In this article, we will discuss the 12 Best Cloud Computing Stocks to Buy According to Analysts.
Cloud computing enables companies to store their infrastructures remotely using the Internet, ultimately reducing costs and creating value. As per Gartner, worldwide end-user spending on public cloud services is expected to reach $723.4 billion in 2025, reflecting a rise from $595.7 billion in 2024. The use of Al technologies in IT and business operations continues to accelerate the role of cloud computing in helping operations and outcomes. The cloud use cases have been expanding with an increased focus on distributed, hybrid, cloud-native, and multi-cloud environments, aided by a cross-cloud framework, which should make the public cloud services market achieve a growth rate of 21.5% in 2025.
Gartner believes that 90% of organizations will adopt a hybrid cloud approach through 2027. Resultantly, all segments of the cloud market should see a double-digit growth rate in 2025 demonstrating how I&O (Infrastructure and Operations) leaders remain focused on effectively integrating I&O into their GenAl strategies and laying the groundwork for running Al and GenAl infrastructure at the edge.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Key Trends to Watch Out in 2025
Moving forward, the concept of cloud computing is expected to change because of technological enhancements and dynamic business requirements. As per Nasscom Community, quantum computing integration, AI-driven cloud services and multi-cloud, and interoperability are some of the future trends in cloud computing. The emerging field of quantum computing focuses on changing how data processing is done because it can handle even the most complicated computations that some other conventional systems cannot solve. Over the next 5 years, more cloud services are expected to offer its clients quantum computing capabilities, which should in turn help in cryptography, drug development, material science, and optimization.
AI and ML are some of the leading technologies behind innovation in the cloud. Nasscom Community believes that pervasive AI is expected to be in each layer of the cloud system, right from the server level to the customer service level by 2025. Moving forward, AI algorithms should help in predictive analysis and, therefore, prevent problems that can arise with infrastructure, control workload, and reduce automation of tedious tasks.
Future developments in the cloud computing field are expected to enhance the multi-cloud strategies involving using more than one cloud service provider between the business and the cloud altogether. Notably, distributing workloads among several cloud providers would help enterprises maximize cost and performance. The businesses have been dividing their workload across multiple cloud service providers in a bid to control data and resources and use the strength of each cloud service provider.
With this in mind, we will now have a look at the 12 Best Cloud Computing Stocks to Buy According to Analysts
A close up view of a laptop computer, the cloud computing platform displayed on the screen.
Our Methodology
To list the 12 Best Cloud Computing Stocks to Buy According to Analysts, we conducted extensive research and sifted through several online rankings. After getting the initial list of 18 stocks, we chose the ones that were popular among hedge funds and that analysts saw the most upside to. Next, the stocks were arranged in ascending order of their average upside potential, as of 10th January. We also mentioned the hedge fund sentiment around each stock, as of Q3 2024.
At Insider Monkey we are obsessed with 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 Best Cloud Computing Stocks to Buy According to Analysts
12) Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 286
Average Upside Potential: 7.3%
Amazon.com, Inc. (NASDAQ:AMZN) caters to the cloud computing industry primarily through its Amazon Web Services (AWS) business, which has been regarded as one of the most dominant players in the industry. The company’s AWS segment continues to be a critical driver of growth and profitability in Q3 2024. During the quarter, Amazon.com, Inc. (NASDAQ:AMZN)’s cloud computing business saw 19% YoY growth in revenue to $27.5 billion, maintaining its position as the market leader in cloud services.
Notably, capital investments for 2024 have been projected at $75 billion, mainly to enhance AWS infrastructure and Al services. The integration of Al capabilities into AWS offerings should act as a significant growth catalyst, mainly representing the upcoming phase of expansion for Amazon.com, Inc. (NASDAQ:AMZN)’s cloud business. With enterprises adopting Al technologies, AWS is well-placed to capitalize on the momentum in the cloud computing market via its comprehensive suite of Al and machine learning services. Al-driven workloads are expected to make up a significant portion of cloud computing demand over the next few years.
Amazon.com, Inc. (NASDAQ:AMZN)’s investments in Al infrastructure and services, which include the development of custom Al chips and expansion of its Al-powered tools, should result in increased customer adoption and higher-value workloads on AWS. This should fuel revenue growth and improve margins as customers use more advanced, higher-margin services. Analysts at Stifel Nicolaus increased their target price on the shares of Amazon.com, Inc. (NASDAQ:AMZN) from $224.00 to $245.00, giving a “Buy” rating on 15th November.
11) Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 202
Average Upside Potential: 9.3%
Alphabet Inc. (NASDAQ:GOOGL) is a significant player in the cloud computing space through its subsidiary, Google Cloud. The company’s Al offerings are expected to differentiate its services from competitors, which should attract more enterprise customers and drive growth in this high-margin business. Alphabet Inc. (NASDAQ:GOOGL) continues to aggressively integrate Al capabilities into its core offerings, which should help enhance user experiences and maintain competitive edge. In Q3 2024, Google Cloud revenues rose 35% to $11.4 billion led by accelerated growth in Google Cloud Platform across Al Infrastructure, Generative Al Solutions, and core GCP products.
The synergies between Alphabet Inc. (NASDAQ:GOOGL)’s cloud services and its other Al-powered products are expected to create a strong ecosystem for businesses, which should promote deeper integration and long-term customer relationships. This can result in increased customer retention and higher-value contracts, fueling revenue growth and margin expansion in its cloud segment. Several analysts remain optimistic about Alphabet Inc. (NASDAQ:GOOGL)’s cloud business. For example, JPMorgan highlighted Google Cloud’s accelerating growth due to greater GenAl demand primarily because of its Gemini large language model.
As per Matt Britzman, senior analyst at Hargreaves Lansdown, Alphabet Inc. (NASDAQ:GOOGL)’s cloud business demonstrated strong performance in Q3 2024. The analyst further highlighted that the major cloud providers are well-positioned to benefit from the Al revolution. Reuters reported that the company’s cloud business grew at the fastest pace in 8 quarters, courtesy of companies doubling down on cloud spending, which is critical to power Al technologies.
Qualivian Investment Partners, an investment partnership focused on long-only public equities, released its Q3 2024 investor letter. Here is what the fund said:
“Alphabet Inc. (NASDAQ:GOOGL): Q2 2024 revenues and EPS beat expectations, with total revenues growing 14%, Search ad revenues growing 14%, YouTube ads growing 13%, and Google Cloud revenues growing 29%. Revenue growth in the quarter constituted a continued sequential improvement from earlier quarters in the year, suggesting a continued rebound in Alphabet’s core business except for YouTube ad revenues, which missed expectations and showed deceleration in the growth rate as compared to Q1 when it grew 21%. Operating margins improved by 310 bps vs. the same quarter last year.
Management continued to highlight developments with their generative AI program, which is seen as a foundational platform with opportunities across their businesses but particularly in search and cloud. However, this comes with material capex investment well ahead of the expected economic benefits from Gen AI, and the level of spending is leading investors to worry about the ROI on that spend for Alphabet, as well as the other hyperscalers (Microsoft and Amazon). We continue to have confidence in Alphabet’s ability to generate strong revenue, earnings, and cash flow growth well above the S&P 500’s in the years to come and view it as a core holding for the long term.”
10) International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 56
Average Upside Potential: 10.1%
International Business Machines Corporation (NYSE:IBM) continues to focus on its strengths in artificial intelligence (AI) and hybrid cloud services to place itself for future growth. The company’s hybrid cloud solutions help enterprises combine public and private cloud resources, enabling seamless data and application portability. With more and more enterprises seeking to implement AI solutions, International Business Machines Corporation (NYSE:IBM)’s expertise in managing and optimizing Large Language Models both on-premises and in the cloud should result in strong revenue growth.
International Business Machines Corporation (NYSE:IBM)’s recent acquisition of HashiCorp demonstrates a significant move to enhance its cloud capabilities. The integration of HashiCorp’s Terraform product is expected to enhance OpenShift adoption and result in market share gains. This acquisition aligns with International Business Machines Corporation (NYSE:IBM)’s strategy of strengthening its position in the hybrid cloud market and offering comprehensive solutions to its enterprise customers.
HashiCorp’s offerings, combined with IBM and Red Hat, are expected to provide clients a platform for the automation of deployment and orchestration of workloads across evolving infrastructure including hyperscale cloud service providers, private clouds, and on-prem environments. This should enhance International Business Machines Corporation (NYSE:IBM)’s ability to address the total cloud opportunity, which according to IDC had a TAM of $1.1 trillion in 2023, with a CAGR in high teens through 2027. International Business Machines Corporation (NYSE:IBM) expects the transaction to be accretive to Adjusted EBITDA in the first full year, post-close, and FCF in year two.
9) Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders: 71
Average Upside Potential: 10.3%
Datadog, Inc. (NASDAQ:DDOG) focuses on operating an observability and security platform for cloud applications. It provides critical tools and services for cloud infrastructure monitoring and management. Datadog, Inc. (NASDAQ:DDOG)’s broad portfolio of products, including infrastructure monitoring, application performance monitoring (APM), log management, and security monitoring creates cross-selling and upselling opportunities. Therefore, companies tend to adopt Datadog, Inc. (NASDAQ:DDOG)’s products as their cloud environments become more complex.
Datadog, Inc. (NASDAQ:DDOG) continues to benefit from new customer additions and higher adoption of the cloud-based monitoring and analytics platform, courtesy of accelerated digital transformation and cloud migration throughout organizations. The company’s solid adoption of Synthetics and Network Performance Monitoring products should help it in customer wins. Datadog, Inc. (NASDAQ:DDOG)’s Synthetics product simulates user interactions and API calls to point out performance issues before impacting real users.
Datadog, Inc. (NASDAQ:DDOG) continues to execute on growth throughout the 3 pillars of observability and it reported that infrastructure monitoring or APM suite and log management together represent over $2.5 billion in ARR. Within the APM suite, the company includes core APM, Synthetics, real user monitoring, and continuous profiler. The company’s network performance monitoring (NPM) product offers visibility into network performance, supporting companies to monitor traffic flows and optimize network usage. The company can combine NPM with observability and security in a single platform. This supports it in differentiating it from standalone NPM tools, which helps in bringing in new customers and cementing its market share.
Brown Capital Management, an investment management company, released its third quarter 2024 investor letter. Here is what the fund said:
“Other examples of negative sentiment include portfolio companies that reported earnings that met or exceeded expectations, but only saw their share prices go up slightly, stay flat or even decline. For example, Datadog, Inc. (NASDAQ:DDOG) is a leading SaaS-based, information technology (IT)-monitoring and analytics software platform for developers, IT operations and business users. The platform automates the monitoring of infrastructure, applications databases, networks, logs and security. Datadog’s platform is differentiated by providing a unified view of these systems via a visual interface configured to the needs of each user (i.e., a single pane of glass). Datadog delivered solid operating results in the second quarter of 2024, reporting revenue growth of 27% and raising 2024 full year revenue, operating income and earnings guidance. Despite these solid fundamental results, Datadog’s share price was down 11.8% in the third quarter. We speculate that these market reactions are evidence of the negative environment for high-growth companies. For more, please see the Detractors section below.
Datadog, mentioned above, automates the monitoring of infrastructure, applications databases, networks, logs and security. The company delivered solid operating results in the second quarter of 2024, reporting revenue growth of 27% and raising guidance for 2024 full-year revenue, operating income and earnings. Datadog noted improving consumption and demand trends among its enterprise customers and stabilizing trends among its small and mid-sized customers. On its earnings call, Datadog management disputed that it has interest in large acquisitions, notwithstanding news articles on July 17 that Gitlab was seeking a buyer and Datadog is among the potential suitors. Despite solid fundamental results, Datadog’s share price underperformed in the third quarter of 2024. This may be due to its premium valuation and investor worries about Datadog’s ability to sustain its current strong revenue growth in a softer economic environment. We remain confident in Datadog’s ability to deliver durable growth over the long term. We believe Datadog has a massive and underpenetrated total addressable market that is growing about 10% annually. We also believe Datadog has a strong competitive positioning in infrastructure monitoring and is gaining market share.”
8) Rackspace Technology, Inc. (NASDAQ:RXT)
Number of Hedge Fund Holders: 13
Average Upside Potential: 15.8%
Rackspace Technology, Inc. (NASDAQ:RXT) operates as a multi-cloud technology services company. The company provides a wide range of cloud-related services, such as cloud migration, managed cloud services, and cloud optimization among other services. Rackspace Technology, Inc. (NASDAQ:RXT)’s Public Cloud segment has been regarded as a crucial growth driver. This segment supports companies in optimizing and managing their workloads and applications on public cloud platforms including Amazon Web Services (AWS) and Microsoft Azure.
The record bookings seen in this division in Q3 2024 demonstrate the elevated demand for the company’s cloud infrastructure and services offerings. The strength of Public Cloud was mainly evident in infrastructure and services, highlighting that the company is successfully capitalizing on the ongoing shift towards cloud-based solutions across industries. With businesses continuing to migrate to cloud-based solutions, Rackspace Technology, Inc. (NASDAQ:RXT)’s expertise in multi-cloud services is expected to result in higher market share and revenue growth. The company’s emphasis on improving its Public Cloud offerings aligns with industry trends, potentially enabling Rackspace Technology, Inc. (NASDAQ:RXT) to capture a significant portion of the growing cloud services market.
