According to a new L.E.K. Consulting report, investor sentiment today heavily ties a company’s enterprise value to how well they develop and execute their artificial intelligence (AI) strategies for growth. The report reveals that a company that executes its AI transformation well can expect a valuation gain of up to 19%.
On the contrary, a poor, or poorly executed, AI transformation can lead to a 9% loss of value. This is according to an L.E.K. analysis based on S&P 500 profit and loss data and results of an L.E.K. survey of executives. It is to be noted that the 28% change is the average shift in a company’s value due to its use of AI, while the impact could be even bigger for some.
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“The old ways of delivering on strategy and innovation will no longer satisfy investor expectations because AI advancements have raised the bar on what’s possible. AI strategies require targeted investment and careful implementation. Doing it right will lead to growth. But if a company swings and misses with AI, fails to swing enough or swings too much — or not at all — the value destruction could be significant.”
-L.E.K. Managing Director and Head of the Digital Transformation practice Darren Perry.
The key, however, lies in implementing a framework with which companies can bridge the AI gap toward success. They can do this by creating and implementing an AI transformation strategy that builds value.
“Winning companies will strategically deploy AI across all potential value-creation levers. In our experience, too many companies are just focusing on AI’s potential related to productivity gains. To maximize upside potential — and ultimately avoid value erosion — leaders must plan and execute AI holistically so the strategy encompasses performance, competition and unique opportunities.”
-Darren Perry.
According to the report, companies must discover their true differentiators and use AI to augment them further. For instance, Shopify used AI-powered features to enhance the product exploration experience for merchants and customers. As a result, the company saw a 15% jump in sales.
Likewise, AI can help companies find new revenue streams by synthesizing data to create new insights, develop new business models to monetize data and even lead to unique opportunities.
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).
12. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 13
BigBear.ai Holdings, Inc. (NYSE:BBAI) is an artificial intelligence specialist that provides decision intelligence solutions. On March 10, the company announced that the U.S. Department of Defense (DoD) has awarded the company a 3.5-year, $13.2M sole source contract to support the Chairman of the Joint Chiefs of Staff’s (CJCS) Directorate for Force Management (J-35). Under the contract, BigBear.ai will be responsible for the delivery and maintenance of the DoD Joint Staff J-35’s ORION Decision Support Platform (DSP).
This platform provides automated force management capabilities and data analytics to the DoD’s Joint Planning and Execution Community (JPEC). Leveraging BigBear.ai’s deep subject matter expertise and advanced technical skills, the DoD will be able to enhance ORION DSP’s scalability, adaptability, and analytical capabilities to deliver modern, AI-powered solutions. The contract has been awarded through the Tradewinds Marketplace, the DoD’s premier platform for AI/ML procurement, making it BigBear.ai’s second award through the contract vehicle.
“We are honored to support the Chairman of the Joint Chiefs of Staff’s Office. Winning this contract demonstrates BigBear.ai’s ability to deliver modern, AI-powered solutions that enable data-driven decision-making at the highest levels of defense leadership. ORION DSP plays a pivotal role in optimizing force structure, and we look forward to bringing our expertise in AI, data analytics, and software development to ensure mission success.”
-Kevin McAleenan, CEO of BigBear.ai.
11. Synaptics Incorporated (NASDAQ:SYNA)
Number of Hedge Fund Holders: 27
Synaptics Incorporated (NASDAQ:SYNA) is a global developer and fabless supplier of premium mixed-signal semiconductor solutions that enable interaction with connected devices and data. On March 10, the company announced that it has extended its esteemed Synaptics AstraTM AI-Native platform with the SR-Series high-performance adaptive microcontroller units (MCUs) for scalable context-aware Edge AI. The Synaptics Astra AI-Native platform is a compute solution designed for Edge AI that focuses on building intelligent IoT devices. The new series features three power tiers, namely performance (100 GOPS), efficiency, and ultra-low-power (ULP) always-on (AON), built on Arm® architecture.
The enhancements are designed for multimodal consumer, enterprise, and industrial Internet of Things (IoT) workloads with accelerators and adaptive vision, audio, and voice algorithms. The compact MCUs help minimize system cost, power, and footprint while allowing seamless integration into a wide range of devices, such as battery-operated security cameras, sensors, and more.
“We believe we are at an inflection point in Edge AI where embedded developers have a unique opportunity to redefine human-machine interaction through multimodal processing and contextual awareness. Unlocking this potential requires a new class of embedded compute silicon. As part of our Astra family, the SR-Series extends our Edge AI processing roadmap with intelligence optimized for various power levels. It allows the development of cognitive IoT devices that seamlessly adapt to their surroundings, from ultra-low-power always-on sensing to high-performance edge inference.”
-Vikram Gupta, Senior Vice President and General Manager of IoT Processors, Chief Product Officer at Synaptics.
