In this article, we will take a detailed look 10 Buzzing AI Stocks This Week.
Paul Hickey, Bespoke Investment Group co-founder, said while talking to CNBC in a latest program that despite the market gains still concentrated in a few names, he’s bullish short and long term because of AI.
“The longer term play is the AI trade. This is an AI bull market. Every bull market has a theme, and ChatGPT was to AI what Netscape and AOL were to the internet.”
Hickey also mentioned the possible scenario where market gains would start to broaden out.
“ChatGPT didn’t invent AI; it made it tangible for consumers and businesses, just like Netscape with the internet. It caused, you know, made it a lot more practical on the part of businesses and the consumer. So I think in that respect, there’s a lot more investment to go, and we’ve seen the infrastructure stocks in AI benefit. But even just last week, some of these software names—and we’re going to slowly start to see that broaden out to the rest of the economy.”
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For this article, we picked 10 AI stocks currently buzzing on the back of latest news and analyst ratings. With each company we have mentioned the number of hedge fund investors. 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).
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10. Hewlett Packard Enterprise (NYSE:HPE)
Number of Hedge Fund Investors: 64
Talking about Hewlett Packard Enterprise (NYSE:HPE)’s latest results during a program on CNBC, Jim Cramer said he liked the quarter:
“I like the quarter very much. I think Antonio Neri is doing a terrific job. One thing people should recognize is that a lot of this comes from their AI business. They mentioned $6.7 billion in cumulative orders since Q1 for the fiscal year and a backlog of AI systems worth $3.5 billion.”
However, Cramer pointed to something he found “cryptic” in the earnings call:
“There was also something cryptic mentioned—they said they debooked a large order, $700 million, during the same quarter due to concerns with a specific customer. Everyone is now scrambling to figure out who that customer is.”
Wall Sreet is pitching on on Hewlett Packard Enterprise (NYSE:HPE)’s results.
Citi upgraded Hewlett Packard Enterprise (NYSE:HPE) to Buy from Neutral and raised its price target to $26 from $23, expecting the company to benefit from improving demand in server and enterprise networking, as well as expanding AI opportunities. “While AI orders and revenues can be lumpy, we see potential for a stronger contribution from enterprise AI and sovereigns, which bodes well for revenue momentum and margins moving forward,” Citi analyst Asiya Merchant wrote in a note to clients. “Along with an improved outlook for core enterprise infrastructure spending and potential EPS accretion from the Juniper acquisition, with management confident in closing the deal by early 2025, we are increasingly optimistic.”
Deutsche Bank analyst Matt Niknam had a more cautious view, describing the results and guidance as an “incremental positive in the context of the current valuation.” Hewlett Packard Enterprise (NYSE:HPE)’s server business is seeing momentum due to both AI and traditional servers, although AI servers are negatively impacting gross margins, which fell to 30.9%, the lowest level since Q4 2020, Niknam, who maintains a Hold rating and $22 price target, said.
Hewlett Packard Enterprise (NYSE:HPE)’s Hybrid Cloud segment provided “the bulk of the upside surprise this quarter,” while its Intelligent Edge (networking) business is relatively stable after a prolonged period of inventory digestion at customers. On the negative side, the forward guidance includes a sequential decline in AI server sales, partly due to delays from Hewlett Packard Enterprise (NYSE:HPE)’s Blackwell and “de-booking” to the tune of roughly $400 million, Niknam added.
“While the F1Q outlook effectively matches consensus pre-print, we still consider the results ‘good enough’ in light of a fairly discounted valuation (10x CY26E EPS) relative to HPE’s near-term growth prospects,” he wrote.
9. Marvell Tech Inc (NASDAQ:MRVL)
Number of Hedge Fund Investors: 70
Marvell Tech Inc (NASDAQ:MRVL) shares are buzzing as the company posted strong third-quarter results.
“Next year, both custom AI silicon and electro-optics are expected to experience significant growth, leading to substantial upside to our prior estimates,” Needham analyst N. Quinn Bolton wrote in a note to clients.
Bolton added that Marvell Tech Inc (NASDAQ:MRVL)’s AI revenue is now projected to surpass the previous $1.5 billion target by “hundreds of millions of dollars,” as the company’s two main customers for custom silicon — believed to be Amazon (AMZN) and Google (GOOG) (GOOGL) — are ramping up, with Amazon likely driving much of the upside.
