In this article, we will be taking a look at the 20 worst performing AI stocks of last week.
US Stocks in September
This September saw a sluggish start for most US stocks, and large-cap technology stocks were no exception to this trend. The main driving factors for this development include concerns over the health of the American economy resurfacing, particularly in light of the August jobs report. The report underscored the labor market’s weakness in the US, which has not left investors feeling all that secure about the state of the economy.
On the stock side, many investor favorites in the artificial intelligence (AI) space have been doing poorly so far in September, with losses ranging from around 4% to even over 20% for the first week of September. The primary reason for this decline seems to be that investors are just not satisfied with the growth demonstrated by major AI companies at present. While growth is definitely present, it’s continuing to fall short of investor expectations, which have increased exponentially in light of the hype cycle created around AI stocks.
Are We Really In An AI Bubble?
The first week of September was actually the worst week for chip stocks recorded in over two years. Many investors are now beginning to wonder whether AI is worth the amount of money being poured into it, resulting in corporate spending on AI coming under greater scrutiny than ever before. The greater scrutiny is predominantly because of investors and analysts now thinking that many AI stocks are overhyped and overvalued and don’t have the means to justify this hype and valuation – essentially, the main concern is that we’re in an AI bubble that’s on the brink of bursting.
However, as with any high-tension market situation, there are diverging opinions as well. In his September 6 interview on CNBC’s “Closing Bell Overtime,” Deepwater Asset Management’s managing partner, Gene Munster, emphatically stated that we are not in an AI bubble. For him, the bigger problem in the AI space is that every other company today is trying to talk about AI and say that it’s working towards AI incorporation in its operations – something that’s leading to a lot of noise in the market, which is drowning out the voices of companies offering real substance in this space. He thus noted that it’s important for investors to be careful not to invest in just any company that says it’s working with AI and instead to focus on the better, perhaps more boring, options in the market.
According to Munster, the main players to keep your money in are predominantly big tech names, as these are the only companies that are poised to deliver substantial growth instead of just generating noise. However, investors are still confused about whether AI is a good place to invest in even today, which is why we’ve compiled a list of the worst performing AI stocks in September so far and explained whether these stocks are worth picking up or if they’re just temporary beneficiaries of the hype around AI.
A scientist at a computer station, surrounded by a neural network of artificial intelligence code.
Our Methodology
We compiled our list by screening for AI stocks that have seen declines of 10% or above in the first week of September, and then ranked the stocks based on their weekly decline as of Friday, September 6. We have also mentioned the number of hedge funds holding stakes in each stock.
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).
20 Worst Performing AI Stocks of Last Week
20. Flex Ltd. (NASDAQ:FLEX)
Weekly Decline: 10.81%
Number of Hedge Fund Holders: 46
Flex Ltd. (NASDAQ:FLEX) is an information technology company based in Austin, Texas. It provides manufacturing solutions and incorporates advanced manufacturing capabilities, including AI and ML, in its fabrication, assembly, and test processes.
While Flex Ltd. (NASDAQ:FLEX) has been following other tech and AI stocks in their downward plunge, the company seems to be financially sound and has good prospects for growth. In its first-quarter fiscal 2025 earnings call, Flex Ltd.’s (NASDAQ:FLEX) management noted that the company has been making strong progress in multiple large program ramps across its cloud, power, and automotive businesses. Through this progress, these programs have begun generating revenue, with Flex Ltd. (NASDAQ:FLEX) overall raking in $6.3 billion in revenue for the first quarter – up 2% sequentially but down year-over-year.
The macro-environment seems compatible with Flex Ltd.’s (NASDAQ:FLEX) business model as well. The AI transition in data centers is the main reason why the company is seeing strong demand for its cloud solutions and power products.
The only issue investors may find with this stock, as with many other AI players, is that revenue generation seems to be slower than anticipated – as evidenced by the first-quarter results as well. However, seeing as Flex Ltd. (NASDAQ:FLEX) is focusing on expanding its technical and advanced manufacturing capabilities to create differentiation and position itself for sustained growth and profitability, existing shareholders may yet see more value in the stock.
There were 46 hedge funds long Flex Ltd. (NASDAQ:FLEX) in the second quarter, with a total stake value of $923.8 million. Lyrical Asset Management was the largest shareholder, holding 9,266,933 shares.
Artisan Partners mentioned Flex Ltd. (NASDAQ:FLEX) in its first-quarter 2024 investor letter:
“We initiated new GardenSM positions in Flex Ltd. (NASDAQ:FLEX), On Holding and Onto Innovation during the quarter. Flex provides outsourced electronic manufacturing services to a diverse set of end markets. The company hired a new CEO in 2020, who has been driving a strategic pivot toward manufacturing high-value products in areas such as health care, industrial, automotive and cloud infrastructure. Today, these higher value items account for ~60% of revenues, and we believe they will continue to tick higher. We also believe an improving business mix, along with the reshoring of supply chains, will lead to faster growth and higher margins.”
19. Micron Technology, Inc. (NASDAQ:MU)
Weekly Decline: 10.87%
Number of Hedge Fund Holders: 120
Micron Technology, Inc. (NASDAQ:MU) is a semiconductor company that offers memory and storage products. It is based in Boise, Idaho.
