The rise of artificial intelligence (AI) is driving significant growth in the data center market. Analysts predict that the demand for data center capacity to support AI workloads will increase significantly due to factors like growing computing power requirements. The need to process large amounts of data and the growing adoption of AI applications across various industries should accelerate the growth.
Likewise, Fortune Business Insights expects the data center market to grow at a Compound Annual Growth Rate (CAGR) of 25.7% between 2024 and 2032. The growth comes as companies and nations prepare a massive capital deployment of $1.8 trillion from 2024 to 2030 to meet the growing demand for computing power worldwide.
The US is one of the countries spearheading the data center investment spree. As part of the Stargate project, the US is poised to play host to a $500 billion investment into data centers, which is expected to bolster the country’s computing capacity to boost AI development. The first $100 billion investment is expected to come up this year.
The Stargate project is expected to give the US a strategic advantage and create thousands of jobs.
“As for the 100,000 jobs the project is supposed to create? Some construction jobs will be created as the data centers are built, but many more (millions more) will be created as the data centers come online. We’ve never had a compute cloud like this—there’s literally no way to calculate the economic impact of this amount of AI compute. It will be massive,” said Shelly Palmer, a tech pundit and consultant,
Amid the investment spree, there are growing concerns over a potential oversupply of data center capacity despite the ever-growing needs as part of the AI boom. Reports that Microsoft is canceling leases for US data center capacity are raising concerns about whether tech giants have secured more AI computing capacity than they needed. The software giant has already canceled data center leases totaling hundreds of megawatts, signaling it could have more capacity in its pipeline than it needs.
According to the Kyndryl AI Readiness Report, 86% of leaders are confident in their AI implementation, but 36% cite ROI as a barrier to adoption. Data centers, the core of the digital economy, support various demanding workloads, emphasizing the need for low-latency, high-bandwidth environments for AI applications. The time to invest is now.
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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. Koninklijke Philips N.V. (NYSE:PHG)
Number of Hedge Fund Holders: 12
Koninklijke Philips N.V. (NYSE:PHG) is a technology company that focuses on improving health and well-being through innovation. It offers a cloud-based AI solution that helps radiology departments access an ecosystem of AI applications from multiple vendors. The company announced the expansion of its cloud-based radiology informatics solution to Europe on February 27, following its deployment at 150 sites in North and Latin America.
Philips HealthSuite Imaging, a cloud-based solution for radiology departments managed by Philips and hosted on AWS, ensures data security with regular upgrades, security patches, and compliance checks. This SaaS model allows clinicians to access the latest innovations from any location. Its launch comes when 95% of healthcare providers plan to migrate over half of their applications to the cloud. Integration of generative AI capabilities, especially conversational reporting tools that use Amazon Bedrock’s foundation models, solves two major market issues: workflow inefficiencies and radiologist shortages. Therefore, the solution should enhance collaboration, accelerate clinical decision-making, and improve operational efficiency.
“The availability of Philips’ cloud-based radiology solutions in Europe will be a game changer for healthcare providers, helping them to manage staff shortages, optimize workflows and drive better outcomes”, said Shez Partovi, Business Leader Enterprise Informatics at Philips.
10. Vuzix Corporation (NASDAQ:VUZI)
Number of Hedge Fund Holders: 13
Vuzix Corporation (NASDAQ:VUZI) is a consumer electronics company that designs, manufactures, and markets smart glasses and augmented reality (AR) technologies. It also integrates artificial intelligence technology in its products for the enterprise, medical, defence, and consumer markets. The company joined forces with TranscribeGlass on February 27, to launch an AI powered transcription service using the Vuzix Z100 smart glasses.
The AI powered solution is designed to convert speech into text with sub-300 millisecond latency. The solution is specifically designed for the deaf or people struggling with hearing problems. It connects via Bluetooth to a customer’s smartphone or tablet to convert speech into text. The transcription service marks a strategic expansion for Vuzix Corporation (NASDAQ:VUZI) into the assistive technology market and is expected to open up new revenue streams.
“The Z100 smart glasses provide an ideal platform for TranscribeGlass’s cutting-edge AI-powered transcription,” said Paul Travers, President and CEO of Vuzix. “Our collaboration will drive adoption and innovation in the smart glasses industry, reinforcing Vuzix’ leadership in AI-enabled wearable technology.”
9. TaskUs, Inc. (NASDAQ:TASK)
Number of Hedge Fund Holders: 17
TaskUs, Inc. (NASDAQ:TASK) is an information technology service company that provides digital outsourcing services for companies. Its services help brands grow their brands in areas like social media, e-commerce, and gaming. It has also started supercharging teammates with artificial intelligence and advanced technologies to make them more productive. On February 27, TaskUs launched its Agentic AI consulting practice designed to help businesses accelerate their adoption of AI-powered automation.
