In this article, we will take a detailed look at the 12 Best AI Stocks Leading the ‘Big Tech Race’ to $4 Trillion According to a Famous Wall Street Analyst.
Wedbush Securities analyst Dan Ives has said in a fresh note that major tech giants are now running in a “race” to capture the $4 trillion AI market, calling GPUs the new “oil” or “gold” in the technology sector. Ives said that the AI “party” is just getting started and the clock is showing “9p.m. in a party going till 4 a.m. with the rest of the tech world now joining.” Ives thinks spending on GPUs and data centers is the “only game in town.” Ives thinks the “first wave” of AI benefited major technology giants leading the AI race, with the second, third and fourth “derivatives” beginning to show trickle-down effects on other companies.
In a separate investing event, Ives recently predicted that the AI-led bull run can last for another two to three years, saying in a year from now investors will be looking at $3 trillion to $4 trillion market caps for major tech companies.
“The tech bull market is just starting,” Ives reportedly said.
In his latest note Ives highlighted several stocks which he believes can benefit from the AI revolution. In this article we take a detailed look at these stocks and discuss their AI-related growth catalysts and see whether or not they are sound long-term investments. With each stock we have mentioned hedge fund sentiment. 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12. Palantir Technologies Inc(NYSE:PLTR)
Number of Hedge Fund Investors: 45
Wedbush analyst Dan Ives said in a latest note that Palantir Technologies Inc(NYSE:PLTR) is one of the stocks that can benefit from the “AI party” that is just getting started. Ives counted Palantir Technologies Inc(NYSE:PLTR) among the stocks that will ride the AI wave thanks to their “massive installed bases” in both the enterprise and consumer spaces.
Last month, Wedbush’s Dan Ives said the latest selloff around Palantir Technologies Inc (NYSE:PLTR) was a “golden” buying opportunity. Ives has an Outperform rating and a $35 price target on Palantir Technologies Inc (NYSE:PLTR). Palantir Technologies Inc (NYSE:PLTR) is trading at a high P/E multiple of 170, which has alarmed many. However, Palantir Technologies Inc (NYSE:PLTR) bulls believe Palantir Technologies Inc’s (NYSE:PLTR) consistent contract wins from the government and AI-related growth catalysts justify this multiple. Analysts are bullish on Palantir Technologies Inc’s (NYSE:PLTR) AI platform (AIP), which helps companies and governments in decision making based on AI technologies. In the first quarter alone, Palantir Technologies Inc (NYSE:PLTR) saw a 16% YoY increase in government contracts. US government revenue jumped 12% year over year.
Palantir Technologies Inc (NYSE:PLTR) has increased its U.S. commercial sector growth outlook to 45% from an initial estimate of 40%. Palantir Technologies Inc (NYSE:PLTR) is expected to report sales growth of 20% next year according to Wall Street estimates. The stock is trading at 54X its 2025 EPS estimate of $0.39, which is justified based on the strong growth trajectory.
Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its first quarter 2024 investor letter:
“The top contributor to return for the quarter was Palantir Technologies Inc. (NYSE:PLTR). Sentiment improved on Palantir after it reported stronger than expected commercial customer revenue and free cash flow. U.S. commercial growth was especially encouraging, as U.S. commercial revenue was up by a large percentage year over year for the fourth quarter and U.S. commercial customer count grew nearly as much. We expect Palantir to become one of the premier artificial intelligence (AI) software providers, built on its Foundry and AIP platforms.”
11. MongoDB Inc (NASDAQ:MDB)
Number of Hedge Fund Investors: 56
MongoDB Inc (NASDAQ:MDB) is one of the stocks that will benefit from the “AI party” where the clock is still at “9PM” while the party is scheduled to go on until “4AM,” according to Dan Ives. Ives thinks MongoDB Inc (NASDAQ:MDB) is one of the stocks that can profit from the AI revolution because of their “massive installed bases” in both the enterprise and consumer spaces.
MongoDB Inc (NASDAQ:MDB) shares plunged last month after the company posted Q1 results and gave a disappointing Q2 and full-year fiscal 2025 outlook. During the second quarter MongoDB Inc (NASDAQ:MDB) expects revenue in the range of $460.0 million to $464.0 million vs. consensus of $471.54 million.
