Almost 50 House Democrats have signed a message to stop the unauthorized use of AI tools in the government. Members of Congress have asked to cease applying any unauthorized artificial intelligence system that will aid in curbing government spending. President Donald Trump has set up DOGE, or the Department of Government Efficiency. Meanwhile, billionaire Elon Musk has been assigned the responsibility to cut what DOGE will say is waste, fraud, and abuse in the federal bureaucracy.
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The Democrats have acknowledged that artificial intelligence holds the potential to modernize the US government. However, it also highlighted the potential concerns related to employee monitoring and access to sensitive data by DOGE and its AI tools.
“These present serious security risks, self-dealing, and potential criminal liability if not handled correctly, and have the potential to undermine successful and appropriate AI adoption,”
-Letter, spearheaded by Representatives Donald Beyer, Mike Levin and Melanie Stansbury.
The Democrats have further demanded that the administration terminate the use of any AI systems that haven’t been formally approved through processes such as FedRAMP or that have been unable to meet existing legal requirements. The letter, addressed to the White House Office of Management and Budget, was also questioned on whether any of the technology used by the administration was powered by Musk’s company, xAI. This question, in particular, has been asked to clarify any potential conflicts of interest.
According to the Democrats, these would be “exponentially worse if Musk pursues further contracts to become a major provider of government AI services.”
The White House has recently introduced new policies on federal agency AI use and the federal government.
“President Trump recognizes that AI is a technology that will define the future. This administration is focused on encouraging and promoting American AI innovation and global leadership, which starts with utilizing these emerging technologies within the Federal Government. Today’s revised memos offer much needed guidance on AI adoption and procurement that will remove unnecessary bureaucratic restrictions, allow agencies to be more efficient and cost-effective, and support a competitive American AI marketplace.”
– Lynne Parker, Principal Deputy Director of the White House OSTP.
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. The hedge fund data is as of Q4 2024.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A wide angle shot of Wall Street, capturing the hustle and bustle of the city and its financial markets.
12. Arm Holdings plc (NASDAQ:ARM)
Number of Hedge Fund Holders: 43
Arm Holdings plc (NASDAQ:ARM) is a semiconductor and software design company that designs and manufactures semiconductor technology and other related products. On April 15, KGI Securities initiated coverage of the stock with a “Neutral” rating and $130 price target. The rating reflects caution amid macroeconomic uncertainty as well as Arm’s strategic decision to withdraw from a UK semiconductor deal. Both of these factors have led to dampened investor confidence.
11. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 63
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. On April 16, Morgan Stanley reiterated the stock as “Equal Weight” and lowered its price target on the stock to $90 per share from $95.
“Palantir’s technical capabilities coupled with a forward deployed engineer model allows customers to realize early success on their GenAI initiatives.”
10. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 85
Snowflake Inc. (NYSE:SNOW) is a software application company that provides a cloud-based data platform. On April 16, DA Davidson lowered the firm’s price target on the stock to $200 from $225 and kept a “Buy” rating on the shares. The rating, issued as part of a broader research note, discussed how the firm is assuming a base case of one or two quarters of negative GDP in the US. This has already translated to lower valuations and will likely translate to lower growth as well. The next couple of quarters are going to witness a slowdown in consumer activity and corporate investment, regardless of how tariffs play out, the firm noted.
9. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 126
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives. On April 16, Piper Sandler reiterated the stock as “Overweight” and cut its estimates on the stock from $450 to $400. Tesla’s first-quarter financials are expected to be disappointing, with deliveries falling short of expectations.
Consequently, margin concerns are justified for the electric vehicle maker. Since there isn’t enough information on Tesla’s “Model 2,” the firm has revised its estimates as well. Nevertheless, the firm is quite optimistic that Tesla’s developments may lead to sharp rallies, particularly the advancement of its robo-taxis.
“We’re cutting our estimates to reflect this outlook, and our price target is now $400, down from $450. However, while our 2-3 month outlook leans bearish, remember that TSLA can rally sharply whenever ‘big picture’ catalysts emerge.”
8. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 161
Broadcom Inc. (NASDAQ:AVGO) is a technology company uniquely positioned in the AI revolution owing to its custom chip offerings and networking assets. On April 15, the company announced Incident Prediction, an industry-first security capability that leverages artificial intelligence to identify and disrupt living-off-the-land (LOTL) attacks and other cyberthreats. The capability has been trained on a catalog of over 500,000 real-world attack chains to stop cyberattacks before they happen.