While Micron Technology, Inc. (NASDAQ:MU) started 2024 on a stronger footing, the stock has been disappointing investors for at least the past three months as it has remained on a prolonged downward trajectory. Despite this, a closer look at the company’s financials shows that Micron Technology, Inc. (NASDAQ:MU) has actually been doing well. In the fiscal third quarter of 2024, the company generated revenue of $6.8 billion, versus the $3.7 billion figure from the same period a year ago – so the company’s revenue has jumped by over $3 billion in a year. Operating cash flow has also risen significantly year-over-year, coming in at $2.5 billion in the third quarter versus $24 million in the same period a year ago.
One of the reasons why Micron Technology, Inc. (NASDAQ:MU) may be struggling is that it’s still recovering from an inventory glut from last year, which is also why last year’s financials are significantly lower than this year’s. The company’s CEO has also noted that their seeing robust AI demand, which is the primary factor for the 17% sequential revenue growth. Additionally, Micron Technology, Inc. (NASDAQ:MU) is gaining more market share in high-margin products like High Bandwidth Memory, demonstrating the strength of the company’s AI product portfolio.
Industry tailwinds in smartphone, personal computer, and data center growth all look excellent for Micron Technology, Inc. (NASDAQ:MU), which is why a lot of investors are sticking with the stock despite its disappointing performance. This is because they also realize that the reason Micron Technology, Inc. (NASDAQ:MU) isn’t performing well right now is that it’s investing heavily in capital expenditures to expand its manufacturing capacity. In the third quarter alone, it invested $2.06 billion in CapEx. This investment will hold the stock back for now but may lead to higher growth in the future, especially since Micron Technology, Inc. (NASDAQ:MU) is making these investments at an opportune time when it has the US government’s support to expand its manufacturing capacity.
We saw 120 hedge funds long Micron Technology, Inc. (NASDAQ:MU) in the second quarter, with a total stake value of $5.2 billion. Citadel Investment Group was the most prominent shareholder, holding 7,059,800 shares.
18. Arista Networks, Inc. (NYSE:ANET)
Weekly Decline: 10.96%
Number of Hedge Fund Holders: 65
Arista Networks, Inc. (NYSE:ANET) is an information technology company that offers data-driven client-to-cloud networking solutions for data center, campus, and routing environments. The company also provides the best IP/Ethernet-based solutions for AI/ML workloads.
In the second quarter, Arista Networks, Inc. (NYSE:ANET) delivered revenues of $1.69 billion, which represents a growth of 15.8% year-over-year, and also beat the first quarter’s revenue of $1.5 billion. This type of growth is quite typical for companies serving the AI market and the expansion in data centers like Arista Networks, Inc. (NYSE:ANET). This company’s products, particularly in the ethernet space, enable AI connectivity, which is essential for AI and tech companies.
According to several analysts, we are going to see upgrades worth $1 trillion to our existing data center infrastructure, so Arista Networks, Inc. (NYSE:ANET) is also poised to greatly benefit from this tailwind. The company’s management also completed repurchases of its common stock worth $2 billion in the first quarter and further authorized an additional program to repurchase up to $1.2 billion worth of shares.
Stock buybacks are generally a good indicator in terms of valuation because they indicate that company management feels that the stock is undervalued. It represents a certain confidence on the part of company management, highlighting that they are aware of the market and the value of their product offerings. Since Arista Networks, Inc. (NYSE:ANET) is offering both optimal networking for AI platforms and AI for networking outcomes, such confidence may be well-place. In light of this, the stock’s current negative performance should not discourage long-term investors from retaining or buying Arista Networks, Inc. (NYSE:ANET) shares.
A total of 65 hedge funds were long Arista Networks, Inc. (NYSE:ANET) in the second quarter, with a total stake value of $1.9 billion. Citadel Investment Group was the largest shareholder, holding 859,600 shares.
17. Intel Corporation (NASDAQ:INTC)
Weekly Decline: 11.04%
Number of Hedge Fund Holders: 75
Intel Corporation (NASDAQ:INTC) is a semiconductor company based in Santa Clara, California. It offers computing and related products and services worldwide.
This company may be a red flag for many investors since, on the first Tuesday of September, Intel Corporation (NASDAQ:INTC) was hit with reports that it could lose its place in the Dow Jones Industrial Average. Additionally, competitor Qualcomm is also reportedly looking into buying segments of Intel Corporation (NASDAQ:INTC), potentially including its PC chip design business. While this deal, if it comes to fruition, may be considered a positive development for Intel Corporation (NASDAQ:INTC) by some, others are concerned about the possible loss of an innovative and lucrative segment and its impact on Intel Corporation (NASDAQ:INTC) in the aftermath.
Public opinion surrounding Intel Corporation (NASDAQ:INTC) has also been negative because of its dismal second-quarter earnings report since revenue for the company fell by 1%, and adjusted EPS came in at $0.02, down from $0.13 from a year ago. Investors are also disappointed because of Intel Corporation’s (NASDAQ:INTC) underwhelming third-quarter guidance with revenue of $12.5 billion to $13.5 billion, which implies a decline of 8% at the midpoint. Additionally, the company also eliminated its dividend in the interest of cash conservation – a justifiable reason, but one that has still been off-putting for investors.
