In this article, we discuss the 9 trending AI stocks on the latest news and ratings.
AI’s Appetite for Resources and the Price of Progress
A Bloomberg report from December 13, AI Wants More Data. More Chips. More Real Estate. More Power. More Water. More Everything, explores the resource-intensive nature of artificial intelligence, emphasizing its demands on electricity, water, and infrastructure. ChatGPT and similar AI systems require vast amounts of power, far exceeding traditional services like Google Search. AI models require enormous energy, materials, and specialized hardware like GPUs. This is driving a global race for resources, with companies seeking efficient solutions, including nuclear power and synthetic data generation, the report states.
The infrastructure required to support AI, from data centers to power grids, faces significant challenges, with rising demands for energy and materials like copper, silicon, and rare metals. While AI presents a tremendous opportunity, the article highlights potential environmental impacts, talent shortages, and increasing infrastructure costs. As AI companies compete to meet the growing needs of generative AI, the global ecosystem is reshaping.
READ ALSO: 10 Companies Hoarding Bitcoin Like There’s No Tomorrow and 10 Important AI Announcements for Investors.
The Future of AI and Energy in the U.S.
Byron Deeter, partner at Bessemer Venture recently joined CNBC’s ‘Closing Bell Overtime’ and discussed the continued strong investor interest in AI, with the U.S. government’s backing further supporting the country’s leadership in the sector. He highlighted the role of energy in AI development, noting the need for nuclear energy in the U.S. due to the growing demand for computing power. Deeter also talked about Service Titan, a company providing software for industries like plumbing and HVAC, which recently went public. He sees the IPO as a sign of more companies following suit in 2025, with a strong pipeline of potential filings for the coming year.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 hedge funds.
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).
9. Aehr Test Systems, Inc. (NASDAQ:AEHR)
Number of Hedge Fund Holders: 12
Aehr Test Systems, Inc. (NASDAQ:AEHR) offers semiconductor test solutions that support AI-related devices. Its tools enable wafer-level testing, burn-in, and stabilization, catering to integrated circuit manufacturers worldwide.
On December 16, Aehr (NASDAQ:AEHR) announced that it received its first AI customer order for multiple high-power FOX-XP wafer level test and burn-in systems, valued at over $10 million. The order includes proprietary WaferPak Contactors and marks a significant milestone for the company. The systems will ship within 90 days, with the first system set to ship immediately. This breakthrough expands Aehr’s market opportunities for testing AI processors, offering cost efficiency, improved yields, and better scalability in semiconductor manufacturing. Aehr is now the only company offering both wafer-level and package-level test and burn-in solutions for AI processors. Gayn Erickson, President and CEO of Aehr Test Systems remarked:
“With this solution, we are now able to offer our customers the ability to do production wafer level burn-in of their AI processors and accelerators in addition to our offering of both reliability qualification and production burn-in at package part with our Sonoma ultra-high-power test and burn-in system that we are now shipping in volume to many manufacturers around the world. Aehr Test Systems is the only company in the world that can now offer both wafer level and package level turnkey test and burn-in solutions for these AI processors.”
8. DigitalOcean Holdings, Inc. (NYSE:DOCN)
Number of Hedge Fund Holders: 22
DigitalOcean Holdings, Inc. (NYSE:DOCN) offers cloud computing solutions that support AI and machine learning applications, providing GPU-powered virtual machines, interactive development environments, and deployment tools for scaling and managing AI models.
Stifel increased its price target for DigitalOcean to $40 from $35, keeping a Hold rating on the stock. The firm highlighted that after a slow start to 2024, the year is ending on a positive note due to stabilizing growth rates, signs of AI monetization among large software companies, lower interest rates, and solid economic growth. While the firm expects management to take a more cautious approach to Q1 guidance, it anticipates that overall top-line growth will at least match the latter half of 2024, driven by these favorable conditions.
7. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 44
Cloudflare, Inc. (NYSE:NET) provides cloud-based security and performance solutions with a strong focus on AI and machine learning applications.
Cloudflare (NYSE:NET) was upgraded to Buy from Hold by Stifel and its price target was raised to $136 from $95 on December 17. The firm believes Cloudflare is well-positioned to achieve sustained growth, with an expected 25%-30% year-over-year revenue increase and improving profitability. Factors driving this outlook include strong leadership appointments, successful go-to-market strategies, ongoing success across multiple business segments, and early momentum in AI inference. Stifel views Cloudflare as a top-tier asset, confident that its technology and market trends will lead to financial and stock performance outperformance. The firm said:
“We have long viewed Cloudflare as a best-in-class asset. While shares are certainly not cheap, you need to pay up for quality, and we believe self-help dynamics, and solid technology levered to many secular trends, can help Cloudflare deliver financial/stock outperformance, with Cloudflare offering the most upside optionality in our coverage universe in coming years.”
6. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 57
Verizon Communications Inc. (NYSE:VZ) provides communications and technology services with a focus on AI-driven solutions for both consumer and business markets. The company offers wireless, broadband, and IoT services, leveraging advanced technologies to enhance connectivity, security, and data management for various industries globally.
