In this article, we will look at the 10 Most Promising New Technology Stocks According to Hedge Funds.
Tech IPO Outlook 2024
After a prolonged slump, the technology IPO is experiencing a revival in 2024, particularly among companies leveraging artificial intelligence. According to a July 10 report by Morgan Stanley, the firm’s bankers predict to see at least 10 to 15 tech IPOs this year, driven by the growing interest in AI applications across various sectors, especially within technology and healthcare.
According to Colin Stewart, Morgan Stanley’s Global Head of Technology Equity Capital Markets, understanding a company’s role in the evolving AI landscape is crucial for its attractiveness to investors. Companies that demonstrate how AI can transform enterprise operations or customer interactions are more likely to succeed in going public.
The past few years saw a significant decline in IPO activity due to high interest rates and lower company valuations. Many tech firms opted to delay their offerings as capital became more expensive. However, as the market adjusts to these higher rates, companies are realizing they cannot postpone their IPOs indefinitely. The need for liquidity and public financing is prompting many large private firms to consider going public again.
AI has been a revolutionary addition to the healthcare segment as well. Companies are increasingly focused on harnessing vast amounts of data to drive improvements in patient care and medical research. By developing systems that can analyze complex datasets such as electronic health records, imaging data, and genomic information. These firms are positioning themselves as essential players in the healthcare ecosystem. The ability to generate proprietary datasets that power AI applications is becoming a key factor in attracting investor interest.
Read More: 10 Best Small-Cap Stocks Ready To Explode and 10 Cheap NASDAQ Stocks To Invest In Now.
Moreover, George Chan, the EY Global IPO Leader in a report regarding global IPO trends Q3 2024, highlighted several critical insights. His observations reflect a complex interplay of economic factors influencing IPO activity amid a backdrop of global challenges. Chan noted that the global IPO market in Q3 2024 has shown signs of cautious optimism, despite facing a global economic slowdown, market volatility, and geopolitical shifts. There was a year-over-year decline in both the number of IPOs and proceeds, down 14% to 310 IPOs and 35% to $24.9 billion. However, Q3 did see a modest increase in IPO launches compared to the first two quarters of the year.
The report emphasizes that the onset of a global interest rate easing cycle is crucial for shaping future IPO activity. As inflationary pressures diminish and central banks pivot towards stimulating economic growth, lower interest rates are expected to reduce the cost of capital for companies looking to go public. Chan pointed out that this shift could alleviate some financial burdens and encourage investment in new ventures, which is vital for revitalizing the IPO landscape. Despite overall declines in IPO volumes, he highlighted the resilience demonstrated by markets in the Americas and EMEIA.
The EMEIA region saw a remarkable 45% increase in IPO proceeds compared to the previous year, helping to mitigate the global downturn. Chan stressed that investor sentiment is shifting as they prepare for increased volatility in the second half of 2024. With inflation and interest rates receding, other factors are beginning to play more significant roles in influencing IPO decisions. He emphasized that well-timed market entries and compelling equity narratives will be crucial for businesses aiming to capitalize on available opportunities.
Lastly, the report also noted an uptick in cross-border listings, with an increase from 64 companies listing abroad in the same period last year to 77 this year. This trend reflects a growing preference among international companies for US markets due to their liquidity and favorable valuations. Chan indicated that as geopolitical tensions influence capital flows, investors are increasingly diverting funds from slower or unstable economies to more promising markets.
With this context, let’s take a look at the 10 most promising new technology stocks according to hedge funds.
An entrepreneur presenting the latest technology innovation in electrical components.
Our Methodology
To compile the list of the 10 most promising new technology stocks according to hedge funds, we used the Finviz stock screener and Q3 2024 hedge fund data by Insider Monkey. We used the screener to filter technology stocks with IPO dates within the past 3 years and then sorted them by market capitalization. Next, we sourced the number of hedge funds holding each stock and ranked the stocks in ascending order of the number of hedge fund holders.
Why do we care about what hedge funds do? 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 Most Promising New Technology Stocks According to Hedge Funds
10. Klaviyo, Inc. (NYSE:KVYO)
Number of Hedge Funds: 24
Klaviyo, Inc. (NYSE:KVYO) is a technology company that specializes in helping businesses utilize their customer data to improve marketing efforts and drive sales. It provides tools that allow businesses to capture, store, and analyze their customer data.