In light of all these factors, Intel Corporation’s (NASDAQ:INTC) decline in the first week of September seems to make sense. Those interested in big tech and semiconductor players in the market at present may do well by steering clear of Intel Corporation (NASDAQ:INTC) at least for the moment.
Intel Corporation (NASDAQ:INTC) was spotted in the 13F holdings of 75 hedge funds in the second quarter, with a total stake value of $1.9 billion.
Ariel Investments mentioned Intel Corporation (NASDAQ:INTC) in its second-quarter 2024 investor letter:
“Alternatively, several positions weighed on performance. One of the world’s largest semiconductor chip manufacturers by revenue, Intel Corporation (NASDAQ:INTC), underperformed in the period on news of a longer than expected turnaround in profitability within the Foundry business. This was exacerbated by disappointing near-term guidance due to a weakening demand environment signaling an extended replacement cycle. We view the quarter as a temporary trough that should dissipate as we see signs of a cyclical recovery for personal computers (PCs) and central processing units (CPUs), driven by the Windows 11 upgrade. In our view, the market is overlooking the progress Intel is making to advance its manufacturing process. Not to mention, the company’s efforts to serve as a viable second source foundry partner of leading-edge silicon. We believe the separation of the design and manufacturing businesses will be a key catalyst in unlocking improved financial performance while also enhancing the competitiveness of the foundry business.”
16. Teradyne, Inc. (NYSE:TER)
Weekly Decline: 11.43%
Number of Hedge Fund Holders: 41
Teradyne, Inc. (NYSE:TER) is a semiconductor materials and equipment company. It offers automated test systems and robotics products worldwide and is based in North Reading, Massachusetts.
Unlike some other companies on our list, Teradyne, Inc.’s (NYSE:TER) performance has actually been confidence-inspiring. In the second quarter, revenues hit $730 million, above the top end of guidance. GAAP EPS also surpassed expectations coming in at $1.14, compared to the $0.90-$1.10 guidance range. The robustness of Teradyne, Inc.’s (NYSE:TER) quarterly performance finds credit primarily in the company benefiting from increased demand for AI applications and improvements in its semiconductor test and robotics segments.
Teradyne, Inc. (NYSE:TER) has constantly maintained a competitive edge by introducing new products, expanding customer bases, and improving operational efficiencies. The company’s semiconductor test segment saw a 14% year-over-year increase in revenue, which was driven primarily by strong demand recovery across memory and Systems on Chip (SoC). The robotics segment also grew sequentially and year-over-year, coming in at $90 million. With such impressive results and tailwinds propelling Teradyne, Inc. (NYSE:TER) higher, the recent weekly decline of the stock seems to merely be a small bump in the road for this AI player.
In total, 41 hedge funds were long Teradyne, Inc. (NYSE:TER) in the second quarter, with a total stake value of $1.4 billion.
TimesSquare Capital Management mentioned Teradyne, Inc. (NYSE:TER) in its fourth-quarter 2023 investor letter:
“New to the portfolio was Teradyne, Inc. (NASDAQ:TER), which produces testing and measurement equipment for semiconductors and other complex electronic systems. Already a holding in our Mid Cap Growth Strategy, after providing lower-than-expected guidance for the final quarter of its fiscal year Teradyne’s price fell, and its market cap entered the buy range for this strategy. We believed that its chip testing volumes reached a low point and were poised to recover. Since we started buying, Teradyne’s shares rallied 30% for the remainder of the quarter.”
15. Applied Materials, Inc. (NASDAQ:AMAT)
Weekly Decline: 11.53%
Number of Hedge Fund Holders: 77
Applied Materials, Inc. (NASDAQ:AMAT) is another semiconductor materials and equipment company on our list, based in Santa Clara, California. It provides manufacturing equipment, services, and software to the semiconductor display and related industries.
In its second-quarter earnings report, Applied Materials, Inc. (NASDAQ:AMAT) revealed that it generated revenue of $6.7 billion, up 5% year-over-year. Its GAAP operating margin also increased to 28.7%, up by 0.7 points year-over-year. Finally, the company also generated $2.39 billion in cash from operations. Applied Materials, Inc.’s (NASDAQ:AMAT) CEO noted that this growth was driven by demand for the company’s unique and connected portfolio of products and services, which has positioned the company to outperform the market over the long term.
Despite these positive announcements, Applied Materials, Inc. (NASDAQ:AMAT) actually saw its stock price dip in the aftermath – a dip that has continued into September. The primary reason for this may be that semiconductor stocks are not expected to recover fully in 2024, which means that the real growth will only come about in 2025 or 2026 as the industry absorbs excess inventory left over from 2023. This may be discouraging for investors who expect immense growth from semiconductor stocks, especially in the current AI-frenzied market.
Despite this, most analysts consider Applied Materials, Inc. (NASDAQ:AMAT) to be a stock worth buying, especially in light of its growth potential, which spans over the next couple of years. As such, being put off from the stock simply because it’s playing catch up like every other semiconductor player may not be the best strategic move.
Applied Materials, Inc. (NASDAQ:AMAT) was spotted in the portfolios of 77 hedge funds in the second quarter, with a total stake value of $5.5 billion.