During full fiscal 2025, MongoDB Inc (NASDAQ:MDB) expects revenue in the range of $1.88 billion to $1.90 billion vs. consensus of $1.94 billion. Adjusted net income per share in the quarter is expected in the range of $2.15 to $2.30 vs. consensus of $2.43.
Despite the weak results, Wall Street continues to believe in the AI story of MongoDB Inc (NASDAQ:MDB). Stifel analysts Brad Reback and Robert Galvin said in a note that MongoDB Inc (NASDAQ:MDB) faced headwinds amid a broader slowdown in the industry that caused a decline in consumption and workloads. The analysts said they continue to believe in the “set of core and emerging AI growth drivers” which can enable MongoDB Inc (NASDAQ:MDB) to sustain a 20%+ revenue growth and strong cash flows in the near future.
Canaccord Genuity David Hynes, who maintained a Buy rating on the stock but slashed his price target to $425 from $435, said that MongoDB Inc (NASDAQ:MDB) is helping customers build AI-enabled applications. He thinks MongoDB should be bought on the dip, calling the stock a “generational asset.”
“When you can get a pullback of this size on a generational asset, you take it,” Hynes added.
Average analyst price target set by Wall Street on MongoDB Inc (NASDAQ:MDB) is $329.58, which presents a whopping 45% upside potential from the current levels. In the next year (fiscal 2026), MongoDB’s earnings are expected to grow 34% while revenue growth is expected to come in at 17%, based on data from Yahoo Finance. Based on these growth catalysts, MongoDB Inc (NASDAQ:MDB) bulls believe the stock’s high forward P/E multiple of over 100 is justified.
Alger Mid Cap Growth Fund stated the following regarding MongoDB, Inc. (NASDAQ:MDB) in its first quarter 2024 investor letter:
“MongoDB, Inc. (NASDAQ:MDB) is a scalable open-source database platform that allows developers to store, manage, and process structured. semi-structured and unstructured data generated by or feeding into the applications. Atlas, their cloud database-as-a-service platform, supports a comprehensive suite of core workloads, covering database, search, analytics and charts, and device sync. We believe the company is benefiting from a secular increase in demand for high-volume data storage driven by organizations needing to be able to store large amounts of data while still performing rapidly. During the quarter, the company reported strong fiscal fourth quarter results where revenues and operating profits beat analyst estimates, driven by strong growth in Atlas. However, shares fell after management issued forward revenue guidance that was below consensus estimates due to one-time items related to unused credits and multi-year upfront enterprise agreements. Nevertheless, we continue to believe the company is well positioned to become a best-in-class database management platform given its exposure to the secular increase in demand for high volume data storage solutions.”
10. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 74
Dan Ives of Wedbush shocked everyone recently when he said during an interview with CNBC that Tesla Inc (NASDAQ:TSLA) is the “most undervalued AI play” right now. Ives thinks the “AI component” of Tesla could be worth between $1 trillion to $2 trillion.
Ives is banking on August 8 as a “historical day” for Tesla Inc (NASDAQ:TSLA). Musk is slated to unveil his robotaxi plan on August 8, which he chalked out after reportedly scrapping off his previous plan to launch an affordable EV for the mass market.
Ives said that Tesla Inc (NASDAQ:TSLA) could “double” over the next 12-18 months because of its fully autonomous driving plans that will take shape in the coming months.
Ives thinks Tesla has gone through a “Category 5 Hurricane” amid softer demand for EVs especially in China, but the analyst thinks the “Cinderella Story” will return to Tesla Inc (NASDAQ:TSLA) and AI will be the “king.” The analyst said the softening demand for EVs called for an “adult in the room” situation at Tesla, and Elon Musk “stepped up” and took the necessary steps which could bode well for Tesla Inc (NASDAQ:TSLA). He was referring to the massive layoffs announced by Tesla recently which have caused a 14% downsizing at Tesla Inc (NASDAQ:TSLA).
Baron Partners Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its first quarter 2024 investor letter:
“The vast majority of the Fund’s underperformance this quarter stemmed from the Fund’s 10-year investment in Tesla, Inc. (NASDAQ:TSLA). Tesla’s shares fell 29.3% during the period and detracted 13.41% from the Fund’s first quarter results. Although Tesla has contributed importantly to the Fund’s performance since 2014, on occasion it has detracted from quarterly performance. In previous instances when Tesla shares have underperformed during a discrete period, they have shortly afterwards reflected the strong growth of the underlying business and the stock has appreciated considerably. We believe that will be the case again, although cannot guarantee it.
