China has sensed a window of opportunity in its race to usurp US dominance in AI innovation. As Washington remains focused on building regulatory walls that restrict access to AI, Beijing has resorted to fostering open-sourcing artificial intelligence models to boost AI innovation and adoption. That was clear when DeepSeek unveiled cost-effective AI models that challenged American tech dominance on large language models and data centers.
While the initial focus was on how DeepSeek came up with powerful AI models that rivaled US models, the focus has since changed to how the Chinese startup catalyzed the adoption of open-source AI models. The decision to open source AI source code comes as Chinese companies look to capitalize on growing opportunities in the artificial intelligence software market, growing at a compound annual growth rate of 35.52% and expected to be worth $223.35 billion by 2028, according to Research and Markets.
“DeepSeek’s success proves that open-source strategies can lead to faster innovation and broad adoption,” said Wei Sun, principal analyst of artificial intelligence at Counterpoint Research.
Understanding that it will require time for China to reach the level of the US in advanced AI computing, Chinese firms have concentrated on creating more efficient and cost-effective AI solutions. They are also striving to establish leading roles in open-source AI, cloud services, and worldwide data networks.
These approaches allow China to provide more affordable and unrestricted AI access to nations discontented with US policies, integrating it into developing markets in ways that will be challenging to disrupt. This is not merely a contest in AI; it is a struggle for dominance over the global digital infrastructure both now and in the future.
Since DeepSeek sent shockwaves, several Chinese companies have released open-source models that are free for individual users. The move to open-source AI models underscores a broader shift in China that no longer focuses on proprietary licensing. Instead, Chinese companies freely offer the underlying source code for modification and redistribution.
While US tech giants have always insisted on open-sourcing their models or source code, that has not always been the case in entirety, for starters, most US companies claim to use open-source code while still restricting their use and modifications. Other US companies generate revenue by charging people to access their models even on claiming they are open source.
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 in Q4 2024.
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11. D-Wave Quantum Inc. (NYSE:QBTS)
Number of Hedge Fund Holders: 15
D-Wave Quantum Inc. (NYSE:QBTS) is a technology company that develops and delivers quantum computing systems, software, and services worldwide. The quantum computing solutions provider achieved a significant milestone on March 31 by completing a quantum artificial intelligence drug discovery project.
In partnership with the pharmaceutical division of Japan Tobacco Inc., D-Wave Quantum Inc. (NYSE:QBTS) leveraged quantum computing technology and artificial intelligence to enhance the drug discovery process. The two companies enhanced large language models with a quantum hybrid workflow to produce a drug-like molecular structure. The project’s objective was to improve quality and speed in a number of processes while hastening the discovery of first-in-class small-molecule compounds.
“AI has made impressive advancements but faces a computational challenge due to escalating power needs and costs,” said Dr. Alan Baratz, CEO of D-Wave. “Quantum computing’s integration with AI and machine learning could offer scalable, energy-efficient solutions to address these issues and potentially offer enhanced AI capabilities. We believe that our work with JT is an important demonstration and validation of quantum’s integration with AI.”
10. Progress Software Corporation (NASDAQ:PRGS)
Number of Hedge Fund Holders: 23
Progress Software Corporation (NASDAQ:PRGS) is a leading provider of artificial intelligence-powered applications and digital experiences that enable businesses to deploy and manage applications. Its stock rallied by about 8% after the leading provider of AI infrastructure delivered better-than-expected first-quarter fiscal 2025 results and issued an impressive outlook on April 1.
Progress Software Corporation (NASDAQ:PRGS) logged a 29% year-over-year increase in revenue to $238 million as customers’ demand for its solutions grew significantly. Earnings per share, on the other hand, totaled $1.31, better than the $1.06 that analysts expected. While annualized recurring revenue increased 48% to $836 million with a net retention rate of more than 100% Progressive Software has raised its full-year EPS guidance to between $5.25 and $5.37, up from its earlier estimate of $5.00 to $5.12. The company successfully integrated ShareFile as part of its AI-driven strategy.
“We’re off to a very strong start for FY25, as our Q1 results demonstrate. Revenues at the high end of guidance reflect steady demand; expenses remain well-controlled; cash flow was again strong; and our bottom-line results and raised EPS guidance reflect numerous positives,” said Anthony Folgers, CFO of Progress.
9. Maxlinear Inc (NASDAQ:MXL)
Number of Hedge Fund Holders: 26
MaxLinear Inc. (NASDAQ:MXL) is a technology company that designs and develops highly integrated radio-frequency (RF) and mixed-signal integrated circuits (ICs) for broadband communications and data applications. Additionally, it focuses on artificial intelligence and machine learning by providing high-speed low power connectivity solutions. On March 31, the company moved to strengthen its prospects in the high-growth AI/ML interconnect market with the launch of Rushmore DSP.