14. Dell Technologies Inc. (NYSE:DELL)
Weekly Decline: 11.65%
Number of Hedge Fund Holders: 88
Dell Technologies Inc. (NYSE:DELL) is an information technology company that sells and supports various comprehensive and integrated solutions, products, and services. It is based in Round Rock, Texas.
Dell Technologies Inc. (NYSE:DELL) is garnering increased investor attention because it is poised to benefit from increasing investment in AI servers. For instance, several big tech names, such as Amazon and Microsoft, are making bigger investments in AI data centers.
Regardless of this, Dell Technologies Inc. (NYSE:DELL) does seem to be facing some headwinds, which may explain the recent decline in the stock’s price. One challenge is the exit from its resell business for VMware. Additionally, due to an increase in Dell Technologies Inc.’s (NYSE:DELL) AI-optimized server mix and a more competitive pricing environment, the company also saw a 230 basis point decline in its gross margin, which came in at $5.5 billion. This is a potential red flag for many investors since the general trend seems to signify that the more AI-optimized servers Dell Technologies Inc. (NYSE:DELL) sells, the more its gross profit margin declines.
The primary reason for this trend surrounding Dell Technologies Inc. (NYSE:DELL) is that its main customers, like Amazon, Alphabet, and Microsoft, are all big tech companies with immense negotiating power. This results in these companies negotiating lower prices for AI-optimized servers and data centers, which leads to lower profit margins for Dell Technologies Inc. (NYSE:DELL). Despite this, the company’s CFO has commented that they still expect solid top-line growth in the second half of 2024, so investors following Dell Technologies Inc. (NYSE:DELL) right now should keep all of these considerations in mind as they try to understand the stock’s weekly decline and future growth prospects.
At the end of the second quarter, 88 hedge funds were long Dell Technologies Inc. (NYSE:DELL), with a total stake value of $2.9 billion.
13. ARM Holdings plc (NASDAQ:ARM)
Weekly Decline: 12.02%
Number of Hedge Fund Holders: 38
ARM Holdings plc (NASDAQ:ARM) is a semiconductor company based in the United Kingdom. It develops and licenses central processing unit products and related tech for semiconductor companies and original equipment manufacturers.
The primary reason why investors consider ARM Holdings plc (NASDAQ:ARM) to be a desirable semiconductor stock is that it has a unique business model. Instead of actually producing semiconductors, the company designs the infrastructure for CPU chips that its customers, such as Apple, Samsung, Alphabet, and Nvidia, use as a blueprint for building.
Through this model, ARM Holdings plc (NASDAQ:ARM) receives license payments and royalties based on the number of products sold. This model has also helped ARM Holdings plc (NASDAQ:ARM) accumulate a market share of 99% within the global smartphone market.
The main reason why ARM Holdings plc (NASDAQ:ARM) is facing challenges in the current market is its valuation. Many investors are put off by the fact that its P/E ratio is 75.1 since the sector median stands way below this figure at only 22.9. As a result, most investors are avoiding ARM Holdings plc (NASDAQ:ARM) at present, at least until the stock’s price falls to a more reasonable level.
ARM Holdings plc (NASDAQ:ARM) had 38 hedge funds long its stock in the second quarter, with a total stake value of $979.1 million.
12. Vertiv Holdings Co (NYSE:VRT)
Weekly Decline: 12.05%
Number of Hedge Fund Holders: 92
Vertiv Holdings Co (NYSE:VRT) is an electrical components and equipment company based in Westerville, Ohio. It offers critical digital infrastructure tech and life cycle services for data centers, communication networks, and commercial and industrial environments.
In the second quarter, Vertiv Holdings Co (NYSE:VRT) saw its organic orders growth come in at 57%, significantly above the 37% growth figure reported in the second quarter of 2023. Net sales also grew by 13%, while operating profit grew by 63% year-over-year. The organic order growth is important to note, seeing as increased orders translate into higher revenue for Vertiv Holdings Co (NYSE:VRT) when it performs its services.
Since Vertiv Holdings Co (NYSE:VRT) has offered not only profit growth but also revenue growth in the second quarter, many investors are eagerly following the stock’s performance because of the potential it has for accelerated revenue growth. The main drivers for this growth include increased scaling of AI deployment since Vertiv Holdings Co (NYSE:VRT) has the capacity to seize this opportunity while continuing to invest in capacity for the future.
Vertiv Holdings Co (NYSE:VRT) is also considered to be the connective tissue between IT and facilities in data centers. Many analysts consider the AI data centers space to be the area offering the highest growth potential within AI, seeing as investments in this space have only been increasing this year. This is why Vertiv Holdings Co (NYSE:VRT) seems to be uniquely positioned to benefit in this market. In light of all this, the current decline of the stock shouldn’t raise any alarms just yet.
In total, 92 hedge funds were long Vertiv Holdings Co (NYSE:VRT) in the second quarter, with a total stake value of $3.2 billion.
