In this article, we discuss the 11 best artificial intelligence and robotics stocks to buy according to hedge funds. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Artificial Intelligence and Robotics Stocks To Buy According To Hedge Funds.
Machines are becoming smarter everyday. Even chess professionals have started to acknowledge the incredible capabilities of modern-day computers that have the ability to process information at lightning speeds, instantly analyzing data and suggesting solutions. Artificial intelligence, a simulation of human intelligence by machines, has evolved beyond language processing and speech recognition to reactive learning and self-awareness. The commercial side of the technology has also exploded to over $40 billion in value.
The AI sector is growing at a brisk pace. According to a report by Research and Markets, the AI industry is slated to grow at a compound annual growth rate of more than 28% and will reach $171 billion in value within the next three years. Some of the companies leading this growth include Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT), among others discussed in detail below. These are also some of the favorite hedge funds stocks, according to the latest 13F filings.
A study by professional services firm PwC has forecast that AI products could contribute as much as $15 trillion to the world economy by 2030. Local economies could be given a 26% boost by AI over the period. The firm has identified over 300 use cases of AI in an AI Impact Index. China and the United States are named market leaders in AI by PwC. In a recent interview with news publication Financial Times, Nicolas Chaillan, a former chief software officer at the Pentagon, said that the US has lost the AI race to China.
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Our Methodology
With this context in mind, here is our list of the 11 best artificial intelligence and robotics stocks to buy according to hedge funds. The list is compiled according to the number of hedge funds having stakes in each stock. Data from the 873 hedge funds tracked by Insider Monkey was used for this purpose.
Why pay attention to hedge fund holdings? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Artificial Intelligence and Robotics Stocks To Buy According To Hedge Funds
11. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 41
Although International Business Machines Corporation (NYSE:IBM) operates as a diversified technology company, it has a pretty impressive artificial intelligence setup that offers various AI-related services, including integration with cloud and training courses. Earlier this week, the company announced that it would be collaborating with professional services firm Deloitte and defense company Raytheon to jointly develop AI, crypto, and quantum solutions for the aerospace and defense industries.
International Business Machines Corporation (NYSE:IBM) is placed eleventh on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds. On October 5, the company revealed at an investor conference that it was expecting to generate $35 billion in revenue over the next three years. Of the free cash flow over the period, the firm expects the software section, of which the AI forms a large part, to deliver 75% of the total, while 25% will be generated by the consulting department.
Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in International Business Machines Corporation (NYSE:IBM) with 3.4 million shares worth more than $508 million.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT), International Business Machines Corporation (NYSE:IBM) is one of the stocks that is attracting the attention of elite investors.
In its Q2 2020 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and International Business Machines Corporation (NYSE:IBM) was one of them. Here is what the fund said:
“AT&T and IBM exited the portfolio as they no longer met the quality criteria for inclusion with AT&T exceeding the debt limit and IBM falling out due to deteriorating long-term fundamental stability.”
10. Teradyne, Inc. (NASDAQ:TER)
Number of Hedge Fund Holders: 44
Teradyne, Inc. (NASDAQ:TER) is ranked tenth on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds. The firm makes and sells a range of products specially catered for the AI industry that boost device efficiency, optimize yield and improve silicon performance. The firm beat market expectations on earnings per share and revenue in the second quarter. It also earned rating upgrades from investment advisories like DA Davidson and Susquehanna in the first week of October.
Since Teradyne, Inc. (NASDAQ:TER) caters to the semiconductor industry, it is expected to benefit from the $50 billion investment in the semiconductor sector under the new $2 trillion American Jobs Plan of US President Biden. It has also grown as a result of the dramatic increase in semiconductor prices this year on the back of recovery demand and supply chain constraints. This chip crisis is expected to last well into 2022, according to analyst forecasts.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Teradyne, Inc. (NASDAQ:TER) with 128 million shares worth more than $544 million.
Along with Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT), Teradyne, Inc. (NASDAQ:TER) is one of the stocks on the radar of institutional investors.
9. Raytheon Technologies Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 53
Raytheon Technologies Corporation (NYSE:RTX) primarily operates in the defense and aerospace domain, but the giant leaps in the technology industry over the past few years have made quantum computing and AI an important part of the defense sector as well. In line with the developments, the company has adapted, pouring resources into AI and robotics while delivering impressive earnings. It is placed ninth on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds.
Raytheon Technologies Corporation (NYSE:RTX) offers various AI-related services and products, including AI-powered analytics software, the Stinger Virtual Trainer for battlefield exercises, and a smart combat vehicle named the Lynx Infantry Fighting Vehicle. In the robotics field, the firm has automated the advanced missile production lines, freeing up skilled labor for more important tasks.
At the end of the second quarter of 2021, 53 hedge funds in the database of Insider Monkey held stakes worth $2.1 billion in Raytheon Technologies Corporation (NYSE:RTX), down from 58 in the preceding quarter worth $2.4 billion.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT), Raytheon Technologies Corporation (NYSE:RTX) is one of the stocks that hedge funds are buying.