Several factors drove the strong performance of the Public Cloud segment in Q3 2024. First, structural changes were made in the go-to-market in late 2023, including transitioning to services-led motion and building a client-partner model. Second, expansion in mid-market while selectively penetrating the enterprise segment, which led to signing more than 10 master service agreements and continuing to focus on additional ones that will generate new growth opportunities. Finally, a disciplined approach to infrastructure resale, where Rackspace Technology, Inc. (NASDAQ:RXT) focused on deals meeting its return hurdles.
7) DigitalOcean Holdings, Inc. (NYSE:DOCN)
Number of Hedge Fund Holders: 22
Average Upside Potential: 17.5%
DigitalOcean Holdings, Inc. (NYSE:DOCN) operates a cloud computing platform in North America, Europe, Asia, and internationally. The company’s growth trajectory is expected to be aided by its strong portfolio of innovative solutions and an expanding partner base that has been fueling adoption across high-growth sectors such as AI/ML, cybersecurity, and data analytics. DigitalOcean Holdings, Inc. (NYSE:DOCN)’s strong portfolio should continue to aid its top-line growth.
With innovations including larger droplet configurations, GPU-accelerated infrastructure, and enhanced backup options, DigitalOcean Holdings, Inc. (NYSE:DOCN) remains focused on catering to large-scale and high-performance workloads. DigitalOcean Holdings, Inc. (NYSE:DOCN)’s expanding partner base comprises industry leaders such as NVIDIA, Netlify, Hugging Face, and MongoDB.
With the help of its alliance with NVIDIA, DigitalOcean Holdings, Inc. (NYSE:DOCN) provides GPU droplets accelerated by NVIDIA H100 Tensor Core GPUs and integrates NVIDIA’s Tensor Core GPU worker nodes into its Kubernetes platform. This simplifies deployment with advanced NVIDIA tools. Furthermore, this partnership streamlined the entire setup process for GPU resources. Now, developers can deploy GPU Droplets easily, reducing the complexity of configuring security and networking.
6) Rumble Inc. (NASDAQ:RUM)
Number of Hedge Fund Holders: 6
Average Upside Potential: 18.6%
Rumble Inc. (NASDAQ:RUM) operates video-sharing platforms in the US, Canada, and internationally. Rumble Cloud is a cloud infrastructure offering solutions like virtual machines, and virtual private cloud services, among others. This infrastructure can be utilized by companies for hosting applications, running workloads, and building scalable cloud-native solutions. Rumble Inc. (NASDAQ:RUM)’s stock saw an increase of ~34.6% in just a month, primarily due to a $775 million investment from Tether.
Apart from providing Rumble Inc. (NASDAQ:RUM) with significant capital to support its growth and strategic initiatives, the investment also enhanced investor confidence in its future growth prospects. The company’s partnership with Tether can open avenues for collaborations in advertising, cloud services, and cryptocurrency payment solutions. This can further fuel Rumble Inc. (NASDAQ:RUM)’s market position.
Part of the funds is expected to be earmarked to scale Rumble Inc. (NASDAQ:RUM)’s infrastructure, which can include enhancing Rumble Cloud’s capabilities. This will involve the upgradation of data centers, adding more compute and storage resources, and making sure that the platform is suitable to handle increased demand as users expand their cloud services usage. The partnership with Tether can result in integration with cryptocurrency or blockchain services within Rumble Cloud. This can include providing cloud services that are optimized for cryptocurrency applications or decentralized (DeFi) projects, further enhancing Rumble Cloud’s use cases.
5) Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Average Upside Potential: 19.3%
Microsoft Corporation (NASDAQ:MSFT) is involved in the cloud computing business through its cloud platform, Microsoft Azure. It provides a wide range of cloud services, which include infrastructure-as-a-service (laaS), platform-as-a-service (PaaS), and software-as-a-service (SaaS). While Microsoft Corporation (NASDAQ:MSFT) faced capacity constraints that impacted Azure’s growth potential, it remains optimistic about future prospects. The integration of Al capabilities into Azure cloud services should contribute to Azure’s growth rates. In Q1 2025, Azure’s revenue saw an increase of 33%, thanks to the Al services.