Baron Funds mentioned Vertiv Holdings Co (NYSE:VRT) in its second-quarter 2024 investor letter:
“Vertiv Holdings Co (NYSE:VRT) a leading provider of critical digital infrastructure for data centers, contributed during the quarter. As an industry leader in data center cooling and power management, Vertiv is poised to benefit from AI-driven growth in data center spend. The NVIDIA partner network, strong industry relationships, and broad product portfolio that Vertiv maintains enables its participation in the creation of the technology roadmap for the future of the data center. In addition, Vertiv is investing in its capacity to serve this growing end market more effectively. The company also has an extensive global service network to aid customers as they grow. We believe the company has durable competitive advantages and a flexible balance sheet to benefit from the expected significant capital investment in data centers for years to come. Vertiv reported very strong results for the March quarter, with orders up 60%, which highlighted the strong demand it is seeing for its products. We sold some of our position into strength after the runup from the positive report, but still hold a major position in the Fund as we see considerable upside in the shares over time.”
11. KLA Corporation (NASDAQ:KLAC)
Weekly Decline: 13.26%
Number of Hedge Fund Holders: 55
KLA Corporation (NASDAQ:KLAC) is a semiconductor materials and equipment company. It designs and manufactures process control, process-enabling, and yield management solutions.
Many investors may be considering KLA Corporation (NASDAQ:KLAC) to be a good AI stock, especially in light of its September dividend yield increase of 17%. The company is also definitely a leader in process control and metrology equipment, which is used to inspect chips for defects during the semiconductor manufacturing process. Seeing as KLA Corporation (NASDAQ:KLAC) occupies a dominant position in this very unique niche, many investors seem to be flocking to this stock.
However, the recent declines seen in KLA Corporation’s (NASDAQ:KLAC) stock price may serve as a warning for new investors. This decline may be attributed at least partially to the fact that KLA Corporation (NASDAQ:KLAC), while definitely a strong AI player, doesn’t really seem to be overwhelmingly better than its competitors, such as Lam Research and Applied Materials. These competitors typically tend to trade at lower multiples than KLA Corporation (NASDAQ:KLAC), and both of them have also raised their dividends recently.
KLA Corporation (NASDAQ:KLAC) also seems to be more constrained in how much it can grow its payout, primarily because it’s held back by its overall valuation, current payout ratio, and leverage on the balance sheet – KLA Corporation (NASDAQ:KLAC) has $2.13 billion in net debt as of this September. Hence, the fact that KLA Corporation (NASDAQ:KLAC) seems to be more constrained than its competitors – both of which have hefty net cash positions, has resulted in many investors shying away from KLA Corporation (NASDAQ:KLAC).
There were 55 hedge funds long KLA Corporation (NASDAQ:KLAC) in the second quarter, with a total stake value of $2.3 billion.
Parnassus Investments mentioned KLA Corporation (NASDAQ:KLAC) in its second-quarter 2024 investor letter:
“KLA Corporation (NASDAQ:KLAC), a provider of process control and yield management solutions for the semiconductor and related nanoelectronics industries, continued its strong run. We expect KLA will continue to benefit from the increasing complexity of chip designs.”
10. Coherent, Inc. (NASDAQ:COHR)
Weekly Decline: 13.34%
Number of Hedge Fund Holders: 47
Coherent, Inc. (NASDAQ:COHR) is an information technology company based in Saxonburg, Pennsylvania. It manufactures engineered materials, optoelectronic components and devices, and optical and laser systems and subsystems for use in the industrial, communications, electronics, and instrumentation markets. Moreover, it’s a leader in the silicon carbide (SiC) market. SiC is a material used in high-performance chips.
This laser-making company has recently been garnering investor attention since it poached the CEO of Lattice Semiconductor, Jim Anderson, and made him its own CEO. Anderson has been a desirable executive for many companies since during his time at Lattice, shares of the company roughly octupled in value. Hence, companies like Coherent, Inc. (NASDAQ:COHR) were vying for his guidance, and this company managed to win him over.
However, even under new, stronger leadership, Coherent, Inc. (NASDAQ:COHR) still has several challenges to face. As of this May, the company had a significant debt load, which has been harming its profitability. Additionally, the P/E ratio of this stock is currently 24.5 versus the sector median of 22.8, so Coherent, Inc. (NASDAQ:COHR) is also slightly overvalued. This position might also explain Coherent, Inc.’s (NASDAQ:COHR) recent declines in September.
In total, 47 hedge funds were long Coherent, Inc. (NASDAQ:COHR) in the second quarter, with a total stake value of $1.6 billion.
Next Century Growth Investors, LLC mentioned Coherent, Inc. (NASDAQ:COHR) in its second-quarter 2024 investor letter:
“Coherent Corp. (NYSE:COHR) is a market leader in engineered materials, optoelectronic components, and lasers for use across various end markets, with attractive growth opportunities in areas such as the data center and electric vehicles. COHR recently hired a new CEO with a track record of enhancing business strategy to deliver consistent revenue growth and margin expansion, and we believe he has the opportunity to do the same at COHR.”
9. Vistra Corp. (NYSE:VST)
Weekly Decline: 13.49%
Number of Hedge Fund Holders: 92
Vistra Corp. (NYSE:VST) is an energy company offering retail electricity and power generation services. It is based in Irving, Texas.
The reason we’ve added an energy company to our list is that this specific company has the potential to benefit from the growing popularity of generative AI since rising AI use is directly related to rising energy needs. Vistra Corp. (NYSE:VST) is investing significantly in alternative energy sources, so it’s in a good position to meet these rising needs. As a result, many investors are paying more attention to this stock.
