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.
READ ALSO Top 10 Trending AI Stocks to Watch and 20 Trending AI Stocks on Latest News and Ratings
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.
13. Pegasystems Inc. (NASDAQ:PEGA)
Number of Hedge Fund Holders: 27
Pegasystems Inc. (NASDAQ:PEGA) is a Massachusetts-based American software and enterprise transformation company. As an AI-powered platform, Pegasystems helps organizations personalize engagement, automate services, and overall streamline their business operations. Their “enterprise AI decisioning and workflow automation platform” delivers business-transforming value. One of its newest offerings is the Pega GenAI Blueprint, the company’s latest SaaS capability incorporating generative AI into the ideation phase of the initial design stage for application development.
Pegasystems Inc. (NASDAQ:PEGA) has recently been named by Citi as one of its “top picks” on the back of an “underappreciated artificial intelligence story” and an “attractive valuation” (see 20 Hidden Gem AI Stocks). The Wall Street bank set a price target of $92 with a 25% upside from its current trading price. This comes after the software company persuaded the court to partially reverse a jury’s earlier decision to award rival Appian $2bn in damages after a legal battle alleging that Pegasystems stole its rival’s trade secrets.
“We recently moved PEGA to our top pick, seeing the recent VA Appellate Court ruling as a key unlock on valuation, sentiment, and investor interest now that the $2B lawsuit and going concern risk have now rolled off (expect few-hundred million potential risk). While there is still risk given APPN re-appealing to the VA Supreme Court and impact from legal fees/distractions, we significantly lowered the discount applied to our base case post-appeal (from $1B to $200M).”
– Citi analysts Steven Enders and George Kurosawa
12. Wolfspeed, Inc. (NYSE:WOLF)
Number of Hedge Fund Holders: 29
Wolfspeed, Inc. (NYSE:WOLF) is an American developer and manufacturer of wide-bandgap semiconductors that focuses on silicon carbide and gallium nitride materials, as well as devices for power and radio frequency applications. It makes chips using silicon carbide, a material that is more energy-efficient than the standard silicon. Wolfspeed, Inc. devices are used for industrial uses, renewable energy systems, and artificial intelligence applications.
On October 15, Wolfspeed, Inc. (NYSE:WOLF) announced a $750M in proposed funding from US CHIPS and Science Act in order to support the company’s North Carolina expansion as well as catalyze New York expansion. The EV and AI chipmaker stated that the proposed funding would underpin “a first-of-its-kind 200mm silicon carbide manufacturing footprint in upstate New York and central North Carolina.”
Moreover, Wolfspeed, Inc. (NYSE:WOLF) also secured $750 million in fresh financing from Apollo, Fidelity, and other firms. According to the company, the combined $1.5 billion in investments will help it boost domestic production of silicon carbide for electric vehicles (EVs), artificial intelligence (AI) data centers, and battery storage systems. On Tuesday, October 15, analysts at Morgan Stanley kept an “Equal Weight” rating on the shares and raised their price target on the company’s stock from $10 to $15.
11. Duolingo, Inc. (NASDAQ:DUOL)
Number of Hedge Fund Holders: 35
Duolingo, Inc. (NASDAQ:DUOL) is an American educational technology company operating as a mobile learning platform in the United States as well as internationally. The company actively uses AI for offering personalized experiences that adapt to each learner. Its AI engine called BirdBrain personalizes learning by adjusting exercise difficulty to its Bandit” algorithm which is an AI-driven notification system.
On Wednesday, October 16, Citizens JMP research analyst Andrew Boone joined CNBC’s “The Exchange” to discuss how AI is both an opportunity and a threat to certain stocks. Discussing Duolingo, he said AI can continue to be a catalyst for the language learning platform Duolingo. He explained that to make AI beneficial for Duolingo, Inc. (NASDAQ:DUOL), the company is moving towards one-on-one tutoring. Technology now allows people to converse with it, which means that it now allows them to practice conversation with the learning platform. By enabling it in the app and selling it as a premium subscription, he thinks it can be a real catalyst for 2025. That being said, Boone also notes how OpenAI’s advanced mode, which allows conversational learning, is a new competitive threat at the same time.
10. Okta, Inc. (NASDAQ:OKTA)
Number of Hedge Fund Holders: 50
Okta, Inc. (NASDAQ:OKTA) is a workplace cybersecurity company operating as an identity partner in the United States as well as internationally. Okta’s AI-driven features across their Customer Identity Cloud and Workplace Identity Cloud helps clients take control over their digital presence.