The company announced its third-quarter results for fiscal 2024, underscoring significant business development. It not only launched its platform in five new languages, including German, Portuguese, Korean, Spanish, and Italian, bringing the total to seven supported languages. But also expanded its SMS marketing services to 18 countries, including Norway, Denmark, Sweden, Finland, Italy, and Portugal.
As of September 30, the total customer count of the company was over 157,000, up from more than 135,000 a year earlier. As a result of an increase in customers, its total revenue surged 34% year-over-year to reach $235.1 million. In addition, management was also able to improve its gross profit to $180.7 million from $117.0 million in the third quarter of 2023, representing a 10% increase in gross margins.
ClearBridge Small Cap Growth Strategy made the following comment about Klaviyo, Inc. (NYSE:KVYO) in its Q3 2023 investor letter:
“We began eight investments this quarter, including Klaviyo, Inc. (NYSE:KVYO), which made the transition from a private placement in the Strategy through the initial public offering process. We intend to augment these initial investments and build positions, provided company execution and market prospects remain vibrant.
Klaviyo is a founder-led software and database platform that provides marketing automation solutions primarily to smaller e-commerce customers. Leveraging a tight integration with e-commerce enablement provider Shopify and a disruptive technology architecture, Klaviyo has experienced rapid growth in a sizable core market, with opportunities to add additional products and customer groups, including the fitness/wellness market, and to expand internationally. Throughout its history, Klaviyo has managed to balance a robust growth rate with disciplined investment and has a path to meaningful long-term profitability.”
9. OneStream, Inc. (NASDAQ:OS)
Number of Hedge Funds: 24
OneStream, Inc. (NASDAQ:OS) is a technology company that specializes in financial management software. Its primary product is the Digital Finance Cloud, a platform designed to help businesses manage their financial operations more effectively. The platform not only combines all financial and operational data in a single place but also uses artificial intelligence to enhance planning and forecasting.
Finance departments are undergoing a digital transformation, however at a slower pace compared to other business areas. Many CFOs are recognizing the necessity for a cloud-based platform that consolidates financial and operational data into a single view. OneStream, Inc. (NASDAQ:OS) is aimed at modernizing the office of the CFO by unifying core finance and operational functions. At the recent Splash EMEA user conference, OneStream introduced several innovations to its platform including a navigation center, AI-powered anomaly detection, and expanded solutions exchange.
It is witnessing positive results as new users are subscribing to its services thereby driving its subscription revenue higher. During the third quarter of fiscal 2024, the company generated $129.1 million in revenue, up 21% year-over-year. Within the total revenue, subscription revenue accounted for $110.7 million indicating a 39% increase during the same time.
OneStream, Inc. (NASDAQ:OS) total customer count reached 1,534 indicating an 18% increase year-over-year. In addition to this, the company also went from being a negative free cash flow company in the same quarter last year to having a positive free cash flow of $1.3 million for the recent quarter. Looking ahead management is expecting Q4 revenue to be between $127 million to $129 million.
8. Joint Stock Company Kaspi.kz (NASDAQ:KSPI)
Number of Hedge Funds: 26
Joint Stock Company Kaspi.kz (NASDAQ:KSPI) is a leading financial technology and e-commerce platform in Kazakhstan, making significant advancements in the digital landscape. The company offers a robust suite of services that includes payments, marketplace solutions, and fintech offerings, all designed to enhance user experience and engagement.
It became the first Kazakhstan-based company to list in the US in January 2024. The company has been posting robust financial results. During the fiscal third quarter of 2024, Joint Stock Company Kaspi.kz (NASDAQ:KSPI) grew its consolidated revenue by 28% and net income by 18%, year-over-year. Revenue growth was fueled by a robust performance across the board, with the marketplace taking the lead after growing its revenue by 43% during the same time.
Payments and Marketplace segment combined accounted for 68% of the total net income. Management has been focused on scaling its marketplace platform in the top 3 largest cities of Kazakhstan. As a result of this strategy, the company grew its e-grocery gross merchandising value (GMV) by 88%. Moreover, active customers on the platform increased from 422,000 in Q3 2023 to 725,000 in the recent quarter.
