inc (NASDAQ:MRVL)
Number of Hedge Fund Investors: 74
About a year ago, Brook Dane, Goldman Sachs Asset Management, said while talking to CNBC that the market was missing on the AI potential of Marvell Technology Inc (NASDAQ:MRVL).
“Marvell’s core business is doing connectivity in data centers and one of the key bottlenecks besides using GPUs is thi connectivity issue and we think as the big platforms continue to spend on AI they are gonna continue to invest behind Marvell Technology Inc (NASDAQ:MRVL) connectivity solutions.”
Artisan Mid Cap Fund stated the following regarding Marvell Technology, Inc. (NASDAQ:MRVL) in its Q2 2024 investor letter:
“During the quarter, we initiated new GardenSM positions in CCC Intelligent Solutions, Marvell Technology, Inc. (NASDAQ:MRVL) and Insmed. Marvell Technology is a semiconductor company offering networking, secure data processing and storage solutions to customers worldwide. We believe Marvell has among the broadest range of intellectual property in technological areas (e.g., high-bandwidth data switching and storage applications) that position it well for the growing requirements of data centers, wireless networks and autos. Several of the company’s product lines (e.g., custom silicon, optical connectivity and switching) are benefiting from the growth of AI data centers. And we believe a significant opportunity exists for the company to help design and manufacture cost-effective custom data center chips that would help cloud providers reduce their reliance on expensive graphics processing units (GPUs). Furthermore, like many other semiconductor companies, a portion of its business may be poised for a cyclical recovery after the industry’s recent inventory correction.”
6. Dell Technologies Inc (NYSE:DELL)
Number of Hedge Fund Investors: 88
UBS analysts recently said in a note that AI stocks will continue to grow on the back of strong capital spending and demand. Solita Marcelli, chief investment officer for Americas at UBS, said he expects global tech to see earnings growth of about 15-20%.
“We continue to like AI beneficiaries within the tech sector,” said Marcelli.
The firm named Dell Technologies Inc (NYSE:DELL) among these beneficiaries.
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.”
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