At the annual Oktane Identity Conference in Las Vegas that happened from October 15 to October 17, Okta, Inc. (NASDAQ:OKTA) revealed new AI products that aim to better protect customer data. From Secure SaaS Service Accounts that are designed to reduce the risks associated with unmanaged SaaS applications to its new “Governance Analyzer” powered by Okta AI. The final announcement was its Auth for GenAI, which is a product designed to help developers securely integrate generative AI into their applications.
“The biggest problem in technology today, which is if you look at a company that has probably thousands of applications… they don’t all work together in the sense of they don’t all share complete information about the identity threats that are coming toward the applications, that are coming toward the infrastructure, and they’re not good at sharing real-time risk signals and taking actions as those threats emerge…
If the industry worked to integrate more of its applications and interfaces, McKinnon states this can “make the whole industry more secure.”
– CEO Todd McKinnon highlights about the category.
9. Autodesk, Inc. (NASDAQ:ADSK)
Number of Hedge Fund Holders: 55
Autodesk, Inc. (NASDAQ:ADSK) is an American multinational software corporation offering 3D design, engineering, and entertainment technology solutions worldwide. Autodesk leverages generative AI technology to drive innovation across the design, construction, manufacturing, and entertainment industries.
Autodesk, Inc. (NASDAQ:ADSK), at the annual Design & Make conference, Autodesk University, unveiled new artificial intelligence capabilities and data integrations that aim to accelerate the digital transformation of the architecture, engineering, construction, and operations (AECO) industry. Entering nearly every discussion when it comes to AI, the company has announced Autodesk AI-powered time-saving automation coming to Autodesk Fusion. Other key AI advancements include tools like the ML Deformer in Maya for real-time character posing, AI denoising in Arnold to reduce rendering times, and Wonder Studio’s new Motion Prediction feature, which anticipates character movements for more natural poses. The company will also continue to develop Autodesk Flow, an industry cloud designed to streamline workflows and data management.
After attending Autodesk University, Oppenheimer has maintained an “Outperform” rating on the company’s stock, raising the firm’s price target from $275 to $300. The company plans to focus on long-term AI monetization, expanding its product portfolio and enhancing productivity.
According to reports from Fintel, on Wednesday, October 16, Wells Fargo also initiated Autodesk, Inc. (NASDAQ:ADSK) with an “Overweight” recommendation. The financial services company states that it is bullish on the software company.
“We initiate OW on ADSK given our confidence recent model transitions help pave a cleaner path forward for reaccelerating rev growth & a return to 30+% FCF margin.”
8. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 61
Cisco Systems, Inc. (NASDAQ:CSCO) is an American multinational digital communications technology conglomerate corporation offering a vast portfolio of technology innovations. The company has integrated AI-powered capabilities across many of its products, introduced a $1 billion fund earlier this year to invest in AI startups, and even maintains a strong foothold in cybersecurity, offering AI-powered security tools, and much more.
On Wednesday, October 16, Citigroup analysts upgraded the stock to “Buy” from “Neutral” and raised the price target to $62 from $52 per share. This reflects an estimated 15% upside from Tuesday’s close. According to Citi analysts, investors shouldn’t overlook the artificial intelligence potential of Cisco Systems, Inc. (NASDAQ:CSCO). The upgrade in the networking company’s shares by analyst Atif Malik highlights a narrowing valuation gap relative to peers, as well as a rapidly expanding AI Ethernet total addressable market that is projected to reach $10 billion by 2025.
“While AI is currently a small piece of the biz (~2% of revs), we see the potential for a stronger contribution,” he wrote. “With more AI coming, we are incrementally more constructive on the group and expect continued investor rotation out of semis/hardware into networking equipment to benefit group valuation.”
Furthermore, the addition of the company’s products in Meta Platforms’ AI hardware comes as a “positive validation of CSCO’s technology.” With at least three major hyperscalers already using its tools in their backend networks, Malik believes that the company’s $9 billion 2027 hyperscaler AI opportunity forecast may be “potentially understated”. The analyst has also increased his earnings per share estimates for 2025 and 2026 by 2% and 5%, respectively.
“We believe shares warrant a sizable discount to networking peer valuation to reflect lingering share loss concerns, somewhat tempered by growing AI opportunities. Even at a 30+% discounted target multiple to peer average, we see meaningful upside to shares”.
7. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Holders: 88
Dell Technologies Inc. (NYSE:DELL) is an American multinational technology company involved in the design, development, manufacturing, marketing, selling, and support of several comprehensive and integrated solutions, products, and services. The company has fully integrated AI across its entire product portfolio, expanding critical partnerships along the way. Its latest development in AI is the Dell AI factory, one of the world’s broadest generative AI (GenAI) solutions portfolio tailored for AMD environments.
On October 15, Bloomberg reported that Dell Technologies Inc. (NYSE:DELL) will begin shipping devices featuring Nvidia’s Blackwell artificial intelligence accelerators soon. This comes after a previous report from sources such as The Information that Blackwell chips may be “delayed by three months or more due to design flaws”; demonstrating how the production of these chips are now back on schedule. Arthur Lewis, Dell infrastructure unit president, said in an interview that these chips will be sent to select customers next month and will be generally available at the beginning of 2025.
For a company generally known for its personal computers, Dell’s analysts have been concerned about Dell’s AI-oriented products and competitive positioning. However, Lewis affirms that the company’s existing relationships with its customers and a wide array of services and products differentiate it from others.
6. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 91
Branded under the name Alibaba, Alibaba Group Holding Limited (NYSE:BABA) is a Chinese multinational technology company that initially began as an ecommerce operator but has slowly expanded into industries such as fintech, cloud computing, logistics, entertainment, and local services. The company leverages artificial intelligence in its business operations, including its virtual assistant AliMe and advanced AI algorithms, to analyze customer data and enhance personalization.
On Wednesday, Alibaba Group Holding Limited (NYSE:BABA) launched an updated version of its artificial intelligence-powered translation tool. According to the company, it is “better than products offered by Google, DeepL, and ChatGPT”. This is based on an assessment by Alibaba International’s new model, Marco MT, by translation benchmark framework Flores. The translation tool is based on Alibaba’s own model called Qwen, and supports 15 languages. The AI translation product by Alibaba’s fast-growing international unit was released a year ago and already has around 500,000 merchant users.
Speaking with Annabelle Droulers on “Bloomberg: the China Show”, Alibaba International VP noted how translation is the bread and butter of their global e-commerce operations since one has to translate their product listing into different languages if they want to build a global operation.
“We just updated our translation infrastructure with large language model. Previously, it was based on the original generation or previous generation of machine learning algorithms, but now we have completely revamped it based on our own language model and we’re happy to report that we are actually achieving over performance”.
Alibaba’s international business, including platforms such as AliExpress and Lazada, reported sales growth of 32% in the quarter ended June. On Tuesday, October 15, Barclay’s analyst Jiong Shao maintained the stock at “Overweight” and raised the price target to $137 from $107. The firm expects Alibaba to deliver “broadly in-line” Q3 results.
5. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 92
Previously known as Vistra Energy Corp, Vistra Corp. (NYSE:VST) is a Texas-based integrated retail electricity and power generation company. Vistra Corp. (NYSE:VST) is a prominent example of how technology and energy sectors have been integrating to benefit from the AI boom. The company is benefiting from the rising demand for electricity from data centers.
On Thursday, October 17, JP Morgan analyst Jeremy Tonet initiated Vistra’s stock with an “Overweight” rating, setting the price target to $178. The investment banking company considers Vistra holding the “catbird” seat amongst independent US power producers, along with two others.
“We see structural tailwinds, including manufacturing onshoring, broader electrification trends (transportation, heating and more), as well [as] data-center development underpinning a paradigm shift in power demand”.
-Tonet wrote in a note to clients.
Moreover, it is expected that power supply in competitive electricity markets will lag behind demand, allowing the three independent power producers to “to capture outsized margins for an extended period of time”. Tech companies will increasingly be demanding carbon-free power to drive their data centers, boosting nuclear powers and enabling owners to “command a substantial premium”. Since half of Vistra’s gas generation is in the Texas ERCOT guide, analysts say that it can help fill a potential 40 gigawatt supply gap in the Lone Star State by 2030.
4. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 103
Netflix, Inc. (NASDAQ:NFLX) is an American subscription video-on-demand over-the-top streaming service with 283 million paid memberships in over 190 countries. Streaming companies such as Netflix, Inc. (NASDAQ:NFLX) are using AI as their most adept tool for everything from personalization and content optimization to AI-driven closed captioning and language dubbing, and even optimizing streaming quality.