This March, Vistra Corp. (NYSE:VST) also completed an acquisition of Energy Harbor. Through this acquisition, the company has increased its presence as a player in the nuclear energy space. So those investors looking for hidden AI stocks may benefit from considering Vistra Corp. (NYSE:VST) for their portfolios. With its nuclear portfolio Vistra Corp. (NYSE:VST) is well-positioned to capitalize on AI-driven electricity demand as major hyperscalers pen contracts with nuclear energy providers for low-cost alternative fuels.
Vistra Corp. (NYSE:VST) was seen in the portfolios of 92 hedge funds in the second quarter, with a total stake value of $4.03 billion.
8. Fabrinet (NYSE:FN)
Weekly Decline: 13.87%
Number of Hedge Fund Holders: 31
Fabrinet (NYSE:FN) is an electronic manufacturing services company based in George Town, Cayman Islands. It provides optical packaging and precision optical, electro-mechanical, and electronic manufacturing services.
Fabrinet (NYSE:FN) had been performing pretty well until September began, primarily because of the company’s stellar results in the fiscal fourth quarter of 2024. The quarter’s results went well beyond average analyst estimates, bringing in revenue of $753 million, up 15% year-over-year, and non-GAAP (adjusted) net income of $88 million, up 29% year-over-year. In contrast, analysts only expected revenue of $733 million on the top line.
This quarter was Fabrinet’s (NYSE:FN) fourth in a row in which the company generated record revenues and EPS figures. The company has also mentioned that it will be expanding its existing stock buyback program, with the new authorization encompassing $139.5 million worth of ordinary shares. This represents a significant opportunity for shareholder value returns and also highlights Fabrinet (NYSE:FN) management’s confidence in its growth potential.
Despite this, since Fabrinet (NYSE:FN) sees a lot of its revenue come in from new AI products in datacom, the current negative news surrounding AI stocks may be responsible for bringing the stock down. However, since the company has proved in fiscal 2024 that it’s on an impressive growth trajectory, it would be ill-advised to entirely ignore this AI player.
We saw 31 hedge funds holding stakes in Fabrinet (NYSE:FN) in the second quarter, with a total stake value of $575.7 million.
First Pacific Advisors mentioned Fabrinet (NYSE:FN) in its second-quarter 2024 investor letter:
“Fabrinet (NYSE:FN) is a contract manufacturer of optical communications components and modules. The company has a dominant position in hard-to-replicate precision-manufacturing technologies and an enviable track record of execution. The majority of Fabrinet’s sales are to networking equipment manufacturers, but it has been successfully diversifying into the data center, industrial, auto, and medical end-markets. FN’s stock jumped after reporting June 2023 earnings – datacenter sales increased 50% sequentially and more than 100% over the previous year, driven by their 800-gigabyte transceivers for Artificial Intelligence applications. The company also announced that Nvidia is a 10%+ customer.
Fabrinet was a top-five holding in the Fund before its June 2023 earnings announcement. Since then, the stock has appreciated considerably and we have trimmed in keeping with our risk management policies. Given the growth in its forward earnings estimates, Fabrinet trades in line with its historical earnings multiples and remains a top five position for us.”
7. Broadcom Inc. (NASDAQ:AVGO)
Weekly Decline: 15%
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) is a reputable semiconductor company. It supplies semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide devices and analog III-V-based products. It’s also a leader in the custom ASICs market.
Many investors in AI stocks consider Broadcom Inc. (NASDAQ:AVGO) to be the preferred provider of AI networking solutions. This is primarily because of the company’s Jericho3-AI fabric, which connects up to 32,000 GPUs in high-compute data centers.
An additional plus point for Broadcom Inc. (NASDAQ:AVGO) investors is that it has more diverse revenue streams than other AI players, like Nvidia. Broadcom Inc. (NASDAQ:AVGO) not only offers AI networking solutions but also provides wireless chips and accessories for use in 5G-capable smartphones. Additionally, the company offers optical components and solutions to industrial and automotive companies. Diversification in its business model thus ensures that Broadcom Inc. (NASDAQ:AVGO) rakes in impressive revenues each quarter.
In spite of all this, Broadcom Inc. (NASDAQ:AVGO) has been hit like many other AI stocks this September, primarily because performance does not match up to expectations – regardless of how well the company is actually performing. Investors continue to want more, leading to disappointed hops when these expectations are not being met. Still, Broadcom Inc. (NASDAQ:AVGO) remains a good AI stock to consider picking up.
Broadcom Inc. (NASDAQ:AVGO) was seen in the 13F holdings of 130 hedge funds in the second quarter, with a total stake value of $20.04 billion.
Mar Vista Investment Partners, LLC mentioned Broadcom Inc. (NASDAQ:AVGO) in its second-quarter 2024 investor letter:
“During the quarter, we established new investments in Broadcom Inc. (NASDAQ:AVGO) and Meta Platforms. We initiated a position in Broadcom in Q2. As a skilled aggregator, Broadcom acquires firms, streamlines their operations, and invests R&D dollars in mission critical products that generate industry leading profit margins, robust cash flows and high returns on invested capital. Its primary markets include AI accelerators targeting generative AI applications, networking & wireless semiconductors, and mission-critical infrastructure software solutions.