It is one of the most promising new technology stocks according to hedge funds as the stock was held by 26 hedge funds in Q3 2024, as per Insider Monkey’s database.
7. NCR Atleos Corporation (NYSE:NATL)
Number of Hedge Funds: 27
NCR Atleos Corporation (NYSE:NATL) is a financial technology company that specializes in self-directed banking solutions. The company also operates the Allpoint network, which is the largest network of ATMs available for consumers. This allows users to withdraw cash from various locations without incurring additional fees.
NCR Atleos Corporation (NYSE:NATL) has reported strong financial growth through the first three quarters of 2024, highlighting several key achievements and strategic developments in its operations. The company grew its service revenue by 6% during the first three quarters of fiscal 2024, with a notable increase in ATM as a Service (ATMaaS) revenue, which surged by nearly 30%. This indicates a strong demand for their self-service banking solutions. Moreover, during the same time, it also improved ARPU on its network machines by 7%, reflecting enhanced monetization of its existing ATM fleet.
Turning to the third quarter of fiscal 2024, the company’s revenue reached approximately $1.08 billion, exceeding expectations, while profits were also above forecasts, driven by growth in transactions and services.
NCR Atleos Corporation (NYSE:NATL) is one of the most promising new technology stocks according to hedge funds. It was held by 27 hedge funds in Q3 2024, as per the Insider Monkey database.
6. Credo Technology Group Holding Ltd (NASDAQ:CRDO)
Number of Hedge Funds: 30
Credo Technology Group Holding Ltd (NASDAQ:CRDO) is a company based in the Cayman Islands that specializes in high-speed connectivity solutions for data infrastructure. In simple terms, it develops technologies that help improve how data is transmitted over wired connections, making it faster and more efficient. The company focuses on breaking bandwidth barriers, which means it creates products that allow more data to be sent at higher speeds without losing quality.
Credo Technology Group Holding Ltd (NASDAQ:CRDO) recently held its earnings call for the first quarter of fiscal year 2025, revealing significant financial performance and future growth prospects. The company reported a total revenue of $59.7 million, which represents a 70% increase compared to the same quarter last year. This includes a record $57.3 million in product revenues, up 30% from the previous quarter, driven largely by the growing demand for AI infrastructure solutions.
Management anticipates continued growth, particularly as it targets both leading hyperscalers and emerging data center operators who are increasing their infrastructure investments in AI technologies. The company expects to generate significant revenue from these new customer relationships and is preparing to enter the 64 gig PAM4 PCIe Gen 6 market later this year.
TimesSquare Capital Management U.S. Small Cap Growth Strategy stated the following regarding Credo Technology Group Holding Ltd (NASDAQ:CRDO) in its Q2 2024 investor letter:
“Among the wide variety of Information Technology companies, we prefer critical system providers, specialized component designers, systems that improve productivity or efficiency for their clients, and others that closely tie to increasing shares of corporate IT budgets. Credo Technology Group Holding Ltd (NASDAQ:CRDO), a supplier of high-speed connectivity solutions, surged ahead by 51%. The company reported inline April quarter results and management’s July quarter guidance met expectations; AI spending is a growth driver.”
5. Samsara Inc. (NYSE:IOT)
Number of Hedge Funds: 30
Samsara Inc. (NYSE:IOT) is a technology company that focuses on Connected Operations Cloud. It is a platform designed to help businesses improve their efficiency and safety through data analysis. Major beneficiaries of its technologies are businesses that rely on physical operations, such as transportation, construction, and logistics. The company connects various physical assets to the cloud using Internet of Things (IoT) technology. This allows organizations to gather real-time data from these assets, which can be analyzed to make informed decisions.
Management of Samsara Inc. (NYSE:IOT) has been focused on expanding its customer base and enhancing its platform through AI and advanced technologies. In pursuit of these strategies, the company on November 12 announced several innovative products and a strategic partnership with ACSS, at the Go Beyond ’24 conference held in London.
New products announced during the conference include Connected Training, which uses data-driven insights to enhance driver training, reportedly reducing safety incidents by 35%, and the Low Bridge Strike Alerting system, which is designed to prevent collisions with low bridges, enhancing safety for fleet operations.