Marvell Tech Inc (NASDAQ:MRVL) is rapidly positioning itself as an AI-first company, with its custom silicon business accounting for 73% of Q3 revenues, up from 39% during the same period last year. Marvell has a five-year agreement with Amazon (AMZN) AWS, helping Amazon design its Trainium and Inferentia ASICs, and providing a range of optical interconnect products.
Marvell Tech Inc (NASDAQ:MRVL) is now focusing on the AI opportunity, as evidenced by the recent restructuring charges, and is progressing through the design phase of its 2nm platform.
8. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
BofA Securities raised its price target on Tesla (NASDAQ:TSLA) to $400 from $350 and maintained its rating after a visit to its gigafactory in Austin, Texas.
“The visit gave us increased confidence that TSLA is well-positioned for growth in 2025 and beyond with its core EV business, the launch of its robotaxi offering, and its investments in Optimus,” said analyst John Murphy and his team.
The analysts also noted that Tesla Inc (NASDAQ:TSLA) has opportunities to improve margins, which are currently mainly driven by hardware, but will shift more towards margin-accretive software with the growth in FSD, premium connectivity, and charging.
BofA highlighted that Tesla Inc (NASDAQ:TSLA)’s Full Self-Driving (FSD) technology is expected to require an intervention only once every 10,000 miles, bringing it closer to the point where Tesla could safely launch its (monitored) robotaxi business. This compares favorably with Waymo, which requires an intervention every 17,000 miles.
Polen Focus Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q3 2024 investor letter:
“The largest relative detractors during the quarter were Apple, Airbnb, and Tesla (not owned). We’ve spoken at length about our rationale for not owning Tesla, Inc. (NASDAQ:TSLA). In short, the market seems to be pricing in a lot of positive optionality for this company in the near-to-intermediate term (and particularly a fully autonomous fleet of electric vehicles in the medium term). What exists today is an automobile manufacturer limited to the higher-income segment that is increasingly challenged to sell vehicles when interest rates are not zero. We continue to question the company’s long-term growth profile and governance.”
7. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 116
Salesforce Inc (NYSE:CRM) is among the key enterprise software vendors that are poised to benefit in 2025, according to a survey of chief information officers by KeyBanc, which shows that IT budgets are expected to rise in the coming year.
The survey found that IT budgets are anticipated to grow by 3.9% year over year in 2025. Among the large companies surveyed, 71% of respondents expect increases in their IT budgets, while 82% of small businesses surveyed also anticipate growth.
“Following our second half 2024 survey, we are incrementally more optimistic compared to our midyear report six months ago,” said KeyBanc analyst Jackson Ader in a detailed report. “We are seeing positive signs of a potential rebound within front office applications in 2025 with increasing budget priorities.”
“Specific vendor callouts include CRM’s rising priority and MSFT remaining a leading cloud vendor and beneficiary of generative AI, a category where expectations for spending were up this survey,” he added.
Polen Focus Growth Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q3 2024 investor letter:
“In the third quarter, we purchased new positions in Apple and Oracle and eliminated our small positions in Nike and Salesforce, Inc. (NYSE:CRM). We exited our position in Salesforce to fund better opportunities in Shopify and MSCI. Salesforce is seeing slower revenue growth than we would have expected, given the weakening macroeconomic environment. Furthermore, since its core end markets in customer relationship management (“CRM”) and Service are fairly mature, a lower growth level versus our expectations could persist for some time.”
6. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Barton Crockett from Rosenblatt explained on CNBC why he believes Apple Inc (NASDA:AAPL) could be a long-term play but not a stock to own just for this holiday season:
“We do believe that Apple is not really a holiday play. We do think that the iPhone growth will be accelerated as they roll out more broadly and more impactfully with their AI features, but that’s a next year story. This year, it’s gratifying that their demand has been as stable as it has, given the changes and their slow start in AI. But we can look forward to better days ahead. We do believe that the stock has anticipated that, and we think that makes Apple a stock you want to own here—not for holiday sales, really, but for next year.”
Morgan Stanley recently called Apple’s current position “challenging,” with KeyBanc and TF International Securities expressing concerns over iPhone sales volume. KeyBanc downgraded Apple to “underweight” with a $200 price target. Almost every bullish case on Apple Inc (NASDAQ:AAPL) was built around this assumption: millions of people would rush to upgrade their iPhone because of AI features. But the latest numbers for iPhone 16 do not show much enthusiasm for the new device.
