Artificial intelligence startups are playing a big role in US venture capital funding. As per PitchBook data reported by Reuters, the total capital raised in 2024 was nearly 30% higher year-on-year. AI startups bagged a record 46.4% of the total $209 billion raised in the previous year, compared to less than 10% a decade earlier. This means that venture capitalists put $97 billion into artificial intelligence startups in the US. Artificial intelligence technology has been garnering investor interest recently, a majority of which are very optimistic about the sector.
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“The AI/LLM companies did enjoy a historically rich funding environment. Most raised multiple rounds at exponentially higher valuations last year. They will need to smash very significant business milestones this year to continue enjoying unlimited access to infinity capital”.
-James Cross, managing director at Franklin Venture Partners.
In particular, AI companies like xAI, OpenAI, and Anthropic have led the way in funding. xAI has raised $6 billion in a May funding round and another $6 billion in December to develop its AI chatbot Grok. OpenAI has also raised $6.6 billion in October. Similarly, AI startup Anthropic is in talks to raise as much as $2 billion at a $60 billion valuation, CNBC has confirmed. The funding round is being led by Lightspeed Venture Partners. Anthropic, OpenAI, and other tech giants are in a generative AI arms race so that they don’t fall behind in a market that is predicted to top $1 trillion in revenue within a decade.
Many of these funding rounds share a common goal: advancing AI capabilities, with some aiming for the long-term vision of achieving AGI. However, Sam Altman, CEO of OpenAI, has said that Artificial General Intelligence (AGI) has become a sloppy term.
“If you look at our levels, our five levels, you can find people that would call each of those AGI, right? And the hope of the levels is to have some more specific grounding on where we are and kind of like how progress is going, rather than is it AGI, or is it not AGI?”
– Altman said.
Altman also referred to something called the ARC-AGI challenge, referring to it as “a North Star toward AGI”. The new AI model which OpenAI plans to introduce on Jan. 10 passes this challenge.
“They said if you can score 85% on this, we’re going to consider that a ‘pass,’ And our system — with no custom work, just out of the box — got an 87.5%. And we have very promising research and better models to come”.
-Sam Altman.
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.
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10. Pony AI Inc. (NASDAQ:PONY)
Number of Hedge Fund Holders: N/A
Pony AI Inc. (NASDAQ:PONY) specializes in autonomous mobility, offering AI-driven robotruck and robotaxi services, intelligent driving software, and vehicle integration solutions. On January 6, Reuters reported that Pony AI Inc. is planning to expand its AI-powered robotaxi services in Hong Kong. The company aspires to expand its autonomous driving operations globally as it joins Baidu in a race to provide services in the city. Initially, it will offer its robotaxi commuting services to airport staff within Hong Kong International Airport before it ventures into other areas. The company has currently obtained robotaxi service licenses in Beijing, Shanghai, Guangzhou, and Shenzhen, and is also considering the deployment of its autonomous driving business in South Korea, Luxembourg, the Middle East, and other countries.
9. Zepp Health Corporation (NYSE:ZEPP)
Number of Hedge Fund Holders: 2
Zepp Health Corporation (NYSE:ZEPP) is a smart wearable and health technology company that offers intelligent healthcare tools. On January 6th and 7th, the company unveiled its latest smart wearables and health technology advancements at the CES Pepcom and ShowStoppers media events. Zepp Health revealed its integrated solutions for fitness, sleep, nutrition, hearing, and productivity, helping individuals live modern lifestyles while achieving balance and fulfillment. Some of the advancements showcased at the event include AI-driven personalized fitness plans through Zepp Coach, AI-driven sleep tracking with Zepp Aura, nutrition insights through Amazfit, advanced hearing solutions with Zepp Clarity, and much more. Amazfit, Zepp Clarity, and Zepp Aura are the company’s leading consumer brands.
8. SoundHound AI (NASDAQ:SOUN)
Number of Hedge Fund Holders: 11
SoundHound AI (NASDAQ:SOUN) is a voice artificial intelligence company offering voice AI solutions to businesses. On January 2nd, SoundHound AI announced that Lucid, a company that develops advanced electric vehicles, has launched the Lucid assistant. The Lucid Assistant, powered by the cutting-edge voice platform “SoundHound Chat AI”, is a new hands-free voice assistant that allows customers to control various vehicle functions through speech. The integration of generative AI technology through SoundHound Chat AI used in Lucid Assistant will allow drivers to enhance their user experience through interactive knowledge discovery, real-time data, and effortless in-vehicle controls. SoundHound’s proprietary technology allows Lucid Assistant to respond to the wake words “Hey Lucid”, ask questions in a conversational tone, and receive accurate responses. The voice assistant is also capable of answering almost any question about the vehicle’s functionality and allows drivers to control critical features like navigation.