Broadcom is well-positioned to benefit from the rapidly expanding demand for custom AI accelerator chips that support the evolution of the generative AI market. The company is the second-largest producer of AI accelerator chips behind Nvidia and leads the market in custom AI ASIC chips. Its customers include leading hyper scalers like Alphabet and Meta who are turning to Broadcom for custom silicon due to its performance and cost advantages. We believe the company is a direct beneficiary of a multi-year capital cycle driven by hyper scalers building out next-generation AI factories.
Broadcom recently acquired VMware, the leader in virtualization software targeting the enterprise market. The integration of VMware is tracking ahead of plan as management has simplified its product bundles, transitioned to a subscription revenue model, and reduced operating costs. We believe this simplified go-to-market structure will result in strong top-line revenue growth and expanding operating margins. We believe Broadcom will compound intrinsic value per share in the mid-20% range over the intermediate term as it benefits from the AI-infrastructure build-out, a cyclical recovery in its legacy semiconductor business, and modestly accelerating growth from its infrastructure software business as VMware is successfully integrated.”
6. Marvell Technology Group Ltd (NASDAQ:MRVL)
Weekly Decline: 15.13%
Number of Hedge Fund Holders: 74
Marvell Technology Group Ltd (NASDAQ:MRVL) is another semiconductor company on our list. It provides data infrastructure semiconductor solutions spanning the data center core to the network edge. It also competes with Broadcom in the custom ASICs market.
While Marvell Technology Group Ltd (NASDAQ:MRVL) performed well in the fiscal 2025 second quarter sequentially, results were less impressive when considered year-over-year. Revenue for the quarter was $1.27 billion, up 10% sequentially but down 5% year-over-year. This loss is primarily attributed to Marvell Technology Group Ltd’s (NASDAQ:MRVL) losses since GAAP diluted loss per share was reported at $0.22.
The main segments of Marvell Technology Group Ltd (NASDAQ:MRVL) that posed a challenge were enterprise networking and carrier infrastructure, with revenue for the former falling by 54% and the latter falling by 72% year-over-year. GAAP operating expenses came in at $688 million, coupled with a GAAP net loss for the second quarter of $193.3 million.
Considering the fact that Marvell Technology Group Ltd (NASDAQ:MRVL) is currently focusing on leveraging AI-driven demands in data centers, these results have been disappointing for investors, who expected more from a company operating actively in the AI space. As a result, the stock has seen declines in the first week of September, and many investors are deciding to wait and see how the stock develops further instead of buying into it right now.
A total of 74 hedge funds were long Marvell Technology Group Ltd (NASDAQ:MRVL) in the second quarter, with a total stake value of $3.6 billion.
Artisan Partners mentioned Marvell Technology Group Ltd (NASDAQ:MRVL) in its second-quarter 2024 investor letter:
“During the quarter, we initiated new GardenSM positions in CCC Intelligent Solutions, Marvell Technology, Inc. (NASDAQ:MRVL) and Insmed. Marvell Technology is a semiconductor company offering networking, secure data processing and storage solutions to customers worldwide. We believe Marvell has among the broadest range of intellectual property in technological areas (e.g., high-bandwidth data switching and storage applications) that position it well for the growing requirements of data centers, wireless networks and autos. Several of the company’s product lines (e.g., custom silicon, optical connectivity and switching) are benefiting from the growth of AI data centers. And we believe a significant opportunity exists for the company to help design and manufacture cost-effective custom data center chips that would help cloud providers reduce their reliance on expensive graphics processing units (GPUs). Furthermore, like many other semiconductor companies, a portion of its business may be poised for a cyclical recovery after the industry’s recent inventory correction.”
5. Super Micro Computer, Inc. (NASDAQ:SMCI)
Weekly Decline: 15.69%
Number of Hedge Fund Holders: 47
Super Micro Computer, Inc. (NASDAQ:SMCI) is an information technology company based in San Jose, California. It develops and manufactures high-performance server and storage solutions based on modular and open architecture.
The services that Super Micro Computer, Inc. (NASDAQ:SMCI) offers are essential for businesses investing in AI since server and storage services are necessary for building the infrastructure to support next-generation technologies and complex AI models.
As a result, business has been great for Super Micro Computer, Inc. (NASDAQ:SMCI). In the second quarter of fiscal 2025, the company generated revenue of $1.27 billion, above the midpoint of guidance. This growth was driven mainly by stronger demand from Super Micro Computer, Inc.’s (NASDAQ:SMCI) data center end market.
Despite all this, analysts have been downgrading Super Micro Computer, Inc. (NASDAQ:SMCI) because of concerns over the company’s delayed annual report. This uncertainty has led to many analysts valuing the stock similarly to other hardware manufacturers with lower growth trajectories. Poor analyst opinions of Super Micro Computer, Inc. (NASDAQ:SMCI) may thus be one of the factors contributing to the stock’s recent decline.
In the second quarter, 47 hedge funds were long Super Micro Computer, Inc. (NASDAQ:SMCI), with a total stake value of $1.5 billion.
