According to Ark Invest, an investment manager focused on disruptive technologies, artificial intelligence breakthroughs are expected to increase the share of the global equity market associated with disruptive innovation from 16% to 60% by 2030. With inflation transitioning to deflation in several sectors, the firm believes that five innovation platforms, namely robotics, energy storage, AI, blockchain, and multi-OMIC (biological analysis) sequencing will be profoundly impacting macroeconomic metrics over the next few years.
“Interest rates are likely to surprise on the low side of expectations, broadening the equity rally from a narrow subset of stocks and reinforcing the need for diversified AI investments.”
–Catherine Wood, CEO and CIO
One of the firm’s ETFs with the investment theme of next-generation internet outperformed broad-based global equity indices in the third quarter, benefiting from its holdings in companies involved in innovative technologies. The year-to-date performance of the fund is 16.81%, outperforming its category by 1.59 percentage points year-to-date.
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In light of this trend, joining CNBC’s “The Exchange”, technology reporter Kate Rooney revealed how Wall Street is trying to cash in on the AI craze using AI itself. According to Rooney, the new world of generative AI is starting an “arms race for hedge funds”. Modern versions of AI today are better than human traders in ways more than one. They learn from mistakes and get smarter along the way, and they ultimately require minimal human intervention. Combining this with the rise of OpenAI and Anthropic, these “off-the-shelf” models tend to be cheaper.
Moreover, while human traders may be capable, they often succumb to emotions and tend to make mistakes. This is why Intelligent Alpha CEO Doug Clinton believes that a “lack of emotion” is actually the edge or “superpower” of AI. That said, the program revealed how hedge funds are now looking into AI to “get ahead of the markets”, where their use of AI will ultimately help them improve decision making in the field. Companies like OpenAI and Anthropic, which have raised significant capital along the way, ultimately need enterprise clients to scale, and Wall Street is an ideal fit due to its reliance on data and analysis.
Intelligent Alpha has launched a first-of-its-kind ETF named after famed stock trader Jesse Livermore. The ETF uses OpenAI’s ChatGPT, Anthropic’s Claude, and Google’s Gemini to construct a global equity portfolio. As per Clinton, firms that get on board with AI could gain an edge with a price tag of millions of dollars.
“What it does is it adds some intelligence to indexes, which are just definitionally sort of a set of rules that can’t be smart. And they also take that emotion out of the active side where human beings are still making decisions, but we get caught up. You know, we make mistakes and sometimes those compound. And so I think by fixing those two issues, AI has the potential to really capture a lot of value in terms of assets flowing to these new AI-powered funds.”
– Intelligent Alpha CEO
An investor checking their portfolio on a laptop in a cafe full of other investors.
Methodology
For this article, we selected AI stocks by combing through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
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).
AI News Investors Should Not Miss
15. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 9
BigBear.ai Holdings, Inc. (NYSE:BBAI) is an artificial intelligence specialist offering AI-powered decision intelligence solutions for national security, digital identity, supply chains and logistics, enterprise operations, and manned-unmanned teaming in autonomous systems.
On October 14, BigBear.ai Holdings, Inc. (NYSE:BBAI) announced that the US Army has awarded the company with a 5-year production contract valued at $165 million. The contract for Global Force Information Management (GFIM) Production Services aims to support the continued development and transition of GFIM-OE capabilities to production. The company has been working with the army since 2021 to transform 15 legacy systems into an enterprise-wide intelligent automation platform.
“This contract exemplifies our unwavering commitment to the Army’s digital transformation efforts through our deep mission expertise and use of cutting-edge technology”.
– BigBear.ai’s CEO, Mandy Long.
Ryan Legge, President of National Security at BigBear.ai, further notes that:
“For the past several years, BigBear.ai has been working to support the Secretary’s goal of ensuring the Army embraces new technologies to become a more data-centric fighting force… As a leader in providing technical solutions, we are proud to continue and expand on our partnership with the G-3/5/7 and PEO-EIS to deliver this mission critical application”.
On October 15, HC Wainwright & Co. reiterated a “Buy” on BigBear.ai and set a price target of $3.00.
14. Navitas Semiconductor Corporation (NASDAQ:NVTS)
Number of Hedge Fund Holders: 15
Founded in 2014, Navitas Semiconductor Corporation (NASDAQ:NVTS) is a pure-play next-generation power semiconductor company developing ultra-efficient gallium nitride (GaN) semiconductors. Navitas has been developing system designs to support the exponential growth in AI power demand.
On October 18, Navitas Semiconductor Corporation (NASDAQ:NVTS) issued a press release that it will be introducing “IntelliWeave”, an innovative patented new digital control technique for improving next-generation AI data center power supply (PSU) efficiency. The IntelliWeave has a novel digital control that enables the highest system efficiencies with precision current sharing, minimal phase error, and high-speed dynamic response. The highest efficiencies are achieved through a patented dual-loop and dual-feed-forward interleaving control which achieves absolute zero voltage switching (ZVS) across the full-load range.
Moreover, there is a digital control for Critical Conduction Mode (CRM) interleaving Totem Pole Power Factor Control (PFC), enabling a 30% reduction in power losses as compared to existing Continuous Conduction Mode (CCM) solutions. The digital control, combined with high-power GaNSafe power ICs has been demonstrated on a 500 kHz GaN-based interleaving 3.2 kW CrM PFC PSU operating at 99.3% peak efficiency including EMI filter loss.