“Lucid is one of the most exciting automakers in the world, so it stands to reason they are launching this pioneering new voice AI assistant. We believe that SoundHound’s best-in-class voice technology opens up unlimited new opportunities for both drivers and OEMs, and will fundamentally change the way we interact with our vehicles into the future.”
-Michael Zagorsek, COO of SoundHound AI.
7. Domo, Inc. (NASDAQ:DOMO)
Number of Hedge Fund Holders: 15
Domo, Inc. (NASDAQ:DOMO) operates a cloud-based business intelligence platform. On January 6th, the company announced that it has partnered with Data Consulting Group (DCG), a global firm offering management consulting, staff augmentation, and business process outsourcing services. DCG employs Domo’s AI and data products platform to enhance its operations and allow customers to automate, integrate, and elevate their data ecosystems. Its expertise in enterprise data strategy, AI readiness, and data governance helps businesses solve their data problems and maximize returns on data investments.
The new collaboration will enable Domo and DCG to offer advanced business intelligence capabilities to global enterprises. DCG will be offering its expertise while Domo’s platform will be employed to deliver streamlined, end-to-end data management and real-time insights. This will be done through tools like Domo Everywhere, an embedded analytics solution that has become a key part of DCG’s offerings. The collaboration includes working with one of the world’s largest gaming platforms and also includes helping DCG modernize customer tracking, support seamless data integration, and enable a collaborative approach to analytics.
“DCG’s ability to bridge data management with holistic enterprise strategies make them an ideal partner for Domo. They have a unique talent for untangling data problems across large organizations, often uniting teams that speak different data languages under one cohesive strategy”.
-RJ Tracy, Domo’s CRO.
6. HP Inc. (NYSE:HPQ)
Number of Hedge Fund Holders: 42
HP Inc. (NYSE:HPQ), a technology company, specializes in personal computing and printing solutions. On January 6th, HP Inc. introduced new and powerful AI PCs and solutions at the CES 2025. The commercial next-gen AI PCs all feature HP AI Companion, a unified user experience that empowers users to increase productivity with AI. These devices include the HP EliteBook Ultra G1i – the world’s most immersive AI business notebook, which offers professionals cutting-edge tools for distinctive work experiences. Other highlights include the powerful mobile and mini workstations like the ZBook Ultra G1a and Z2 Mini G1a, as well as HP Thunderbolt 4 G6 Docks, the world’s first docks with proximity activation. Offering features such as advanced AI performance, enhanced multitasking, and seamless adaptability, HP’s devices are designed to elevate user experience and meet the demands of today’s evolving workforce.
5. Atlassian Corporation (NASDAQ:TEAM)
Number of Hedge Fund Holders: 44
Atlassian Corporation (NASDAQ:TEAM) is a global software company that designs, develops, licenses, and maintains various software products worldwide. One of the biggest analyst calls for Tuesday, January 7th, was for Atlassian Corporation (NASDAQ:TEAM). Truist upgraded the stock to “Buy” from Hold, boosting the price target to $300 from $250. According to the firm, there is “still room for upside from here” for Atlassian. The analysts told investors in a research note that the company is well-positioned for the year, sporting a “unique” artificial intelligence opportunity and the potential for higher profit margins. The company integrates AI in its suite of project management and collaboration tools, enhancing efficiency and team productivity. Atlassian Intelligence, in particular, offers several AI features that help teams collaborate and work efficiently. According to Truist, Atlassian sports the most favorable near-term model setup out of the companies in its infrastructure coverage.
“While at first investors feared risk of AI displacing seats in IT organizations and posing risk to Atlassian’s core business, we see the narrative shifting to acknowledge the potential for Atlassian to become a beneficiary in the AI age”.
4. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 51
AppLovin Corporation (NASDAQ:APP) provides a leading marketing platform powered by AI technology. On January 7th, Piper Sandler analyst James Callahan reiterated an “Overweight” rating on AppLovin Corporation (NASDAQ:APP) with a $400.00 price target. Applovin leverages AI-powered technologies to optimize advertising and enhance user engagement. The company has revamped its AI-powered Axon engine, helping it to enter new verticals like e-commerce. The introduction of Axon 2.0, in particular, has allowed it to improve its real-time ad delivery and targeting capabilities, in turn helping it in serving e-commerce advertisers.