10. Super Micro Computer Inc. (NASDAQ:SMCI)
Number of Hedge Fund Holders: 45
Super Micro Computer, Inc. (NASDAQ:SMCI) designs and manufactures high-performance server and storage solutions for data centers, cloud computing, AI, and edge computing worldwide. On March 11, the company announced that it is introducing a wide range of new systems fully optimized for edge and embedded workloads. Based on the latest Intel Xeon 6 SoC processor family (formerly codenamed Granite Rapids-D), the new servers drive smarter, faster, and more efficient AI from the data center to the edge. The entire range of Intel® Xeon® 6 Processors support over 40% more memory bandwidth and up to 144 CPU cores.
The new SYS-112D series systems are designed to run high-performance Edge AI solutions, while the compact systems SYS-E201-14AR and SYS-E300-14AR support IoT and AI inferencing at the far edge in sectors such as security, retail, and healthcare. Additionally, Supermicro’s 2U Edge AI product family can be deployed at the enterprise edge as well as in telco and space-constrained environments.
“As the demand for Edge AI solutions grows, businesses need highly reliable, compact systems that can process data at the edge in real-time. At Supermicro, we design and deploy the industry’s broadest range of application optimized systems from the data center to the far edge. Our latest generation of edge servers deliver advanced AI capabilities for enhanced efficiency and decision-making close to where the data is generated. With up to 2.5 times core count increase at the edge with improved performance per watt and per core, these new Supermicro compact systems are fully optimized for workloads such as Edge AI, telecom, networking, and CDN.”
– Charles Liang, president and CEO of Supermicro.
9. Confluent, Inc. (NASDAQ:CFLT)
Number of Hedge Fund Holders: 49
Confluent, Inc. (NASDAQ:CFLT) operates a data streaming platform in the United States and internationally that allows organizations to continuously stream, connect, process, and manage data in real-time across various systems. On March 10, Citizens JMP analyst Patrick Walravens reiterated a “Market Outperform” rating and $40.00 price target on the stock. The firm believes that Confluent is poised to tap into a significant total addressable market, anticipated to reach $100 billion by 2025.
The company’s partnership with Databricks is particularly notable as it is expected to open up additional sales avenues in the AI sector. Its recent developments like Tableflow, a major component of the Databricks collaboration, and bring your own cloud (BYOC) product, reflect on its innovation capabilities. The firm is also optimistic about Confluent’s management team led by CEO Jay Kreps. All of these factors contribute to a positive outlook for the stock.
8. 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 March 11, Ondas Holdings Inc. (NASDAQ:ONDS), a leader in autonomous drone and data solutions, announced that its wholly owned subsidiary, Ondas Autonomous Systems (“OAS”), has entered into a strategic partnership with Palantir Technologies Inc. (NASDAQ:PLTR) to enhance its autonomous drone operations. The collaboration will integrate Palantir’s Foundry platform into the Ondas Autonomous Systems (OAS), supporting the adoption of OAS’s Optimus System and Iron Drone Raider autonomous drone platforms worldwide.
Palantir Foundry’s AI-driven insights will enable Ondas to optimize supply chain, production workflows, and customer engagement strategies, in turn helping it to deliver superior value to commercial and military customers. According to Eric Brock, Chairman and CEO of Ondas, Foundry and other Palantir capabilities will allow access to a comprehensive AI-enabled infrastructure that supports their business expansion. Foundry’s AI-driven insights will be particularly helpful as they deploy their Optimus and Iron Drone platforms.
“We are excited to partner with Ondas to scale their autonomous drone solutions. Foundry’s ability to integrate siloed data sources and enable real-time analytics will empower Ondas to make faster, data-driven decisions, ensuring their customers-across industries and defense-operate with greater efficiency and resilience.”
-Kevin Kawasaki, Global Head of Business Development at Palantir.
7. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 83
Intel Corporation (NASDAQ:INTC) develops and sells computing hardware, software, and semiconductor products, including processors, GPUs, storage, and AI solutions for various industries. On March 11, Christopher Danely from Citi maintained a “Hold” rating on the stock, raising concerns over a potential build in the CPU market. According to Danely, February notebook shipments increased 6% month-over-month, which was in line with its expectations given normal seasonality and a low comparison base.
The issue, the analyst pointed out, is how CPU shipments have grown at a low double-digit pace in the second half of 2024, while PC unit sales only achieved mid-single-digit growth. The gap raises the likelihood of a stock pileup, creating downward pricing pressure. However, the firm expects PC units to increase 4% year-over-year with Q1 notebook shipments projected to drop 10% quarter-over-quarter due to a weak comparison base. For now, investors are on the lookout for a balance between production and end-user demand, particularly with the rise of AI-driven computing. Inventory management mistakes could lead to pricing pressure if demand fails to keep up.