Built on Samsung’s leading-edge CMOS technology, Rushmore DSP is designed to boost performance and power efficiency, paving the way for high-speed and efficient networking solutions. Its 1.6T (200G/lane) PAM4 SERDES should address power performance bottlenecks in artificial intelligence infrastructure scaling. Additionally, it should elicit strong interest as networks transition to 51.2T and 102.4T, which require 200G/lane connectivity solutions. The switch to 200G/lane technology is becoming essential as AI/ML workloads drive exponential bandwidth requirements.
8. Viavi Solutions Inc. (NASDAQ:VIAV)
Number of Hedge Fund Holders: 28
Viavi Solutions Inc. (NASDAQ:VIAV) is a technology company that provides network tests, monitoring and assurance solutions for communications service providers and hyperscalers. It’s also a leader in light management technologies for 3D sensing and anti-counterfeiting. The company announced the enhanced capabilities of its ONE LabPro ONE-1600 on April 1.
By enhancing the capabilities of the world’s first electrical 212G/lane, 1.6Tb/s testing solution, Viavi Solutions Inc. (NASDAQ:VIAV) has essentially set itself for growth opportunities while supporting high-bandwidth network switching devices for AI infrastructure. Likewise, it is expected to strengthen Viavi prospects in the expanding bandwidth network testing market, especially in the next-generation data centers market amid the AI boom.
“Our collaboration is focused on developing cutting-edge testing solutions that tackle these challenges, accelerating the adoption of 1.6T technology, and supporting the evolution of AI-driven infrastructure and high-performance data centers,” said Khushrow Machhi, Senior Director of Marketing, Physical Layer Products Division, and Broadcom.
7. Ambarella, Inc. (NASDAQ:AMBA)
Number of Hedge Fund Holders: 32
Ambarella, Inc. (NASDAQ:AMBA) is a technology company that develops semiconductor solutions that enable artificial intelligence (AI) processing, advanced image signal processing, and high-definition (HD) compression. On March 31, the company announced significant developments in edge generative AI technology. Additionally, it confirmed the shipping of 30 million cumulative edge AI systems on chip.
The developments underscore Ambarella, Inc. (NASDAQ:AMBA) leading position as a supplier of edge AI systems on chip. It also highlights the company’s ability to enable scalable high performance and a vision of AI applications across edge inference CVflow. The 3.0 AI SoC portfolios should, therefore, support GenAI models from 0.5 to 34 billion parameters.
“While we are continuing to enable advancements in GenAI processing at the edge, we also remain steadfast in our hallmark differentiators of not merely providing the proprietary CVflow AI accelerator, now in its third generation,” said Fermi Wang, President and CEO of Ambarella.
6. Check Point Software Technologies Ltd. (NASDAQ:CHKP)
Number of Hedge Fund Holders: 40
Check Point Software Technologies Ltd. (NASDAQ:CHKP) is a leading provider of artificial intelligence-powered cloud-delivered cybersecurity solutions. The company leverages AI in all its solutions to enhance cybersecurity efficiency and accuracy while protecting over 100,000 organizations worldwide. On March 31, the company was recognized for its competitive edge in Attack Surface Management following the acquisition of Cyberint.
Following the acquisition, Check Point Software Technologies Ltd. (NASDAQ:CHKP) gains access to Cyberint’s ASM expertise to provide customers with superior attack surface oversight and enhanced security measures. This solution offers real-time visibility and automatic risk mitigation by combining state-of-the-art threat intelligence, and AI-powered protection. It seamlessly integrates with the Check Point portfolio.
“Our leadership shows how our customers can benefit from a comprehensive external view mapped to the threats related to their assets and the ability to simplify the remediation to those threats.” said Yochai Corem, VP of External Risk management at Check Point Software Technologies.
5. Credo Technology Group Holding Ltd. (NASDAQ:CRDO)
Number of Hedge Fund Holders: 43
Credo Technology Group Holding Ltd. (NASDAQ:CRDO) is a technology company that provides various high-speed connectivity solutions for optical and electrical Ethernet applications. Consequently, it plays an important role in the artificial intelligence infrastructure ecosystem with its low-latency connectivity solutions. The company unveiled a new Lark family of optical Digital Signal Processors on April 1, targeting opportunities in powering next-generation AI applications and hyperscale networks.
Featuring high-performance reliability and low power consumption capabilities, the new optical Digital Signal Processors (DSPs) strengthen Credo Technology Group Holding Ltd.’s (NASDAQ:CRDO) prospects of playing a key role in reducing interconnect power consumption in data centers amid the AI boom. The power efficiency of the 800G optical transceivers, as Lark 850 consumes less than 10W, should address the power ceiling for AI-tailored data centers. The new Lark DSP family should also unlock new growth opportunities for Credo Technology in the rapidly expanding AI infrastructure market as data centers face critical power constraints.