“The inspiration for Incident Prediction came from how GenAI can ‘predict’ the next word when generating text. By leveraging our extensive attack chain repository and threat intelligence using advanced AI and ML, Incident Prediction can predict the next four or five possible moves attackers will make in a customer’s environment, disrupt them, and then revert to normalcy right away. As a result, security analysts no longer need to triage the event to figure out mitigation strategies; Incident Prediction does that automatically for them.”
-Eric Chien, Fellow, Symantec Threat Hunter Team, Broadcom.
7. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology company. On April 15, the company revealed that it will begin analyzing user data on customers’ devices to improve its artificial intelligence platform. This move will not only help it safeguard user information but also allow it to catch up in the AI race. According to the company, AI models will be trained using synthetic data. This information will mimic the format and characteristics of real-world messages without including any actual user-generated content. The company said it will start using the approach soon with those users who opt in to sharing device analytics.
6. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures and sells advanced chips used in artificial intelligence applications. On April 16, Daiwa upgraded the stock to “Buy” from Outperform and lowered the price target from TWD1,250.00 to TWD1,200.00 amid tariff impacts and market reactions. According to Rick Hsu, the pessimistic market scenario doesn’t match TSM’s current business performance, which has had a robust revenue rate in the first quarter of 2025.
The firm anticipates a 5% quarter-over-quarter increase in the top line for the second quarter due to inventory build-up for the upcoming iPhone release and persistent demand from AI servers that use GPU and ASIC technologies. The firm has also adjusted its second-half 2025 projections for the company to account for the macroeconomic uncertainties.
5. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 223
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services. One of the most notable analyst calls on Wall Street on April 16 was for Nvidia Corporation. Bank of America reiterated the stock as “Buy” and lowered its price target to $160 per share from $200. The price target revision comes amid tariff uncertainty. However, the firm believes that the stock is still well-positioned.
“Our $160 PO is based on 26x CY26E PE ex cash, toward lower-end of NVDA’s historical 25x-56x forward year PE range, which we believe is justified given near-term concerns around cost inflation and tariffs, partially offset by stronger growth opportunities ahead as gaming cycle troughs and data center demand potentially faces strong, long-term demand dynamics.”
4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 234
Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses. On April 16, Needham analyst Laura Martin maintained a “Buy” rating on the stock and reduced the price target to $178.00. The firm’s buy rating stems from Alphabet’s strategic positioning in the digital landscape, particularly its “Zero Click” strategy that is anticipated to be a major disruptor due to its integration with generative AI.
User behavior and content creation are both likely to be impacted by this strategy, resulting in new business models and frameworks. Alphabet also holds the potential to expand its margins through generative AI, albeit with some challenges. All in all, the buy rating is justified amid near-term valuation risks and potential upside drivers stemming from Generative AI.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On April 16, Cantor Fitzgerald lowered the firm’s price target on the stock to $624 from $790 and kept an “Overweight” rating on the shares. With the Q1 earnings season for the firm’s internet coverage sector kicking off next week, results are likely going to be “mixed” due to growing macro uncertainties, tariff impacts, and consumer pull-in ahead of tariffs.
The firm believes that the best way to “generate alpha” in the earnings season is to adopt a defensive strategy with the potential to play idiosyncratic themes. The firm also believes that the overall economy will slow down, and this degree of macro slowdown is factored into Q2 and second-half estimates.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 317
Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements. Morgan Stanley reiterated the stock as “Overweight” and lowered its price target to $472 per share from $530. The analysts noted how there is a “wall of worry” due to macro and micro demand impacts, leaving negative investor sentiment.
“Even post our proactive cuts to our estimates, the valuation looks attractive at 25X GAAP CY26 EPS, for a long-term GenAI winner.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 339
Amazon.com Inc (NASDAQ:AMZN) is an American technology company offering e-commerce, cloud computing, and other services, including digital streaming and artificial intelligence solutions. On April 16, BMO reiterated the stock as “Outperform” but lowered its price target from $280 to $235. The analyst told investors in a research note how the second half of 2025 is “increasingly uncertain” due to softened cloud demand in March, shaky macro environment, and reduced visibility. It said that “AWS remains best-positioned to benefit from the $5T TAM [total addressable market] opportunity.” Nevertheless, the analysts have reduced their AWS growth estimates for Q1 to 19% from 20% and growth estimates for 2025 to 18% from 20%.
“Reiterate Outperform, but reduce estimates and Target Price to $235 from $280.”
While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that some 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 AMZN but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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