A significant decline also occurred at the end of 2022. In that instance, investors had become concerned about a host of external factors. Investors believed the company founder, visionary, and CEO Elon Musk was distracted by his acquisition of Twitter. They also believed a weak Chinese economy emerging from COVID and U.S. government policies would curtail the purchases of Tesla vehicles. These fears proved to be overblown. As the company achieved milestones in the succeeding year, the stock subsequently doubled over the next 12 months…” (Click here to read the full text)
9. Dell Technologies Inc (NYSE:DELL)
Number of Hedge Fund Investors: 82
Dan Ives of Wedbush in a latest note named Dell Technologies Inc (NYSE:DELL) as one of the stocks that can benefit from the AI revolution, which he thinks starts from Nvidia but has the potential to create several phases or “derivatives” that will positively impact other players as well.
Is Dell Technologies Inc (NYSE:DELL) a good AI play right now?
Bank of America analyst Wamsi Mohan said in a note after Q1 earnings that he reiterated his Buy rating for Dell Technologies Inc. (NYSE:DELL). The analyst believes we are still in the early stages of AI adoption and expects momentum around AI servers. Mohan set a $180 price target for Dell Technologies Inc. (NYSE:DELL), which shows a 33% upside potential from the current levels.
Last month, Dell Technologies Inc. (NYSE:DELL) announced expansion of its AI PC portfolio, with new Copilot+ PCs powered by Snapdragon® X Elite and Snapdragon® X Plus processors. Microsoft has also named Dell Technologies Inc. (NYSE:DELL) as its manufacturing partner for Copilot PCs.
Dell Technologies Inc.’s (NYSE:DELL) bulls believe the market’s reaction to Dell Technologies Inc.’s (NYSE:DELL) Q1 report was irrational. Dell Technologies Inc.’s (NYSE:DELL) revenue jumped about 6.2% on a YoY in the quarter to $22.2 billion. Wall Street expects Dell Technologies Inc.’s (NYSE:DELL) EPS this year to come in at $7.71, and at $9.1 next fiscal year (2026). Based on this 2026 estimate, Dell Technologies Inc. (NYSE:DELL) is trading at around 15x its future earnings, which is lower than the industry median P/E of 23.08. According to Yahoo Finance, Wall Street has a $155.14 price target on Dell Technologies Inc. (NYSE:DELL) on average, which presents an upside potential of 14%. Based on high growth expectations from both AI PCs and servers, Dell Technologies Inc. (NYSE:DELL) is an undervalued stock to buy right now, according to analysts.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its first quarter 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) reported results that exceeded earnings expectations and announced a better than expected AI-optimized server order pipeline. We expect Dell to participate in the growth of artificial intelligence hardware in its server, storage and personal computing franchises. Long-term, we like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
8. ServiceNow Inc (NYSE:NOW)
Number of Hedge Fund Investors: 90
Dan Ives of Wedbush in his fresh note identified ServiceNow Inc (NYSE:NOW) as one of the stocks that can benefit from the AI revolution.
Last month, Goldman Sachs published a list of stocks mutual funds were piling into in their “hunt” for AI stocks and diversification of portfolios. ServiceNow Inc (NYSE:NOW) made it to the list. Goldman Sachs segmented the AI product cycle into different phase. ServiceNow Inc (NYSE:NOW) falls in the phase 2 of the cycle, where companies actually deploy and incorporate AI into their products to bolster revenue.
ServiceNow Inc (NYSE:NOW) is a pick-and-shovel name in the AI space since it’s an IT service management company that helps companies manage operations, workflows and maintain IT infrastructure. It’s not easy to switch away from ServiceNow because of the complexity of operations ServiceNow Inc (NYSE:NOW) provides. Its renewal rate came in at over 90% as of the latest quarter. In the current year ServiceNow Inc (NYSE:NOW) is expecting revenue growth of about 22% while it sees 21% revenue growth next year. In the first quarter, ServiceNow Inc’s (NYSE:NOW) subscription revenue growth came in at 25% YoY. At the end of the quarter the company had $8.8 billion of cash and investments versus $1.5 billion of debt.