4. ASML Holding N.V. (NASDAQ:ASML)
Weekly Decline: 15.96%
Number of Hedge Fund Holders: 81
ASML Holding N.V. (NASDAQ:ASML) is a semiconductor materials and equipment company based in Veldhoven, Netherlands. It offers advanced semiconductor equipment systems, including lithography, metrology, and inspection systems.
The main selling point for ASML Holding N.V. (NASDAQ:ASML) is that it has a monopoly on crucial EUV technology that’s needed to make advanced semiconductors and memory chips. However, analysts are now beginning to look at the stock with more scrutiny. This is primarily because the company’s earnings are not expected to grow as fast as its high multiple implies.
Generally, ASML Holding N.V. (NASDAQ:ASML) is expected to see growth in the rest of 2024 and through 2025 – the only issue is that this growth does not seem enough. This bearish sentiment, coupled with the general disillusionment with AI stocks in the market today, is resulting in many investors shying away from ASML Holding N.V. (NASDAQ:ASML) shares, leading to the inevitable decline of the stock in September.
ASML Holding N.V. (NASDAQ:ASML) had 81 hedge funds long its stock in the second quarter, with a total stake value of $9.6 billion.
3. Bloom Energy Corporation (NYSE:BE)
Weekly Decline: 17.5%
Number of Hedge Fund Holders: 29
Bloom Energy Corporation (NYSE:BE) is another energy stock on our list and yet another hidden AI stock investors have been considering recently. It offers solid-oxide fuel cell systems for on-site power generation.
Like Vistra, Bloom Energy Corporation (NYSE:BE) is poised to benefit from rising energy demands from the rapidly growing AI sector. To meet these demands, the stock has recently partnered with CoreWeave, Inc., through which the energy company will deploy its proprietary fuel cells to generate on-site power for CoreWeave at a high-performance data center in Illinois.
This connection to the AI space could be one factor explaining Bloom Energy Corporation’s (NYSE:BE) recent fall. However, the bigger issue for investors is analyst opinions on the company. Jefferies analyst Lloyd Byrne specifically has recently called Bloom Energy Corporation (NYSE:BE) out for offering minimal transparency to its investors in terms of a deal to sell 500 MW of its fuel-cell boxes to Korea’s SK Group. The uncertainty surrounding this deal relates to how it will progress, and company management hasn’t done much to dispel this uncertainty.
There were 29 hedge funds long Bloom Energy Corporation (NYSE:BE) in the second quarter, with a total stake value of $190.8 million.
2. Celestica Inc. (NYSE:CLS)
Weekly Decline: 19.71%
Number of Hedge Fund Holders: 38
Celestica Inc. (NYSE:CLS) is an information technology company based in Toronto, Canada. It provides supply chain solutions to tech firms and has been benefitting immensely from the growing demand for AI-related hardware. The company is a leading provider of connectivity products for data centers and is renowned for its 400G and 800G switches.
Like other AI stocks, Celestica Inc. (NYSE:CLS) has seen a shocking decline in the first week of September. As a result, the stock has gotten caught up in a global sell-off of highly appreciated AI stocks, which is making many investors still sticking with Celestica Inc. (NYSE:CLS) consider exiting their positions.
Additionally, recent fears surrounding the American economy have also instilled concern among Celestica Inc. (NYSE:CLS) shareholders. Since this company’s business is highly cyclical and volatile, considering the fact that its growth is dependent on customer demand, many investors are worried about falling customer demand forecasts and what this may mean for Celestica Inc. (NYSE:CLS). The only position that might work with this stock is if you buy and hold on to it long-term since only then would you be able to generate a meaningful return on your investment. Otherwise, Celestica Inc. (NYSE:CLS) is not looking too attractive for short-term investors.
We saw 38 hedge funds long Celestica Inc. (NYSE:CLS) in the second quarter, with a total stake value of $843.9 million.
1. BigBear.ai Inc. (NYSE:BBAI)
Weekly Decline: 20.37%
Number of Hedge Fund Holders: 9
BigBear.ai Inc. (NYSE:BBAI) is a provider of AI-powered decision intelligence solutions. It is based in Columbia, Maryland, and offers national security, supply chain management, and digital identity solutions.
This small company has been getting mixed reviews over the years, with many investors considering the stock to not be worth investing in. BigBear.ai Inc.’s (NYSE:BBAI) revenue growth history has not been too impressive. In 2021, the company generated $146 million in revenue, and this figure only grew by 6% in 2022 to $155 million. Additionally, revenues remained flat in 2023, which was well below the $388 million projection.
This history, coupled with a difficult macroeconomic environment, has made many investors bearish when it comes to BigBear.ai Inc. (NYSE:BBAI). Additionally, one of the company’s major customers, Virgin Orbit, also went bankrupt in 2023, resulting in revenue streams becoming more constrained. This is a particularly concerning development since BigBear.ai Inc. (NYSE:BBAI) has customer concentration issues – in 2023, 49% of the company’s revenue came from only three clients. All in all, considering the current market situation surrounding AI stocks, BigBear.ai Inc. (NYSE:BBAI) may be too risky of an investment.
Nine hedge funds were long BigBear.ai Inc. (NYSE:BBAI) in the second quarter, with a total stake value of $408,000.
We believe that AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the ones mentioned in our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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