In this article, we will take a detailed look at the 10 Trending AI Stocks to Watch for the Rest of 2024.
Chris Hyzy, Merrill & Bank of America Private Bank chief investment officer, said while talking to CNBC in a latest program that there is “ a lot of momentum” behind the market rally. The analyst said that to gauge how much momentum we have behind the optimism, we need to analyze the “wedge” in the market.
“The biggest wedge that was in the market last year and in 2022 was inflation. That’s beginning to go away. It’s almost to the fact that no one’s is talking about whether or not we are going to have inflation that’s worrisome.”
Hyzy said that the Fed easing its fiscal policy and now China “joining the party” will be two key tailwinds for the market.
Answering a question about the hard landing vs soft landing debate, the analyst said we should look beyond the two possibilities as he believes there are many other scenarios to consider in between these two outcomes.
“We have a lot of components of a soft landing. I’d like to say it’s more of a mid-cycle slowdown with easier financial conditions that should actually create a profit revision to the upside not downside,” Hyzy added.
For this article we picked top 10 trending AI stocks 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. PalantirTechnologies Inc (NYSE:PLTR)
Number of Hedge Fund Investors: 44
Commenting on PalantirTechnologies Inc (NYSE:PLTR)’s multi-year, multimillion-dollar extension of its enterprise deal with energy company APA Corporation, Wedbush’s Dan Ives said the “Messi of AI” Palantir Technologies Inc (NYSE:PLTR) will keep expanding its deal flow and AI use cases:
“We believe the Messi of AI Palantir is in a prime spot to continue expanding its pipeline/deal flow while providing more use cases coming forward to address critical problems across industries and empower data-driven decision-making with a comprehensive suite of AI/ML solutions.”
Wedbush has kept its Outperform rating on the stock and raised its 12-month price target to $45 from $38.
“New and existing customers across the commercial and federal landscapes continue signing up for multiple aspects of the PLTR tech stack based on our recent checks as the company introduces new valuable use cases to customers with more organizations seeking to drive efficiencies on the back of AI,” Ives noted.
What makes Palantir Technologies Inc (NYSE:PLTR) one of the top AI stocks? Its technologies are actually solving the problems of businesses. Palantir’s data technology Ontology is solving the famous hallucination problem for AI systems, thanks to the company’s years of experience with military and defense systems. Earlier this year at an event with customers, Palantir Technologies Inc (NYSE:PLTR) shared some specifics on how its customers are being able to reduce costs and increase profits due to its artificial intelligence platform (AIP) that was launched about a year ago.
Airbus accelerated A350 production by 33%, BP reduced costs per barrel by 60%, and Jacobs Connect cut power usage by 30%. Panasonic decreased waste by 12%, ESI Group sped up ERP harmonization by 70%, and PG&E reduced transformer ignitions by 65%. Eaton boosted productivity by 25%, while Tyson Foods achieved $200 million in cost savings.
However, Palantir Technologies Inc (NYSE:PLTR) stock’s valuation has been a concern for many.
The stock is trading at about 21.2 times the next 12 months (NTM) revenue. For fiscal year 2024, Palantir expects revenue growth of 24% year-over-year (YoY) to $2.746 billion, with an adjusted operating income of $970 million, representing a 35.3% margin. However, revenue growth is expected to slow over the next two years, with estimates suggesting a 22% YoY growth rate, potentially bringing revenues to around $4 billion by fiscal 2026. If Palantir Technologies Inc (NYSE:PLTR) can improve margins by 100 basis points annually, it would be able to generate about $1.5 billion in adjusted operating income by FY26, with a present value of $1.3 billion when discounted at 8%. Applying an S&P 500-like growth multiple of 2.5 to 2.75 times earnings, Palantir Technologies Inc (NYSE:PLTR) would have a P/E of 46, translating to a price target of $27, significantly down from its current price of $36.