According to Piper Sandler, competitive ad pricing, incremental spend, and the potential for expanding attribution windows are some of the strengths in Applovin’s approach to e-commerce and advertising. Analyzing its e-commerce initiatives, the firm noted a competitive edge in ad pricing in comparison to industry peers as well as an incremental spending pattern by consumers. At the same time, some shortfalls that were noted include room for improving the new E-Commerce product discovery, shorter purchase consideration window than competitors, and older average purchaser age. Regardless of the mixed findings, the firm is optimistic about the e-commerce launch and views opportunities for Applovin to enhance the initial version of its advertising product.
3. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 56
International Business Machines Corporation (NYSE:IBM) is a multinational technology company that offers consulting services and a suite of AI software products. On January 7th, TD SYNNEX, an IT distribution company, announced the grand opening of a new North American Innovation Studio in partnership with IBM. The Innovation Studio offers a hands-on environment for TD SYNNEX partners so that they can explore and adopt advanced technologies such as AI, data, automation, and hybrid cloud. Being a part of TD SYNNEX’s Destination AI™ initiative and the IBM Watsonx Gold 100 program, the studio will also be offering IBM trained, technical experts for partners who will help them in AI adoption and monetization. Partners will have a dedicated to explore and demo IBM solutions, such as Watsonx, TD SYNNEX is simplifying access to new technologies and offering comprehensive support pre- and post-sale.
“Partners are the key to accelerating clients’ AI-powered goals. Through our collaboration with TD SYNNEX, we’re enabling partners to develop deep expertise and hands-on training of our data and AI portfolios to help accelerate their enterprise AI goals through IBM watsonx and our other technology innovations. This is another way that the IBM Ecosystem is creating opportunities and value for partners and clients”.
– David La Rose, general manager, IBM Ecosystem, Sell.
2. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 99
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 January 7th, analyst John Murphy from Bank of America downgraded Tesla to Neutral from Buy but raised his price target to $490 from $400.
“Execution risk is high, and TSLA is trading at a level that captures much of our base case [long-term] potential from core autos, robotaxi, Optimus, and energy generation & storage. There are catalysts ahead, which could support the stock. However, execution risk is high. These include: 1) Introduction of a low cost model in [first half of 2025] and another new model in [second half of 2025] (key drivers of volume growth); 2) Launch of robotaxi in mid-2025; 3) Megapack production ramp at Shanghai assembly plant starting in 1Q:25; 4) Updates on [full self-driving] subscribers”.
– John Murphy
The downgrade in rating reflects the firm’s concerns regarding execution risks tied to Tesla’s plans, which include unveiling a low-cost EV model, launching robotaxis, scaling Megapack battery production, and increasing user adoption for its Full Self-Driving vehicles. Tesla’s advanced technologies, including its Full Self-Driving system and Optimus humanoid robots, leverage artificial intelligence for driving autonomously, automating tasks, and more. However, these AI-driven technologies carry huge execution risks. Some more risks discussed by the analyst included product launch delays, slower EV demand, competition, and changes in government policies.
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a technology company that has strengthened its mark in the AI realm with the launch of Apple Intelligence, its personal intelligence system. One of the biggest analyst calls on Tuesday, January 7th, was for Apple Inc. MoffettNathanson, an investment firm, downgraded the stock to “Sell” from Neutral and lowered his target price for the stock to $188 from $202. According to Moffett, Apple’s 30% rally in 2024 is largely unjustified.
“Much has been made of the fact that Apple’s shares have moved steadily higher over the past few months in the absence of any real news. But that’s not actually correct. In fact, there has been a great deal of Apple-relevant news. It’s just that all of it has been bad.”
Moffett asserted that the response to Apple’s iPhone 16 and Apple Intelligence was largely “lukewarm”. When compared to the iPhone 15, sales for the iPhone 16 have waned despite the company pushing Apple Intelligence as a key selling point in its advertisements. Another headwind for the stock that the firm pointed out was intensifying regulatory pressures. China will also be a growing challenge in the future, with competitors such as Huawei depleting the company’s market share in the country. The analyst also stated that President-elect Donald Trump’s proposed tariff plan could weaken Apple’s supply chain to an unknown degree.
“As great a company as Apple is, the outlook for Apple’s shares, given this challenging backdrop, is, unfortunately, decidedly unattractive. A valuation that was already rich got richer, even as the rationale for why it was rich has taken on water”.
While we acknowledge the potential of AAPL 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 timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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