The launch of the Agentic consulting service is a strategic move as TaskUs, Inc. (NASDAQ:TASK) seeks to position itself at a time when businesses are increasingly looking to integrate AI solutions into their operations. By building a new consulting and implementation business line and maintaining its core human-centered services for complex processes, the company is successfully establishing a dual revenue strategy.
“Over the next five years, AI will fundamentally reshape our world,” said Bryce Maddock, CEO of TaskUs. “Our strategic focus this year will be reimagining our business for the AI era. With our new Agentic AI Consulting practice, we will enable clients to fully realize its promise by integrating it into their operations.”
8. Life360 (NASDAQ:LIF)
Number of Hedge Fund Holders: 17
Life360 (NASDAQ:LIF) is a technology company that offers location-based services, including location sharing, safety alerts, and emergency dispatch. Their main service is the Life360 app, which families use to share locations and stay connected. On February 27, the company expanded its footprint into the innovative advertising business with the acquisition of Fantix’s advertising unit.
The unit comes with an AI platform that leverages cutting edge machine learning and privacy first technology to enable smart-advertising. With the acquisition, Life360 (NASDAQ:LIF) remains well-positioned to offer advertisers targeted performance-based advertising solutions. It should also strengthen the company’s advertising business.
“We are happy to welcome the Fantix advertising team to Life360. This acquisition reflects our commitment to build a differentiated, privacy-by-design advertising platform that aligns with our mission to serve families. We are confident that with the addition of Fantix’s cutting-edge AI technology and talented team, we’ll be able to deliver a truly best-in-class solution,” said Chris Hulls, Co-founder and Chief Executive Officer of Life360.
7. NICE Ltd. (NASDAQ:NICE)
Number of Hedge Fund Holders: 28
NICE Ltd. (NASDAQ:NICE) is a global software company that provides cloud and on-premise software solutions to help businesses improve customer interactions and manage compliance. It also provides cloud platforms for AI-driven digital business solutions worldwide. The company offers CXone Mpower, an AI powered customer service that seamlessly orchestrates workflows, agents, and knowledge.
On February 27, NICE Ltd. (NASDAQ:NICE) confirmed it had a record-breaking year for Nice’s CXautomation and augmentation as it achieved 6 billion AI-augmented interactions and 2 trillion AI-analyzed words per month in 2024. The company achieved about 123,560 years of knowledge and consumption as businesses turned to AI to drive proactive and predictive customer service. The 400% increase in CXone Mpower Autopilot interactions reported by NICE indicates that the market is moving from experimental AI deployments to large-scale customer service operations.
Barry Cooper, President of CX Division, NICE, said, “We’ve reached a pivotal moment in the customer service evolution where automation now touches every interaction. As shown by 2024’s historic numbers, businesses are realizing the immense value of AI and human collaboration in driving automated customer service. CXone Mpower is setting this new standard as the complete AI platform for workforce augmentation, interaction orchestration and service automation.”
6. Dynatrace, Inc. (NYSE:DT)
Number of Hedge Fund Holders: 46
Dynatrace, Inc. (NYSE:DT) is a software application company that offers a security platform for multi-cloud environments. It operates Dynatrace, a security platform that provides runtime application security, infrastructure monitoring, and cloud automation. On February 27, the company unveiled a new AI-powered log analytics capability designed to address the challenges that companies face with legacy log management solutions.
Dynatrace’s enhanced log analytics capabilities deliver key innovations: Davis® AI Integration provides instant log explanations and user-friendly analytics; a Natural Language Interface democratizes log analytics across teams; OpenPipeline Technology enriches logs with IT context for effective analysis and seamless integration; and a simplified pricing model helps predict costs and scale log management.
“Dynatrace’s continuous evolution and innovation have allowed us to improve the way we analyze our data,” said Diego Enciso, Observability Specialist at NEQUI. “Its log analytics solution not only optimizes error detection but also helps us prevent fraud and gain valuable insights for strategic decision-making. With this capability, we have strengthened the security and efficiency of our operations.”
5. Axon Enterprise, Inc. (NASDAQ:AXON)
Number of Hedge Fund Holders: 64
Axon Enterprise, Inc. (NASDAQ:AXON) is an industrial company that develops and sells safety devices and services for law enforcement, military, and civilians. Its product line includes body cameras, dashcams, and energy weapons. The company is also integrating AI features into its camera networks to enhance video analytics. On February 26, TD Cowen reiterated a Buy rating on the stock and hiked the price target to $725 from $700.
The price hikes come on the heels of Axon Enterprise, Inc. (NASDAQ:AXON) delivering solid fourth-quarter and full year 2024 results that affirm robust underlying growth. Axon also provided a solid fiscal year 2025 guidance that surpassed analyst’s projections by 25%. The research firm expects the revenue base to grow by between 30% and 35% to over $2 billion. The impressive outlook comes on Axon closing 10 deals as part of its AI Era plan. One of the main factors driving the company’s growth has been its focus on cutting-edge technologies, especially in artificial intelligence (AI) and real-time operations.