Azure growth included ~12 points from Al services, similar to last quarter. Microsoft Corporation (NASDAQ:MSFT) highlighted that demand continues to be higher than its available capacity. Even non-Al growth trends were also in line with expectations with customers continuing to migrate and modernize on its Azure platform. Mark Moerdler from Bernstein remains optimistic about Microsoft Corporation (NASDAQ:MSFT)’s growth prospects. The expected acceleration in Azure’s revenue growth, anticipated to reach 35% – 40% YoY in H1 2025, was the critical driver behind optimism.
Talking about the capacity constraints, the expansion of the global data center network should help Microsoft Corporation (NASDAQ:MSFT) address these challenges. As per the company’s Vice Chair and President Brad Smith, the company expects to spend $80 billion in fiscal 2025 on the construction of data centers capable of handling Al workloads. Notably, more than half of the anticipated Al infrastructure spending is expected to take place in the US.
RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, released its Q3 2024 investor letter. Here is what the fund said:
“Microsoft Corporation (NASDAQ:MSFT): MSFT was a top detractor in the third quarter following a fiscal fourth quarter earnings report that featured inline operating metrics but mixed guidance. Positively, the company reported strong revenue (+15%) and earnings growth (+10%), powered by Azure (+30%), and operating margins of 43%. Guidance however calls for lower than expected fiscal first quarter Azure revenue as infrastructure constraints limit growth, and higher capital expenditures throughout the company’s fiscal 2025 to alleviate these constraints. The company expects growth to reaccelerate in the back half of fiscal 2025 as more AI capacity comes online.
Cloud-based services have become the company’s largest revenue and earnings producer. The company’s Azure platform alone has the potential to grow to more than $200 billion in annual revenue over the next decade. Overall, we believe that the company will continue to deliver double-digit revenue and EPS growth and generate an enormous amount of free cash flow to return to shareholders and use for acquisitions.”
4) Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 116
Average Upside Potential: 30.5%
Salesforce, Inc. (NYSE:CRM) provides cloud-based software for businesses managing customer relationships, sales, marketing, and customer service. The company continues to enhance its core offerings, such as Sales Cloud and Service Cloud, with AI capabilities. Also, its Data Cloud is well-placed to benefit from the AI trend, with customers exploring AI-driven CRM deployments. Salesforce, Inc. (NYSE:CRM) plans to continue investing in its Data Cloud offerings, which should drive future growth.
The company’s Data Cloud was included in 8 of the top 10 deals in FQ3 2025, demonstrating its importance in AI transformations. Notably, 25% of the Fortune 100 are data cloud customers. IBM, one of Salesforce, Inc. (NYSE:CRM)’s valued strategic partners, selected DataCloud to enhance their global client service with a unified view of all client interactions and actionable usage insight that can deliver more efficient personalized experiences. Through leveraging IBM’s global reach, reputation, and expertise, Salesforce, Inc. (NYSE:CRM) can ramp up Data Cloud adoption, foster cross-selling opportunities, and fuel long-term growth throughout its ecosystem.
With 1.9 trillion weekly AI transactions through Model Builder and 83.2 billion weekly workflows through Flow Builder, Salesforce, Inc. (NYSE:CRM)’s AI-driven Data Cloud is being regarded as a critical growth driver. Apart from long-term prospects, Goldman Sachs identified near-term tailwinds for the company. These include macroeconomic improvements, elevated AI spending in the application layer, the Data Cloud’s increasing contribution, and anticipated cyclical improvements in the Marketing and Commerce Cloud which can result in reacceleration of growth.
3) Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 91
Average Upside Potential: 32.6%
Oracle Corporation (NYSE:ORCL)’s Oracle Cloud Infrastructure (OCI) gives numerous businesses scalable and secure computing power, network capabilities, and storage. The company’s cloud business was the key driver of its recent success in Q2 2025. Oracle Cloud Infrastructure demonstrated healthy growth, with revenues rising 52% YoY in constant currency. This growth stemmed from elevated demand for AI compute and the company’s strategic investments in expanding its cloud capabilities. This fiscal year, Oracle Corporation (NYSE:ORCL) expects total Oracle Cloud revenue to top $25 billion.
As of Q2 2025, Oracle Corporation (NYSE:ORCL)’s remaining performance obligation (RPO) stands at ~$97 billion, reflecting growth of 50% YoY in constant currency. To give context, RPO refers to the total revenue amount the company expects to recognize in the future from contracted, not fulfilled, customer commitments. This reflects the growing trend of customers wanting larger and longer contracts, believing that Oracle Cloud Services continue to benefit their businesses. Furthermore, Oracle Corporation (NYSE:ORCL)’s cloud RPO grew ~80% and now represents ~3/4th of the total RPO. The company expects ~39% of the total RPO to be recognized as revenue in the upcoming 12 months and it continues to expect acceleration in growth of current RPO.