9. Hewlett Packard Enterprise Co (NYSE:HPE)
Number of Hedge Fund Investors: 58
Barclays recently upgraded Hewlett Packard Enterprise Co (NYSE:HPE) citing a potential recovery in the enterprise market. Analyst Tim Long expressed confidence in HPE’s growth, particularly in AI server revenues and storage, boosted by the recent JNPR deal. He emphasized that Hewlett Packard Enterprise Co (NYSE:HPE) offers a unique opportunity for investors as it doesn’t carry the same AI premium seen with other hardware companies. Long raised his rating from Equal Weight to Overweight and increased the price target from $20 to $24.
Long highlighted that Hewlett Packard Enterprise Co (NYSE:HPE) may have slightly higher gross margins on AI servers than its competitors, despite being less proactive in this area, which has kept its stock from rising as much as other “AI plays.” Nevertheless, he noted that HPE is ramping up orders and revenue in AI, with a notable increase in AI server sales last quarter.
“We are seeing early signs of an enterprise recovery and believe HPE is one of the best ways to invest in this emerging trend since the stock lacks an AI premium vs. other hardware names.”
Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its first quarter 2024 investor letter:
“The top contributor to return for the quarter was Palantir Technologies Inc. (NYSE:PLTR). Sentiment improved on Palantir after it reported stronger than expected commercial customer revenue and free cash flow. U.S. commercial growth was especially encouraging, as U.S. commercial revenue was up by a large percentage year over year for the fourth quarter and U.S. commercial customer count grew nearly as much. We expect Palantir to become one of the premier artificial intelligence (AI) software providers, built on its Foundry and AIP platforms.”
8. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 117
Salesforce (NYSE:CRM) is trending after Piper Sandler upgraded the stock citing a promising risk-reward profile and significant potential in artificial intelligence.
Analyst Brent Bracelin noted in an investor note, “We are upgrading CRM to Overweight based on a favorable risk-reward given the potential for free cash flow per share to double to over $20 by FY2029 from $9.65 in FY2024, even if top-line growth remains at subdued levels of 8-9%.” He also raised his price target for Salesforce to $325 from $268.
Bracelin highlighted that the introduction of Agentforce could also help stabilize demand.
“Salesforce has historically provided new platform updates three times a year,” Bracelin mentioned. “The pace of AI has changed this cadence, particularly with Data Cloud, which now sees monthly updates. Agentforce, a result of these innovations, will be generally available next month, with early production already underway involving companies like Gucci and Wiley.”
Salesforce Inc (NYSE:CRM) is trending after beating second-quarter estimates and raising its full-year profit guidance to $10.03 to $10.11 per share from $9.86 to $9.94 per share.
In the second quarter, Salesforce’s revenue rose 8% year over year while gross profits jumped 10%.
Salesforce Inc (NYSE:CRM) is also on investors’ radar because of its acquisitions. The company recently agreed to acquire AI voice agent firm Tenyx. This acquisition follows Salesforce’s strategic partnership with Workday to develop an AI-powered assistant for employees. The company has also agreed to buy SaaS data protection startup Own for $1.9 billion in cash.
Wall Street expects $11.12 per share in profits for Salesforce Inc (NYSE:CRM) next year, representing a 10% year-over-year increase. For the current financial year, profits are expected to grow by 23%, with estimates trending upwards. Based on these forecasts, Salesforce trades at a forward price-to-earnings ratio of 22, which is attractive given the AI-related growth catalysts.
Parnassus Growth Equity Fund stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q2 2024 investor letter:
“Salesforce, Inc.’s (NYSE:CRM) growth continues to moderate, and investors question its prospect as it relates to AI. We remain confident that the company, which developed the original salesforce automation product and pioneered the SaaS (software as a service) delivery model, is well positioned to capitalize on emerging AI opportunities.”
7. Micron Technology Inc (NASDAQ:MU)
Number of Hedge Fund Investors: 120
Micron Technology Inc (NASDAQ:MU) shares are trending after the company posted strong quarterly results and bullish guidance.