4. Elastic N.V. (NYSE:ESTC)
Number of Hedge Fund Holders: 64
Elastic N.V. (NYSE:ESTC) is a search artificial intelligence (AI) company that delivers hosted and managed solutions designed to run in hybrid and multi-cloud environments. It offers Elastic Stack, a set of software products that ingest and store data from various sources and formats and perform search, analysis, and visualization of that data. On February 27, the company delivered solid fiscal 2025 third-quarter results that exceeded guidance across all revenue and profitability metrics.
Revenue in the quarter was up 17% year over year to $382 million, as elastic cloud revenue increased 26% to $180 million. The robust revenue growth underscores growth momentum across all aspects of the business amid strong demand for products as Elastic N.V. (NYSE:ESTC) seeks to become a leader in Search AI.
“Continued interest from customers building Generative AI applications and consolidating onto a single platform helped drive our outperformance during the quarter,” said Ash Kulkarni, Chief Executive Officer of Elastic.
3. Autodesk, Inc. (NASDAQ:ADSK)
Number of Hedge Fund Holders: 74
Autodesk, Inc. (NASDAQ:ADSK) is a company that develops software for 3D design, engineering, and entertainment. Professionals in many industries use its software, including architecture, construction, manufacturing, and media and entertainment. The company also utilizes Artificial Intelligence (AI) within its software, allowing users to input design constraints and have AI generate multiple optimized design options. On February 27, the company delivered solid fourth quarter and full year 2024 results and announced it is embarking on a restructuring plan.
Autodesk, Inc. (NASDAQ:ADSK) posted a 12% increase in revenue which amounted to $1.64 billion in Q4 as net income from operations increased to $608 million. Autodesk also announced plans to trim its workforce by 9% or approximately 1,350. The layoff comes as Autodesk remains focused on the convergence of design and integration of artificial intelligence solutions on the cloud.
“We are reallocating internal resources toward these critical areas and beginning the optimization of our go-to-market functions to better meet the evolving needs of our customers and channel partners,” said Autodesk president and CEO Andrew Anagnost. “We expect consistent growth momentum and disciplined execution, reinforced by persistent share repurchases, to deliver sustainable shareholder value over many years.”
2. Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 79
Accenture plc (NYSE:ACN) is an information technology services company that provides strategy, consulting, and technology and operation services. It also provides AI consulting services, helping companies design, implement, and manage responsible AI solutions across various business functions. On February 27, the company confirmed a strategic investment through Accenture Ventures in Workhelix.
Workhelix is a tech-enabled services company that helps organizations reap the rewards of their AI investments. As part of the deal, Workhelix solutions are to be integrated into Accenture LearnVantage as the company looks to enhance its AI workforce transformation capabilities. The acquisition aligns with Accenture plc’s (NYSE:ACN) overarching plan to develop specialized AI capabilities through focused investments instead of solely organic expansion. The timing is especially favourable since generative AI implementation is proving difficult for many organizations, which is driving demand for comprehensive transformation services that consider both technological and human factors.
1. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 85
Snowflake Inc. (NYSE:SNOW) is a software application company that offers a cloud data warehouse platform that allows users to store, analyze, and share data. The company also provides AI powered solutions that simplify unstructured data processing. On February 27, Snowflake moved to deepen its investments in AI innovation with the opening of a Silicon Valley AI hub.
The AI hub will offer solutions that enable developers, startups and business leaders to deepen relationships and shape the future of AI. At a time when the majority of cloud providers continue to operate primarily virtually, the Silicon Valley AI Hub creates a physical hub for AI innovation. This 30,000-square-foot facility accomplishes several strategic goals, including placing the company at the hub of Silicon Valley’s AI talent ecosystem and showcasing its AI capabilities.
Snowflake plans to invest up to $200M in next-gen startups through its AI Data Cloud via the Snowflake Startup Accelerator Program with leading VCs and commits $20M toward AI upskilling, supporting over 4,000 customers with AI/ML capabilities.
Snowflake Inc. (NYSE:SNOW) is presenting itself as a solution to the governance-innovation tradeoff that has impeded enterprise AI adoption by delivering AI capabilities straight to governed data instead of requiring data movement.
“Snowflake is the most consequential data and AI company in the world today,” said Sridhar Ramaswamy, CEO of Snowflake. “Our technology is already at the heart of customers’ data and AI strategies, and now, we are taking it a step further by creating a physical space for people shaping the future of AI to connect, learn, and work.
While we acknowledge the potential of Snowflake Inc. (NYSE:SNOW) 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. If you are looking for an AI stock that is more promising than SNOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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