“As AI drives datacenter growth to unprecedented levels, power becomes increasingly important. Every watt dedicated to optical interconnect is a watt that can’t be used for GPU power,” said Cignal AI Lead Analyst, Dr. Scott Wilkinson. “With over nine million 800GbE modules deployed in 2024, and more than 14 million forecasted for deployment in 20251, Credo’s Lark DSP can play a pivotal role by reducing a major source of interconnect power consumption inside the datacenter.”
4. Dynatrace, Inc. (NYSE:DT)
Number of Hedge Fund Holders: 46
Dynatrace, Inc. (NYSE:DT) is a software application company that provides an observability and security platform. It also leverages artificial intelligence to simplify cloud complexity and enable faster, more secure innovation. On April 1, the company announced the signing of a strategic collaboration with Amazon Web Services aimed at enhancing digital automation and intelligence.
The strategic collaboration seeks to enhance access to deeper insights in AWS environments while focusing on generative artificial intelligence applications. In addition, it will provide real-time insights for cloud migration and modernization while enhancing AI observability and security for Generative AI applications. The strategic collaboration is expected to strengthen Dynatrace, Inc. (NYSE:DT) edge in the observability market amid the AI boom.
“To maintain an optimized and effective cloud environment, observability and security are essential,” said Jay Snyder, Senior Vice President of Channels and Alliances at Dynatrace. “The SCA between Dynatrace and AWS will bolster our existing collaborative efforts in product integration and go-to-market strategies, expediting innovation and the realization of benefits for our mutual customers.”
3. Lumentum Holdings Inc. (NASDAQ:LITE)
Number of Hedge Fund Holders: 57
Lumentum Holdings Inc. (NASDAQ:LITE) is a leading developer and provider of optical and photonic products for the cloud and networking markets. On March 31, the company affirmed the significant milestone it has achieved in advancing next-generation, high bandwidth, and lower power per bit optics for artificial intelligence (AI)/machine learning (ML) and cloud infrastructure.
In collaboration with Marvell Technology, a leader in data infrastructure, Lumentum Holdings Inc. (NASDAQ:LITE) is poised to showcase the industry’s first 400G/per lane PAM4 technology operating at 225 Gbaud. The live demonstration will feature a cutting-edge 450G PAM4 distributed feedback (DFB) laser integrated with a Mach-Zehnder (MZI) modulator. The exhibition highlights the preparedness for next-generation 3.2T optical transceivers, which are crucial for the swiftly growing AI/ML tasks and large-scale cloud networking frameworks.
“Lumentum’s collaboration with Marvell marks our joint commitment to pushing the boundaries of 400G per lane technology innovation,” said Matt Sysak, Lumentum CTO of Cloud and Networking. “Together, we are enabling 400G per lane solutions that go beyond what silicon photonics can offer, unlocking higher performance and scalability foundational for next-generation AI/ML and cloud infrastructure.”
2. Semtech Corp (NASDAQ:SMTC)
Number of Hedge Fund Holders: 57
Semtech Corp (NASDAQ:SMTC) is a technology company that specializes in semiconductors, Internet of Things systems, and cloud connectivity service solutions. The company announced the expansion of its broad optical communications portfolio on March 31 to include solutions across multiple generations of data center connectivity.
The new solutions are designed to address requirements for high speed, processing power and data throughput in machine learning and artificial intelligence clusters. Consequently, they should accelerate the shift to higher bandwidth density while enabling future 800G and 1.6T modules.
“Our 200G and 400G per channel innovations represent critical building blocks that enable the next generation of data center fabric. As AI models continue to grow exponentially in size and complexity, these architectural advances will help hyperscalers build the infrastructure foundation needed for tomorrow’s AI workloads while managing their data center power envelope,” said Amit Thakar, vice president of signal integrity product marketing at Semtech.
1. DXC Technology Company (NYSE:DXC)
Number of Hedge Fund Holders: 69
DXC Technology Company (NYSE:DXC) provides information technology services and solutions. The company leverages artificial intelligence in its solutions to help clients innovate and solve complex challenges while optimizing operations. The company was recognized as a leader in the Magic Quadrant for Outsourced Digital Workplace Services on March 31 by research firm Gartner.
The recognition was in response to DXC Technology Company’s (NYSE:DXC) Modern Workplace Services, which includes Modern Device Management, which is underpinned by an artificial intelligence-driven Experience platform. The AI-powered solution enables more than 15 hours of monthly productivity gains per user while reducing the time required to solve issues by up to 50%.
“We believe being recognized by Gartner underscores our commitment to innovative workplace services that are AI-driven, seamless and improve operational efficiency and enhance resilience,” said Chris Drumgoole, President of Global Infrastructure Services at DXC.
While we acknowledge the potential of DXC Technology Company (NYSE:DXC) 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 time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than DXC but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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