Micron Technology’s (NASDAQ:MU) guidance showed the artificial intelligence boom is more than offsetting consumer weakness.
Micron Technology Inc (NASDAQ:MU) specializes in manufacturing memory solutions, particularly DRAM and NAND, essential for computing and electronic devices. Its products play a vital role in data centers, mobile devices, and various other sectors.
During the last quarter, Micron Technology Inc (NASDAQ:MU) saw record revenues for NAND and storage business units, fueled by robust demand in the data center and automotive industries.
However, Micron Technology Inc (NASDAQ:MU) faces stiff competition in a sector characterized by a narrow “moat.” Major competitors like Samsung and SK Hynix also boast comparable technological expertise, intensifying price wars and cyclical oversupply issues that can significantly impact profitability and cause substantial fluctuations in Micron Technology Inc (NASDAQ:MU)’s valuation.
Micron Technology Inc (NASDAQ:MU) has $4 billion in net debt when accounting for its long-term marketable securities. Yet, Micron Technology Inc (NASDAQ:MU)’s guidance suggests a promising outlook, projecting nearly 40% non-GAAP gross margins. This robust margin profile mitigates many concerns raised by skeptics. For fiscal Q1 2025, Micron Technology Inc (NASDAQ:MU)’s non-GAAP projections indicate earnings of around $1.80 per share.
Despite ongoing uncertainties regarding its ability to sustain these profit margins and questions about its competitive advantages, Micron Technology Inc (NASDAQ:MU)’s valuation remains appealing. Without needing substantial acceleration in its core operations, Micron Technology Inc (NASDAQ:MU) could easily achieve $9 in non-GAAP EPS for fiscal 2025, placing its stock at a price-to-earnings ratio of 12 times this year’s non-GAAP EPS—an attractive figure.
Parnassus Value Equity Fund stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Micron Technology, Inc. (NASDAQ:MU) posted fiscal-third-quarter results that met expectations. Micron’s DRAM (dynamic random access memory) and NAND (non-volatile storage technology) segments grew revenue strongly, continuing the company’s recovery from a cyclical downturn last year. We believe Micron is well positioned to capitalize on AI-driven demand for greater memory.”
6. Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 165
Alphabet Inc (NASDAQ:GOOG) shares are trending after the company released new AI capabilities. Google Cloud showcased its AI capabilities at the Google Gemini at Work event on Tuesday, highlighting various applications of AI agents in businesses. Analysts from Wedbush, led by Scott Devitt, noted a growing confidence in Google’s generative AI offerings and their potential to drive growth for Google Cloud.
Alphabet Inc (NASDAQ:GOOG) is collaborating with major players like Snap, Volkswagen, Warner Bros. Discovery, and Best Buy to develop AI agents tailored for different tasks. The main types of AI agents include those for customer support, employee assistance, coding, data management, security, and creative projects.
Alphabet Inc (NASDAQ:GOOG) also shared that over 2 million developers are utilizing its GenAI solutions, with a remarkable 36-fold increase in Gemini API usage on Vertex AI since the start of the year.
The key question everyone is asking is whether Alphabet Inc (NASDAQ:GOOG) will be able to maintain its search dominance amid the onslaught of AI search products.
Despite constant alarms going off about its search business, Alphabet Inc Class C (NASDAQ:GOOG) search revenue jumped about 13.7% in the second quarter year over year. As of the end of June, Google has about 91.06% share of the search engine market, just 1.65% lower than the December 2019 levels. With AI overviews and other search initiatives, Alphabet Inc Class C (NASDAQ:GOOG) will be able to stave off any competitors given its dominance in the market. According to StatCounter report, Bing search engine’s market share only increased from 3.03% in August 2023 to 3.91% in August 2024. This shows MSFT has not been able to make any notable dent in Google’s market share.
Cloud and YouTube are two key strong catalysts for Alphabet Inc Class C (NASDAQ:GOOG) shares. During the second quarter, Alphabet’s Cloud revenue rose 28.8% to $10.35 billion, crushing past analysts’ forecasts of $10.16 billion. Alphabet Inc Class C (NASDAQ:GOOG) is on the path to reach a $100 billion revenue run-rate from YouTube Ads and Google Cloud by the end of 2024.