Apple Inc (NASDAQ:AAPL) has been seeing a long-term decline in mobile carrier upgrade rates, especially postpaid, for several years. This suggests that people are holding onto their devices longer, likely due to economic factors, satisfaction with current technology, or a lack of exciting new features in recent models
In the latest earnings call, Apple Inc (NASDAQ:AAPL) CEO Tim Cook highlighted new features for the iPhone, such as a more comfortable watch band and sleep apnea detection, but none appeared to be major demand drivers for new customers.
Mar Vista Strategic Growth Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q3 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) stock was strong in the quarter as investors viewed the company’s generative AI roadmap and iPhone 16 product cycle positively. The market was reminded of the strength of the Apple ecosystem as management demonstrated how generative AI solutions would be integrated into its iOS 18 operating system, which was broadly released in the iPhone 16 late in calendar Q3. We believe Apple’s generative AI-enabled products should spur a meaningful iPhone upgrade cycle and create new avenues of monetization through its app store and advertising offerings. We believe this will support intrinsic value growth that will range between high single digits and low double-digits over our investment horizon.”
5. Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 160
Josh Brown, CEO of Ritholtz Wealth Management, explained during a program on CNBC why he is cutting his stake in Alphabet Inc (NASDAQ:GOOG):
“The problem here is not that they’re going to fail with AI—I think they’ll do fine. The problem here is that they have more competition in AI than they’ve ever had in their core business, and it’s unclear how they’ll be able to hit that same level of profitability with that competition in AI as opposed to what they’ve been able to historically do with search. I gave this company the benefit of the doubt for a long time. Price action is telling me there’s just more doubt out there than there is enthusiasm. I did not like the way it gave up that entire post-earnings. So for me, I just want to be smaller there, and there are other setups that I like better.”
What are the key drivers for Alphabet (NASDAQ:GOOGL)?
Alphabet Inc (NASDAQ:GOOGL) remains on track to reach a $100 billion revenue run rate from YouTube Ads and Google Cloud by the end of 2024. In its autonomous driving division, Waymo has shown notable progress, with paid autonomous rides growing 200% quarter-over-quarter to 150,000 weekly rides as of late October, thanks to a fleet of 700 vehicles in service since August.
This growth is significant: Waymo vehicles now average about 30.6 autonomous rides per day—substantially higher than Uber’s average of 4.18 rides per driver daily, based on Uber’s 31 million daily trips and 7.4 million drivers last quarter. This performance underscores Waymo’s competitive edge in autonomous ride volume compared to traditional ride-hailing.
In the third quarter, Alphabet Inc (NASDAQ:GOOGL)’s Search & Other segment saw a 12.2% year-over-year revenue increase, rising from $44.03 billion to $49.39 billion. YouTube advertising also performed well, with revenue up 12.2% to $8.92 billion from $7.95 billion. Meanwhile, Alphabet Inc (NASDAQ:GOOGL)’s subscriptions, platforms, and devices revenue grew even more sharply, surging 27.8% from $8.34 billion to $10.66 billion.
Google Cloud has been expanding steadily, with revenue climbing from $13.06 billion in 2020 to $33.09 billion in 2023. Notably, Google Cloud turned profitable for the first time in 2023, posting $1.72 billion in operating profit—a significant improvement from a $5.61 billion loss in 2020. This segment’s performance continues to strengthen, with the latest quarterly revenue reaching $11.35 billion, up 35% from $8.41 billion in the same period last year.
Conventum – Alluvium Global Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q3 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG), ie Google/YouTube, having returned 20.8% in the June quarter, gave a fair bit of that back by falling 8.8%. Its results seemed pretty positive, and appeared to beat expectations. Management claims its AI integration into its search business is working well, and the margin expansion from costs out is expected to continue. Market chatter suggests that the selloff stems from concerns about the high capital spending on servers and data center equipment. Alphabet has made it clear that this spending is necessary, and somewhat defensive as it can’t risk losing the AI war (a “build it, and they will come” approach). Also, the new Department of Justice case against it probably did not help matters. Nonetheless, we saw no need to adjust our estimates. We wrote last quarter that it traded at a premium to our valuation, but not so much as to warrant selling. With the share price falling and the premium reducing, our view is unchanged. It represents 4.4% of the Fund.”