Netflix, Inc. (NASDAQ:NFLX) offers a cheaper, ad-supported tier powered by AI which was launched in late 2022 to enhance user experience and deliver more effective ads in the process. In an interview on “Squawk on the Street”, Jim Cramer highlights how the company’s innovative use of AI in its ad-supported tier places it “so far ahead of everyone else”. Cramer notes that Wall Street’s enthusiasm for the company’s stock is derived from the company’s “beat and raise” quarter which is eventually driven by its success in AI-based advertising.
Jim Cramer has a bullish take on the back of a strong quarter. The streaming giant is increasingly focused on growth in ad-tier memberships, with ad plans for the third quarter already accounting for 50% of the signups in the 12 countries where ads are currently available. According to co-CEO Gregory Peters, advertising is going to be Netflix’s key growth driver, projecting ad revenue to roughly double in 2025.
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 165
Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses.
Google’s current lineup of AI products includes consumer-oriented AI products such as Google One AI Premium and Gemini for enhanced productivity, along with Gemini versions tailored for personal and enterprise use. For developers, tools like Gemini models, Google AI Studio, and Vertex AI help facilitate the integration and management of AI capabilities.
On Monday, October 15, Google stated that it had signed a corporate agreement in what is claimed to be the world’s first for buying power from multiple small modular reactors. This agreement is done to meet the electricity demand for artificial intelligence. The company has agreed to buy around an estimated 500 megawatts of power from six or seven reactors. Alphabet Inc has agreed with Kairos Power, aiming to bring Kairos’ first small modular reactor online by 2030.
As per Alphabet, a so-called order book framework with Kairos instead of the purchase of individual reactors purchases will help send a demand signal to the market and make a long-term investment to speed the development of SMRs. Mike Laufer, the CEO of Kairos, is confident that this innovative strategy will enhance the likelihood of successful project completion within budget and on schedule.
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
Apple Inc. (NASDAQ:AAPL) is an American multinational corporation and technology company involved in the design, manufacture, and marketing of smartphones, tablets, PCs, wearables, and accessories worldwide. The company uses artificial intelligence in several ways. The launch of Siri by Apple it became the first widely used AI-enabled and natural language processing (NLP)-powered assistant.
Apple Inc. (NASDAQ:AAPL) launched its most important product this month, Apple Intelligence, which is a suite of software tools bringing artificial intelligence to its devices. In lieu of this, on October 15, it introduced its new iPad mini geared by the A17 Pro chip and Apple Intelligence. According to Apple’s press release, the A17 Pro is characterized by a faster CPU and GPU, a 2x faster Neural Engine than the previous-generation iPad mini, and support for Apple Intelligence.
“There is no other device in the world like iPad mini, beloved for its combination of powerful performance and versatility in our most ultraportable design. iPad mini appeals to a wide range of users and has been built for Apple Intelligence, delivering intelligent new features that are powerful, personal, and private. With the powerful A17 Pro chip, faster connectivity, and support for Apple Pencil Pro, the new iPad mini delivers the full iPad experience in our most portable design at an incredible value.”
-Bob Borchers, Apple’s vice president of Worldwide Product Marketing.
On Monday, October 7, Jefferies downgraded the company’s stock from Buy to Hold, stating expectations for the sales of the new AI-enabled iPhones are too high, and that it will take time for smartphone technology to truly support AI.
1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
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. Amazon.com Inc (NASDAQ:AMZN) uses artificial intelligence for everything from reinventing shopping experiences to automated ad creatives, streamlining healthcare access, and more with generative AI powered by Amazon Web Services.
In its latest step in advancing its reach towards AI, Amazon.com Inc (NASDAQ:AMZN) has struck a five-year deal with startup Databricks, a data and artificial intelligence company. This deal can potentially help businesses looking to cut costs when building their own artificial intelligence capabilities by developing custom generative AI models built with Databricks Mosaic AI on AWS.
Databricks will be using Amazon’s Trainium AI chips for powering the training and serving of their large language models, providing joint customers with unmatched scale, performance, and cost-efficiency for their generative AI applications. While many tech analysts and business leaders don’t consider Amazon.com Inc (NASDAQ:AMZN) as a leader in AI innovation, its AI chips, Trainium and Inferentia, are helping it change the narrative and that too, cost-efficiently.
“Generative AI is disrupting every industry and a company’s data will ultimately be its competitive advantage. Strengthening our collaboration with AWS allows us to provide customers with unmatched scale and price-performance so they can bring their own generative AI applications to market more rapidly”.
-Ali Ghodsi, Co-founder and CEO at Databricks.
Overall, AMZN ranks first among the 15 AI News Investors Should Not Miss. 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 timeframe. 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 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 insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