ServiceNow Inc’s (NYSE:NOW) moat in AI lies in its customized generative AI solutions. The company recently made a custom generative AI solution for a bank and it’s pipeline in this respect is strong. ServiceNow management talked about the strong demand for its AI products during Q1 earnings call:
Our Gen AI products were in seven of our top 10 deals, and we closed seven deals over $1 million in ACV in the quarter. We had wins at a second Wall Street Bank, a leading cybersecurity firm and many more, including a significant win for ITOM Pro Plus, which just launched in March. Turning to profitability. Non-GAAP operating margin was over 30%, approximately 150 basis points above our guidance, driven by the timing of marketing spend, OpEx efficiencies and our top line outperformance.
ServiceNow Inc (NYSE:NOW) management also said:
Iconic brands are adopting ServiceNow’s Now Assist AI as a standard for their GenAI roadmaps. This quarter, we expanded our long-standing partnership with Microsoft to include new Generative AI capabilities while also integrating Now Assist AI and Copilot into employee experiences, really exciting. Hitachi Energy is using case summarization with NowAssist for ITSM to resolve cases faster, saving millions. Equinix is the deploying NowAssist AI for HR workflows, aiming to increase agent productivity by 30%. ServiceNow at IBM are combining the power of the Now Platform with Watson X to increase productivity for IBM’s employees, customers, and partners. BNY Mellon and ServiceNow are exploring the utilization of AI and other leading technologies and IT service management helping to unlock additional value for the bank and its clients.
ServiceNow Inc (NYSE:NOW) also helps companies automate their workflows. As more and more companies seek cost optimizations using AI, they will turn to ServiceNow to achieve their goals. That’s why ServiceNow Inc (NYSE:NOW) has a goal to achieve over 20% subscription revenue growth over the next few years.
Lakehouse Global Growth Fund stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its April 2024 investor letter:
“US-based software company,ServiceNow, Inc. (NYSE:NOW), provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
7. Oracle Corp (NYSE:ORCL)
Number of Hedge Fund Investors: 96
Oracle Corp (NYSE:ORCL) is one of the stocks Dan Ives is bullish on following the AI revolution and its trickle-down effects. Ives named Oracle Corp (NYSE:ORCL) among the stocks he thinks could benefit from the AI wave.
Oracle Corporation (NYSE:ORCL) earlier this month posted weak fiscal Q4 results, but the stock remained steady after the company said it signed multiple AI deals with leading horses in the industry. Oracle Corporation (NYSE:ORCL) said it reached a deal with OpenAI and Microsoft to extend Azure Al platform to Oracle Cloud Infrastructure (OCI) to provide additional capacity for OpenAl. Oracle also revealed a partnership with Google after which Google Cloud will offer Oracle Cloud Infrastructure database services and high-speed network interconnect.
Despite the weak fiscal Q4 results, Oracle’s Cloud business was strong. Cloud infrastructure (IaaS) revenue jumped 42% year over year. For fiscal first quarter, Oracle Corporation (NYSE:ORCL) expects its revenue to rise by 6% to 8% in constant currency, while adjusted EPS growth is expected in the range of 11% and 15%. One of the metrics in Oracle’s Q4 report that impressed the Street was Remaining Performance Obligations (RPOs), which surged 44% YoY in the period. Management expects 39% of this amount to come in the next twelve months. Oracle’s Cloud is exposed to the IaaS market, which is projected to grow to $738.11 billion by 2032, according to some estimates. Oracle Corporation (NYSE:ORCL) management said the company is building data centers and analysts believe the company’s automated OCI services will grow amid rising demand. Given Oracle’s partnerships with major AI players and its dominance in the niche OCI market, it’s forward P/E ratio of 22.03 looks attractive when compared to peers.
Madison Sustainable Equity Fund stated the following regarding Oracle Corporation (NYSE:ORCL) in its fourth quarter 2023 investor letter:
“Oracle Corporation (NYSE:ORCL) reported a disappointing second quarter due to supply constraints. Cloud revenue was below expectations as Oracle made planning decisions to accommodate some large-scale Oracle Cloud Infrastructure (OCI) clients that take longer to bring online. We continue to believe that Oracle has a unique position in Generative AI workloads and continue to like its position and strategy.”
6. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 150
Dan Ives of Wedbush has been a big believer in Apple Inc (NASDAQ:AAPL). In a fresh note he said that while NVDA is leading the three-horse race between Apple Inc (NASDAQ:AAPL), NVDA and MSFT, the iPhone maker has a strong upside because of its AI plans. Ives thinks the “holy grain” for Apple Inc (NASDAQ:AAPL) is twofold: a new iPhone refresh cycle and AI apps. Ives thinks Apple’s AI strategy could infuse a new iPhone upgrade cycle that could see 270 million of the total 1.5 billion iPhones in the world getting refreshed. On the other hand, Ives is expecting app developers to build “hundreds of apps” using Apple Inc (NASDAQ:AAPL) AI stack so that consumers could interact with AI on their iPhones.
After the latest AI announcements at the WWDC event, Apple Inc. (NASDAQ:AAPL) shares added over $215 billion in market cap and closed at a record high on June 11. TF International Securities analyst Ming-Chi Kuo said in a fresh note that Apple has a competitive edge over others with its on-device AI.
Notable Wall Street analyst and Deepwater Asset Management Managing Partner Gene Munster recently made waves when he said in a post on Twitter that Apple Inc (NASDAQ:AAPL) is a better investment than Nvidia for the long term. Munster believes owning Apple Inc (NASDAQ:AAPL) over the next year will have a higher return because the market is in “denial” about Apple’s AI potential.
Apple Inc (NASDAQ:AAPL) is trading at 26X its 2025 EPS estimate ($7.22). This multiple, though higher than the industry average of 30, does not show the stock’s overvalued, given Apple Inc (NASDAQ:AAPL) sales growth of 6.40% for fiscal 2025 and 10.50% growth for the next five years on a per-annum basis.
Mar Vista Focus strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its first quarter 2024 investor letter:
“Apple Inc.’s (NASDAQ:AAPL) stock was pressured in the quarter as investors fretted over softening demand for smartphones, regulatory action from the US Department of Justice, and the Chinese government mandates restricting iPhone use by government officials. Despite these near-term headwinds, we continue to believe the company remains competitively advantaged and benefits from the Apple ecosystem, which has an installed base of over 2 billion devices and over 1 billion paying subscribers. We believe the Apple ecosystem will support a more predictable cash flow stream, which should grow intrinsic value high-single-digits over our investment horizon.”
5. Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 165
Wedbush’s Dan Ives in a fresh note named Alphabet Inc (NASDAQ:GOOG) as one of the stocks that can benefit from the AI boom.
According to a latest UBS report, Alphabet Inc (NASDAQ:GOOG) falls in all three layers of the AI value chain – enabling, intelligence and application layer. Alphabet Inc (NASDAQ:GOOG) is an AI enabling player because of its Tensor Processing Units (TPUs) and Google Cloud Platform, while Gemini makes it a key player in the intelligence layer. On the application layer, UBS believes Alphabet Inc (NASDAQ:GOOG) has an edge with its Duet AI assistant and advertising. All these catalysts make Alphabet Inc (NASDAQ:GOOG) a company that could benefit from the $1.2 trillion AI opportunity by 2027, UBS said.
Alphabet Inc. (NASDAQ:GOOG) bulls believe the market is not incorporating Alphabet Inc.’s (NASDAQ:GOOG) growth in Cloud, Other Bets, Video and other high growth initiatives. The stock is trading 20x Alphabet Inc.’s (NASDAQ:GOOG) 2025 EPS estimate of $8.57. This multiple makes the stock look attractively valued since the Wall Street expects Alphabet Inc. (NASDAQ:GOOG) earnings to grow by 13.40% in 2025 and by 19% over the past five years on a per annum basis.
Weitz Investment Large Cap Equity Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its first quarter 2024 investor letter:
“Mega-cap titans Meta Platforms, Alphabet Inc. (NASDAQ:GOOG) and Amazon generated outsized gains and were the Fund’s top relative contributors for the past 12 months. Following our valuation discipline, we continued to methodically rotate from more fully priced stocks to those trading at healthier discounts to our value estimates. We trimmed more tech-adjacent winners during the quarter, including Alphabet
Alphabet has been the most notable trim over the past two quarters. In effect, we removed the heavy overweight layer of the position size, which had been in the 6% to 8% range for most of the last five years. Part of the decision simply reflected valuation prudence after an exceptional period where the stock price ran well ahead of our estimate of business value growth. Some of it was a reality check that Google’s core search business may be less clearly unassailable than it appeared to be five to seven years ago. Our team also has adopted a healthy “prove it” approach to management/culture, capital allocation and future returns on a robust investment cycle. While Alphabet may no longer warrant standout overweight status, the stock remains one of the Fund’s largest holdings.”