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Raytheon Technologies Corporation (NYSE:RTX) was one of them. Here is what the fund said:
“In today’s uncertain economy, we believe we have found such businesses trading at bargain prices in two sectors: industrials and financials. In the industrial space, concerns about the impact of the economic downturn on short-term profitability led to a wave of selling in a select group of leaders with durable competitive advantages, long records of profitability and bright long-term prospects. Companies like Raytheon Technologies is a wonderful example of attractive investments in this sector.”
8. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders: 60
Intuitive Surgical, Inc. (NASDAQ:ISRG) operates in the healthcare sector and has invested heavily in the use of robotics as a substitute for and in the manufacturing of surgical systems and instruments. The firm delivered impressive earnings results for the second quarter in late July, beating market expectations on earnings per share and revenue. It also reported an 87% quarter-on-quarter increase in the shipping of the flagship da Vinci Surgical Systems. Piper Sandler and Bank of America raised the price targets on the stock following the results.
Intuitive Surgical, Inc. (NASDAQ:ISRG) has returned over 29% to investors over the past year. It is ranked eighth on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds.
At the end of the second quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $3.4 billion in Intuitive Surgical, Inc. (NASDAQ:ISRG), up from 53 the preceding quarter worth $2.3 billion.
Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT) are some of the top stocks to buy right now, just like Intuitive Surgical, Inc. (NASDAQ:ISRG).
In its Q1 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and Intuitive Surgical, Inc. (NASDAQ:ISRG) was one of them. Here is what the fund said:
“Notable detractors to the Fund’s returns this quarter (included) Intuitive Surgical. Intuitive Surgical’s (6.3% weight in the Fund) growth slowed in 2020 as COVID hit the brakes on many elective surgeries. Given continued COVID-related risks in the US and Europe in 2021, it’s still unclear as to when elective surgeries recover to more normal levels. As such, hospitals may be holding off on planned surgical robot investments until demand rebounds. That said, in Asia, where COVID has been well contained, Intuitive Surgical’s procedures and systems utilizations improved, which bodes well for recovery in the US and EU. Most procedures can’t be delayed indefinitely or canceled, so we continue to expect a resumption of strong, durable growth as the pandemic recedes.”
7. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 86
NVIDIA Corporation (NASDAQ:NVDA) products power some of the powerful electronic devices around the world today. The company has benefited from the recent increase in chip prices, reporting record revenues and sales. It is placed seventh on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds. Since AI products and robotics require powerful processors to convert real-time data into computer commands, the products of the firm are in high demand these days.
NVIDIA Corporation (NASDAQ:NVDA) also offers products that use AI-technology to power self-driving cars. One of these is the NVIDIA DRIVE PX2, a car platform that will help automakers speed up the production of autonomous vehicles.
At the end of the second quarter of 2021, 86 hedge funds in the database of Insider Monkey held stakes worth $9 billion in NVIDIA Corporation (NASDAQ:NVDA), up from 80 the preceding quarter worth $6 billion.
In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“NVIDIA Corp. is the dominant supplier of Graphics Processing Units (GPUs) worldwide. NVIDIA’s GPUs are at the intersection of a number of important computing trends including the movement to the Cloud, artificial intelligence, autonomous vehicles, edge computing, gaming, and more. We previously owned NVIDIA and sold it in the third quarter of 2020 as the price to value gap closed and our margin of safety was reduced. As with all our MVP companies, we continued to follow NVIDIA closely. Since that time, NVIDIA reported excellent results and its value has compounded rapidly. The technology selloff at the beginning of the year negatively affected the stock price while our estimate of NVIDIA’s value per share increased. This happy combination of events created a margin of safety and an opportunity to once again add NVIDIA to the portfolio.”
6. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 87
Micron Technology (NASDAQ:MU) is another chipmaker that is a leading brand in the AI universe. The firm posted earnings for the fourth fiscal quarter last month, beating market expectations on earnings per share and revenue. It also raised guidance for the coming months. It is ranked sixth on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds. The firm markets several hardware and software products for deep learning applications that make use of artificial intelligence.
One of these, the AI Development Platform, offers better memory storage density, bandwidth, and processing speeds than peers. It is used in analytics and IoT devices. Micron Technology (NASDAQ:MU) has also been making products that cater specifically to the health industry in the precision medicine domain.
At the end of the second quarter of 2021, 87 hedge funds in the database of Insider Monkey held stakes worth $6.3 billion in Micron Technology (NASDAQ:MU), down from 100 in the preceding quarter worth $7.6 billion.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Micron Technology (NASDAQ:MU) was one of them. Here is what the fund said:
“Micron is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
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Disclosure. None. 11 Best Artificial Intelligence and Robotics Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