On December 17, Verizon introduced a new solution in partnership with NVIDIA, integrating Verizon’s 5G private networks and Mobile Edge Compute (MEC) with NVIDIA’s AI Enterprise software and NIM microservices. This collaboration aims to deliver secure, low-latency, and high-bandwidth AI-powered services for enterprise clients.
It is designed to support advanced AI applications like generative AI, computer vision, and AR/VR, the platform is modular and scalable, allowing tailored solutions for various industries. Demonstrations will begin in early 2025, with Verizon highlighting its leadership in private MEC and the transformative potential of AI for businesses. Senior Vice President of Technology and Product Development at Verizon, Srini Kalapala said:
“We’re leveraging our network’s unique strengths including private networks and Verizon’s global industry leadership in private MEC, combined with NVIDIA’s AI compute capabilities to enable real-time AI applications that require security, ultra-low latency, and high bandwidth. Our ongoing investment in our network infrastructure means we’re uniquely positioned to deliver these powerful AI services at scale, driving the digital transformation and fueling the future growth of businesses worldwide.”
5. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 107
Advanced Micro Devices, Inc. (NASDAQ:AMD) specializes in semiconductor solutions, focusing on AI-driven products for data centers, gaming, and embedded systems.
On December 17, Wolfe Research reported that the outlook for AMD heading into January earnings is challenging. There is uncertainty about meeting the $10 billion AI revenue expectations, with guidance of $7 billion potentially leading to concerns if it isn’t raised later. AMD is unlikely to provide clear AI guidance for CY25, which could raise doubts. Additionally, the firm expects a downside to Q1 estimates due to weak seasonality in the PC market following a strong Q4. A recovery in AMD’s subsidiary XLNX is anticipated in the second half of 2025, rather than the first half. The firm is reassessing its rating and estimates.
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 193
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, providing advanced graphics, compute, and networking technologies for industries like gaming, data centers, automotive, and robotics.
Nvidia unveiled the $249 Jetson Orin Nano Super, a lower-cost AI computing device aimed at hobbyists, small businesses, and students, WSJ reports. The device nearly doubles the speed and efficiency of its predecessor, making AI accessible for developing consumer technologies like drones and cameras. Targeting edge computing, it enables AI computations on devices rather than in data centers, the report states. Nvidia also introduced the high-end Jetson Thor for advanced robotics and automation. Jetson Orin Nano Super will be available in China via local distributors despite U.S. trade restrictions.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 235
Meta Platforms, Inc. (NASDAQ:META) leverages AI to enhance user experiences, content creation, and communication across its platforms. Its AI initiatives include machine learning for personalized recommendations, generative AI for content creation, and advancements in natural language processing and image generation among other things
JPMorgan increased Meta Platforms’ price target to $725 from $660 and reaffirmed an Overweight rating. The firm sees strong potential in the internet sector for 2025, forecasting a transition in AI investment toward applications and agents. It predicts higher-than-expected AI-related spending next year by Meta and a few other technology giants as they address 2024’s compute limitations.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) uses AI across its cloud services, productivity tools, and business solutions to enhance automation, security, and user experience. Its AI initiatives include intelligent cloud services, AI-driven applications for business operations, and advanced capabilities in language processing and cloud computing.
Omidia, a technology consultancy estimates that Microsoft purchased 485,000 of Nvidia’s Hopper GPUs in 2024, as reported by Financial Times. The company significantly outpaced rivals like Meta, which bought 224,000, and Chinese companies ByteDance and Tencent, each acquiring around 230,000 units. The demand for Nvidia chips surged as Big Tech invested billions in AI infrastructure to stay competitive.
Microsoft’s investment in Nvidia chips more than tripled from 2023, driven by its AI services and Azure cloud platform, which supports OpenAI and other clients, the report stated. Despite Nvidia’s dominance, the rise of custom AI chips and concerns about slower growth and U.S.-China trade restrictions have tempered its stock performance. Omdia estimates that 43% of server spending in 2024 went to Nvidia, reflecting peak demand. You can also read our report: Nvidia’s (NVDA) Dependence On Microsoft (MSFT) Is A Non-Issue With Its Tech Dominance.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 286
Amazon.com, Inc. (NASDAQ:AMZN) has been a leader in AI innovation, using it to transform shopping, entertainment, and operations, and drive progress across its diverse businesses. The company continues to be deeply involved in advancing AI technologies to enhance customer experiences and optimize services.
On December 16, Fox News reported that Amazon Web Services (AWS) announced an additional $10 billion investment in Ohio’s data center infrastructure, bringing its total commitment to over $23 billion by 2029. This expansion, building on AWS’s 2016 entry into the state, will support new data center locations, though specific sites are yet to be determined. The investment is contingent on securing long-term energy agreements. AWS’s data centers will host technology infrastructure for cloud computing, AI, and machine learning. This follows AWS’s June 2023 announcement of a $7.8 billion investment in central Ohio by 2029, in addition to $6 billion invested through 2022, the report stated.
While we acknowledge the potential of Amazon.com, Inc. (NASDAQ:AMZN) as an investment, 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 an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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