6. 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. Tesla stock faces a rough Monday, March 10, as UBS analysts revised their outlook, lowering the price target from $259.00 to $225.00 while retaining a “Sell” rating.
The price target revision follows Tesla’s disappointing Q4 results, compelling UBS to reduce its Q1 2025 delivery forecast to 367,000 vehicles from an earlier estimate of 437,000. The firm stated that the current run-rate appears slower, but a potential surge in deliveries toward the end of the quarter could appear from increased promotional efforts.
Moreover, the UBS Evidence Lab has collected data signifying that delivery times for Tesla’s Model 3 and Model Y are notably low, with vehicles generally available within two weeks in key markets, reflecting on softer demand for Tesla products.
On the same day, Morgan Stanley kept an “Overweight” rating on the stock with a $430 price target. The analyst told investors in a research note that the stock is down from its December highs, and that this pullback is a buying opportunity for the “embodied AI compounder”.
5. 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. One of the most notable calls on Tuesday, March 11, was for Broadcom. Bernstein reiterated the stock, along with Nvidia, as “Outperform”, stating that investors should take advantage of any dips in both stocks.
“NVDA and AVGO have been brutalized, but are looking attractive for those who can wait out the noise…”
Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $251 implies a 32% upside, however, the Street-high target of $300 implies an upside of 57.8%.
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology company. On March 10, Bloomberg’s Mark Gurman reported that Apple’s smart home hub, an innovation it planned to announce in March, has been delayed as it relies on the delayed Siri capabilities. The smart home hub is reportedly Apple’s new Home accessory designed to serve as a central hub or “Command Center” for smart home management. A few days prior, the company announced that its “much anticipated” AI-powered Siri update as part of the iOS 18.4 update in April has been delayed. Meanwhile, the company has opened an internal testing program for the smart home hub device, which has an iPad-like screen and home-control features.
3. 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. On March 11, Wells Fargo analyst Aaron Rakes said that the sharp decline in Nvidia (NASDAQ:NVDA) shares in recent weeks is a “buying opportunity.” Rakers maintained an “Overweight” rating and $185 price target on the stock. The analyst anticipates five topics to be discussed at the event, including co-package optics, for which he said “there is a lot of investor focus” on where Nvidia stands.
“While we would be very surprised to see [co-package optics] / Silicon Photonics (SiPho) emerge at the GPU level at this year’s event (possibly in the next-gen Rubin architecture), industry reports / checks continue to point to this year’s event as showcasing some CPO integration in NVIDIA’s switch / networking portfolio. We think it is somewhat anticipated that NVDA could intro CPO integration in its Quantum InfiniBand portfolio at this [year’s] GTC.”
Other key topics expected to be discussed include the introduction of Blackwell Ultra (GB300), post-training and test-time scaling, with a focus on inferencing. Besides noting anticipated topics, the firm also noted how Nvidia might see a recovery rally next week if history repeats itself. The company is expecting the GPU Technology Conference, known as the GTC, next week. Wells Fargo data has shown how Nvidia’s shares have outperformed its peers in the timeframe of this conference.
“We maintain our positive views on NVDA’s broadening platform strategy and would be buying NVDA ahead of next week.”
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On March 11, Reuters reported that Meta is testing its first in-house chip for training artificial intelligence systems, a milestone move focusing on the company designing more of its own custom silicon and reducing reliance on external suppliers like Nvidia. Sources claim that Meta has started the small deployment of the chip and aims to ramp up production for wide-scale use if the test goes well. One of the two sources reporting to Reuters also said that Meta’s new training chip is a dedicated accelerator. This means that the chip is designed to handle only AI-specific tasks, making it more power-efficient than the integrated graphics processing units (GPUs) generally used for AI workloads. The chip is the newest in the company’s Meta Training and Inference Accelerator (MTIA) series.
1. 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. On March 11, Derrick Wood from TD Cowen maintained a “Buy” rating on the stock with a price target of $475.00. Wood is bullish on the stock given the continuing robust demand for Microsoft’s Azure AI services. After recent virtual investor meetings with Microsoft’s Director of Investor Relations, Danielle Criste, it has come to light that regardless of the company’s data center buildout strategy entering a different phase, the overall approach has not significantly shifted.
The company is maintaining a healthy balance between AI and non-AI workloads, contributing to impressive financial results. Microsoft is experiencing strong demand for its Azure AI solutions, and it is also optimistic about the prospects for its Copilot offering. In this regard, it is actively developing new pathways for adoption and monetization of Copilot, which will enable it to capitalize on the growing demand for AI-powered solutions and services. Based on these factors, the firm is confident in the path Microsoft is taking, and believes in the potential for its sustained growth in the AI sector.
While we acknowledge the potential of MSFT 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. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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