The company’s partnership with AWS and its open multi-cloud strategy should aid Oracle Corporation (NYSE:ORCL)’s future growth. This approach enables the company to leverage AWS’s extensive customer base while providing its own unique services and databases. The partnership is expected to potentially result in increased adoption of Oracle Corporation (NYSE:ORCL)’s cloud services among enterprises already using AWS, further expanding Oracle’s market reach.
Parnassus Investments, an investment management company, released the Q3 2024 investor letter. Here is what the fund said:
“Oracle Corporation (NYSE:ORCL) announced second-quarter results that exceeded consensus expectations, driven by growth in its cloud infrastructure business, which is benefiting from demand for AI applications. Investor sentiment was further bolstered by the company’s announcement of a new partnership with Amazon.”
2) Domo, Inc. (NASDAQ:DOMO)
Number of Hedge Fund Holders: 15
Average Upside Potential: 39.7%
Domo, Inc. (NASDAQ:DOMO)’s cloud-based platform enables businesses in integrating, visualizing, and analyzing data. The company has been pursuing several strategic initiatives to strengthen its market position and drive growth. For example, its emphasis has been on transition to a consumption-based revenue model. To be precise, this means garnering revenue on the basis of actual usage of its platform, and not via fixed subscription fees.
This shift demonstrated healthy results and continues to contribute to Domo, Inc. (NASDAQ:DOMO)’s Annual Recurring Revenue (ARR). In Q3 2025, 100% of the company’s new logo deals were structured as consumption contracts, which now represent 55% of its ARR. By year-end, the company expects this to reach over 60%. The flexibility has made Domo, Inc. (NASDAQ:DOMO)’s services more accessible to a broader range of organizations. The company has been forming partnerships with cloud data warehouse providers like Snowflake and Databricks, which should help it improve lead flow and expand market reach.
By integrating with well-established cloud data warehouses, Domo, Inc. (NASDAQ:DOMO) can tap into a larger customer base, potentially fueling user adoption and revenue growth. Such alliances should help boost lead flow, potentially reducing customer acquisition costs and improving sales efficiency. Domo, Inc. (NASDAQ:DOMO) has also been investing in innovation, mainly in agentic AI capabilities, to enhance product offerings and sustain its competitiveness in the ever-evolving business intelligence market.
1) Kingsoft Cloud Holdings Limited (NASDAQ:KC)
Number of Hedge Fund Holders: 5
Average Upside Potential: ~467%
Kingsoft Cloud Holdings Limited (NASDAQ:KC) offers cloud services to businesses and organizations primarily in China. Healthy demand for AI and cloud-based solutions inside the solid ecosystem continues to fuel Kingsoft Cloud Holdings Limited (NASDAQ:KC)’s expansion. As a strong contender in China’s cloud computing market, it benefits from the integration with Xiaomi’s IoT, cellphones, and electric cars. Xiaomi’s strategic plan to integrate AI into its ecosystem favorably placed Kingsoft Cloud Holdings Limited (NASDAQ:KC) as a critical partner. This integration is expected to fuel significant demand for computing power, aiding its business growth.
Analysts at UBS remain optimistic about Kingsoft Cloud Holdings Limited (NASDAQ:KC)’s capacity to capitalize on growth opportunities in the cloud service sector, primarily in China, where demand continues to rise. It upgraded the company’s shares from “Neutral” to “Buy,” citing an optimistic revenue growth outlook and margin recovery as reasons. In Q3 2024, Kingsoft Cloud Holdings Limited (NASDAQ:KC)’s revenues were aided by accelerated growth of its high-quality business, such as AI. This growth has offset the decline in the low-margin CDN business.
The company’s AI business accounted for ~31% of public cloud revenue in Q3 2024. Partnering with Xiaomi and other ecosystem players enables Kingsoft Cloud Holdings Limited (NASDAQ:KC) to cater to advanced AI use cases and tap into significant computational power demands. With Xiaomi leading in the IoT space, Kingsoft Cloud Holdings Limited (NASDAQ:KC) should benefit from elevated demand for cloud services aiding connected devices.
While we acknowledge the potential of KC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than KC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