Baron Fifth Avenue Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“We also added to Alphabet Inc. (NASDAQ:GOOG). The company reported solid financial results with first quarter revenue growth of 15% year-over-year, driven by 14% growth in search, 21% growth in YouTube, and 28% growth in cloud (which accelerated from 26% growth in the fourth quarter). The company has also increased its cost discipline efforts, which drove operating margins to 31.6% (compared to 25% in the first quarter of 2023). With regards to GenAI, while we are cognizant of the potential risks to the dominance of search, we believe that on the range of outcomes, Alphabet remains well positioned through its massive user distribution (9 products with over 1 billion users each), long-standing AI research labs (DeepMind and Google Brain), top AI talent, a solid cloud computing division in Google Cloud, and deep pockets for investing in AI. During the quarter, Alphabet also held its annual I/O conference, where it provided an update on its efforts in AI including: Gemini is now used by 1.5 million developers; model quality is expanding rapidly (e.g., context window is now 2 million tokens of length); the new genomics model, Alphafold 3 can predict structures of molecules and potentially accelerate drug discovery; new TPU6 AI chips has shown a 4.7 times improvement in compute performance compared to the prior generation; and Gemini for workspace is showing early data on a 30% increase in user productivity. Alphabet also has real value in assets such as Waymo, which are not factored into valuation today (and are potentially included at a negative valuation as they currently generate losses, hurting EPS). We continue to believe that the current valuation of Alphabet presents an attractive risk/reward for long-term owners of the business and have therefore increased our position.”
5. Nvidia Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 179
Nvidia Corp (NASDAQ:NVDA) shares recently rose after a new report from Bain & Company said the AI-related hardware and software market is expected to grow between 40% and 55% annually, reaching between $780 billion and $990 billion by 2027.
Nvidia’s declines after the latest quarterly results were more or less expected amid Blackwell delay reports confirmed by management. However, the delays were mainly due to a change in Blackwell GPU mask. That does not affect the main functional logic or design of the chip, according to analysts. While Blackwell has been delayed for a few months, it does not change the core growth thesis for Nvidia.
Nvidia is set to see huge growth on the back of the data center boom amid the AI wave.
At Nvidia’s GPU Technology Conference in March 2024, CEO Jensen Huang estimated annual spending on data center infrastructure at about $250 billion. Over the next decade, this could total between $1 trillion and $2 trillion, depending on how long this level of investment continues. During the same Q&A session, Bank of America’s Vivek Arya echoed this estimate, suggesting the total addressable market would fall in the $1-2 trillion range, particularly as countries invest in their own AI infrastructure. By the end of the decade, spending could be at the high end of that range.
Of course, Nvidia won’t dominate the entire $2 trillion opportunity, as it faces competition from companies like AMD and internally developed AI accelerators from Google, Amazon, and even Apple. Some analysts believe Nvidia’s data center market share between 2025 to 2029 will be over $950 billion—less than half of the total market—but still enough to make it the leader in the sector.
Ithaka US Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is the market leader in visual computing through the production of high-performance graphics processing units (GPUs). The company targets four large and growing markets: Gaming, Professional Visualization, Data Center, and Automotive. NVIDIA’s products have the potential to lead and disrupt some of the most exciting areas of computing, including: data center acceleration, artifi cial intelligence (AI), machine learning, and autonomous driving. The reason for the stock’s appreciation in the quarter was twofold: First, the stock benefi ted from tremendous excitement surrounding the further development of generative AI and the likelihood this would necessitate the purchase of a large number of Nvidia’s products far into the future; Second, Nvidia posted another strong beat[1]and-raise quarter, where the company upped its F2Q25 revenue guidance above Street estimates, showcasing its dominant position in the buildout of today’s accelerated computing infrastructure.”