During the second quarter results for the fiscal year 2025, Samsara Inc. (NYSE:IOT) reported a strong performance showcasing execution towards its strategic goals. The company added 169 new customers with ARR exceeding $100,000 and set a quarterly record by adding 14 customers with ARR over $1 million. Moreover, the company also landed contracts with the State of Maine, one of the largest supermarket chains in the US, and one of the largest retail-owned hardware cooperatives globally.
Artisan Mid Cap Fund stated the following regarding Samsara Inc. (NYSE:IOT) in its Q3 2024 investor letter:
“Notable adds in the quarter included Samsara Inc. (NYSE:IOT), Illumina and Onto Innovation. Samsara is a software platform for asset-intensive industries that provides data and insights to enable asset tracking, performance measurement and safety monitoring. We believe the company’s attractive value proposition for customers makes it a durable top-line compounder that will become highly free cash flow generative over time. Recent quarterly results displayed the company’s rapid growth, and we believe it remains in the early stages of its profit cycle based on the size of its addressable markets. We added to the position.”
4. Nextracker Inc. (NASDAQ:NXT)
Number of Hedge Funds: 32
Nextracker Inc. (NASDAQ:NXT) is one of the most promising new technology stocks according to hedge funds. The stock was held by 32 hedge funds in Q3 2024, as per Insider Monkey’s database. It is a technology company that specializes in solar tracking technology and software solutions designed for large-scale solar energy projects. The solar tracking technology allows solar panels to follow the sun as it moves across the sky. Thereby maximizing the amount of sunlight the panels receive, which in turn increases energy production.
Key products by the company include NX Horizon, a single-row solar tracker that is efficient and cost-effective, NX Gemini, a dual-row tracker that supports two rows of solar panels, and TrueCapture, an advanced software system that uses machine learning to optimize how the trackers operate, adjusting their position based on real-time conditions to improve energy yield.
The new energy appetite of the United States is growing, according to a report by the Solar Energy Industries Association published on September 9, in Q2 2024, the US solar market installed 9.4 gigawatts of capacity, up 29% year-over-year. Moreover, solar energy accounted for 67% of all new electricity-generating capacity added to the US grid in the first half of 2024.
Considering the increase in demand for solar energy in the United States, which is one of the biggest markets for Nextracker Inc. (NASDAQ:NXT), the company has been doing great in terms of capitalizing on the market. The company reported strong performance in the second quarter of fiscal year 2025, achieving its seventh consecutive quarter of double-digit revenue growth. The company experienced a 29% increase in revenue for the first half of fiscal 2025 compared to the previous year. While the quarterly revenue of $636 million improved 11% year-over-year. Management attributed revenue growth to increased demand for its products mainly due to its quality and low installation costs.
3. Arm Holdings plc (NASDAQ:ARM)
Number of Hedge Funds: 38
Arm Holdings (NASDAQ:ARM) is a British company that specializes in designing and licensing technology for computer chips. The company operates a worldwide platform that focuses on creating energy-efficient processors used in various devices, from smartphones to supercomputers. Instead of manufacturing chips themselves, they design the architecture for chips (like CPUs and GPUs) and license these designs to other companies. This means they provide the blueprints that other manufacturers use to create their custom chips tailored for specific applications. As a result, around 99% of the world’s smartphones and more than 300 billion chips use the company’s energy-efficient CPUs.
One of the major competitive edges for the company is its unique business model which places Arm Holdings (NASDAQ:ARM) at the center of the AI revolution. The company earns money on licenses and then makes most of its revenue from royalties once the products with those chips start selling. For instance, the company’s architecture is in the Grace Blackwell Superchip, made by Wall Street’s favorite chip maker.
During the second quarter of fiscal 2025, the company generated $844 million in revenue up 5% year-over-year. This was on the back of record levels of royalty revenue and continued strength in license revenue. Royalties for the quarter rose 23% year-over-year to $514 million driven by the increased adoption of Armv9 and smartphone market recovery.
As another major milestone, the company also announced its strategic partnership with Meta to work on optimizing Llama, Pytorch, and ExecuTouch for Gen AI. Considering the irreplaceable use case of its products and its unique business model, Arm Holdings (NASDAQ:ARM) is one of the most promising new technology stocks according to hedge funds. The stock was held by 38 hedge funds in Q3 2024, as per Insider Monkey’s database.
2. Astera Labs, Inc. (NASDAQ:ALAB)
Number of Hedge Funds: 39
Astera Labs, Inc. (NASDAQ:ALAB) specializes in creating connectivity solutions that use semiconductor technology to enhance cloud computing and artificial intelligence (AI) systems.
Astera Labs, Inc. (NASDAQ:ALAB) on November 4, reported impressive financial results for the third quarter of 2024, achieving record revenue of $113 million. This represents a 47% increase from the previous quarter and a remarkable 206% growth compared to the same period last year. Management attributed this success to a new phase of growth driven by multiple product families, particularly in the AI sector, where their solutions are increasingly in demand.
Moreover, the company is expanding its product portfolio with the introduction of the Scorpio Smart Fabric Switches, aimed at addressing complex connectivity needs within AI infrastructure. This new product line is expected to enhance AI server performance and productivity by improving data transfer speeds and efficiency. In addition, the company has also joined the Ultra Accelerator Link Consortium, along with industry-leading hyperscalers and AI platform providers, aiming to develop high-speed, low-latency interconnects for AI workloads.
Looking ahead to Q4, Astera Labs, Inc. (NASDAQ:ALAB) anticipates continued revenue growth, estimating between $126 million and $130 million. The company is well-positioned to capitalize on the increasing importance of connectivity in AI applications, especially as AI models become more complex and require faster data processing capabilities. It is one of the most promising new technology stocks according to hedge funds.
Baron Discovery Fund stated the following regarding Astera Labs, Inc. (NASDAQ:ALAB) in its Q2 2024 investor letter:
“AI models are rapidly moving from objects of curiosity to levels of functionality that just a couple of years ago were believed to exist only in the realm of science fiction. We obviously do not invest in large-cap companies that produce AI hardware, which is where significant market attention is focused right now. Yet we continue to look for exciting small-cap ideas in AI hardware. For example, we owned a small-cap AI-oriented semiconductor company in the second quarter called Astera Labs, Inc. (NASDAQ:ALAB). Astera Labs manufactures analog semiconductors that facilitate improved communications within a motherboard (for example between graphics processing units like what NVIDIA makes and central processing units which are made by companies like Intel), and between servers. We bought shares when the company went public, but due to the incredible hype surrounding hardware-based AI companies, the stock quickly doubled and exceeded what we believed was a reasonable long-term valuation (particularly given new competitive offerings on the horizon). Therefore, we sold our investment but continue to monitor its valuation closely for a potential re-entry point.”
1. Core Scientific, Inc. (NASDAQ:CORZ)
Number of Hedge Funds: 58
Core Scientific, Inc. (NASDAQ:CORZ) is a technology company that specializes in providing the essential infrastructure needed for bitcoin mining and high-performance computing (HPC). It operates a large fleet of computers, known as miners, which are designed specifically to mine Bitcoin. Moreover, the company also offers hosting services for other businesses that want to mine Bitcoin but do not have the necessary infrastructure. They provide space and resources in their data centers for these third-party miners.
It has multiple data centers located across the United States, including states like Georgia, Kentucky, North Carolina, North Dakota, and Texas. These facilities are purpose-built to handle the high energy demands of Bitcoin mining and HPC. Core Scientific, Inc. (NASDAQ:CORZ) has recently shifted its focus to artificial intelligence as well. At the beginning of June, the company announced signing a series of 12-month contracts with CoreWave, an AI hyperscaler, to deliver approximately 200 megawatts of infrastructure to host CoreWeave’s high-performance computing operations. The contract is expected to generate a total cumulative revenue of more than $3.5 billion under the initial one-year contract.
During the fiscal third quarter of 2024, Core Scientific, Inc. (NASDAQ:CORZ) generated total revenue of $95.4 million, which includes $68.1 million from digital asset self-mining, $16.9 million from digital asset hosted mining, and $10.3 million from high-performance computing (HPC) hosting. The self-mining revenue witnessed an 18% decline due to a drop in the number of bitcoins mined and an increased network hash rate, which made mining more competitive.
To cater to this, management has successfully deployed around 31,000 new-generation miners, which improved their self-mining hash rate by 36%. Moreover, the company also expanded its infrastructure significantly, including a 100-megawatt expansion at its Pecos, Texas facility.
While we acknowledge the potential of Core Scientific, Inc. (NASDAQ:CORZ) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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