In this article, we will present the 30 most important AI stocks according to BlackRock.
Artificial intelligence has been the buzzword around Wall Street for many months but a recent selloff in the technology sector has ignited fears of an AI bubble. Investors are looking towards experts to help them make better investment decisions. In a recent commentary on the AI market, as well as the macro conditions surrounding the economy, the investment titan highlighted multiple factors contributing to market volatility, including recession concerns, pre-US election jitters, and profit-taking. Despite these, the investment firm noted, US corporate earnings have been resilient, with the S&P 500 showing 13% growth in the second quarter of 2024, surpassing expectations. The AI sector remained a key theme of this growth, but BlackRock relented that investors were becoming cautious about the scale of AI spending by tech companies. In this environment, the investment firm recommended diversifying investments into energy, utilities, real estate, and resources tied to AI infrastructure.
Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.
Overall, the wealth wizard advocated for broadening investment exposure beyond US tech stocks, particularly into sectors benefiting from ongoing AI buildout, while remaining cautious about Japanese equities and US short-term bonds. In the weekly commentary, the advisory highlighted that the US economy appeared more resilient than anticipated, with broad-based earnings growth suggesting stability. However, inflation remained a concern, and BlackRock expects it to limit how much the Federal Reserve can cut interest rates in the medium term. The investment firm noted that markets were pricing in significant rate cuts, but expectations seemed overblown given persistent inflation pressures, especially from wage growth. The investment titan suggested looking to European markets for income opportunities and remaining underweight on short-dated US Treasuries in favor of medium-term maturities and quality credit.
The investment firm also underlined the broader market backdrop in the weekly commentary, noting that US stocks fell due to recession fears, with the S&P 500 experiencing its largest weekly drop in 18 months. Treasury yields also declined as investors priced in expected Fed rate cuts. The advisory, however, viewed these recession fears as overstated, pointing to US jobs data that showed slowing but steady employment growth. Analysts at the investment firm maintained that wage gains were unlikely to bring inflation back to the Fed’s 2% target in the near term but cautioned that the August Consumer Price Index (CPI) data would be crucial in determining inflation’s trajectory. A surge in immigration had contributed to easing wage inflation, according to the financial firm’s report, but the long-term labor supply trend would influence the Fed’s ability to adjust rates.
Read more about these developments by accessing Billionaire Stan Druckenmiller Is Betting On AI Infrastructure, Tobacco and Industrial Stocks and 10 Tech Stocks to Monitor Amid Market Volatility According to Bernstein Analyst.
Our Methodology
For this article, we selected AI stocks by consulting an investor note from prominent investment firm BlackRock. 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).
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Most Important AI Stocks According to BlackRock
30. Nu Holdings Ltd. (NYSE:NU)
Number of Hedge Fund Holders: 59
Nu Holdings Ltd. (NYSE:NU) owns and runs a digital banking platform in Brazil, Mexico, Colombia, Cayman Islands, Germany, Argentina, the United States, and Uruguay. The stock has been performing on several metrics over the past few months. The user base of the firm continues to expand, reaching 100 million customers at the end of the first quarter of 2024. Revenue is also improving, growing a whopping 66% year-over-year in the first three months of the year. The net income during this period was in excess of $440 million, comfortably beating analyst expectations across Wall Street.
The first quarter results of Nu Holdings Ltd. (NYSE:NU) show that it has managed to increase the average monthly revenue per active user by 30% year-on-year, while maintaining the average monthly customer service costs below $1. The company has lots of room to grow as it is still only the fourth largest financial institution in Latin America. The company recently acquired Hyperplane, a Silicon Valley-based data intelligence company, to enhance artificial intelligence capabilities.
29. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Holders: 38
Robinhood Markets, Inc. (NASDAQ:HOOD) operates as a financial services platform in the United States. Some of the most interesting AI use cases for the firm are in data analytics for trading insights and optimized trading experiences. In the former, the firm uses AI to process vast amounts of real-time market data to provide users with advanced insights, news updates, and trend analysis. This can include identifying market movements, stock price fluctuations, and opportunities for investors. In the latter, AI is used to enhance performance by improving the speed and accuracy of trade execution. By using machine learning algorithms, Robinhood can predict market liquidity and volatility, helping to optimize buy and sell orders.
Robinhood Markets, Inc. (NASDAQ:HOOD) has grabbed the attention of analysts on Wall Street due to popularity among retail traders. Barclays recently upgraded the stock to Equal Weight from Underweight with a price target of $20, up from $18. In an investor note, the advisory noted that over the past year, the business models at Robinhood had matured and while risks remained, there were also potential sales catalysts from new products and regulation, with valuations also starting to look more sensible.
28. Lemonade, Inc. (NYSE:LMND)
Number of Hedge Fund Holders: 17
Lemonade, Inc. (NYSE:LMND) provides various insurance products through various channels in the United States, Europe, and the United Kingdom. The company uses AI to streamline and enhance various aspects of its operations, providing a more efficient and customer-friendly experience. Some of these include automated claims processing through AI bots, customer service and underwriting through AI-powered virtual assistants, and fraud detection via AI algorithms that analyze vast amounts of data to detect anomalies and patterns that might indicate fraudulent claims. The use of AI products helps the insurance firm reduce costs and maintain lower premiums for customers.
Lemonade, Inc. (NYSE:LMND) also makes use of customer data and behavior analytics to provide personalized recommendations and adjust pricing models based on individual risk profiles. The use of AI for this purpose improves speed, accuracy, and overall customer satisfaction while minimizing operational costs.
27. C3.ai, Inc. (NYSE:AI)
Number of Hedge Fund Holders: 18
C3.ai, Inc. (NYSE:AI) operates as an enterprise artificial intelligence (AI) software company in North America, Europe, the Middle East, Africa, the Asia Pacific, and internationally. The company recently posted earnings for the first fiscal quarter. With 71 new agreements and 51 pilot deals, the revenue growth returned to above 20%. The fiscal quarter two guidance showed 24% year-on-year growth, with a strong history of beating targets. In the first fiscal quarter, the company produced 70% non-GAAP gross margins and cut the operating loss to $16.6 million. It also reported positive cash flows and forecast positive free cash for the fiscal year.
C3.ai, Inc. (NYSE:AI) is viewed with bullish sentiments on Wall Street. Wedbush recently lowered the price target on the stock to $30 from $40 and kept an Outperform rating, highlighting that the firm delivered Q1 results featuring top and bottom-line beats, which would be largely overlooked by the ASC 606 adjustment where revenue previously called software would now be called services under new guidance, impacting the company’s subscription and services growth going forward.
26. R1 RCM Inc. (NASDAQ:RCM)
Number of Hedge Fund Holders: 42
R1 RCM Inc. (NASDAQ:RCM) provides technology-driven solutions that transform the patient experience and financial performance of hospitals, health systems, and medical groups. The firm purchased Cloudmed in 2022 and is likely to leverage the technological focus and access to data of the latter to advance an AI program that aims to automate processes to drive further efficiency of economics to be shared with customers. Recent news in this regard is positive. The company has partnered with tech giant Microsoft to improve billing coding productivity. 95 out of 100 top hospitals in the US are customers of Cloudmed.
R1 RCM Inc. (NASDAQ:RCM) purchased Cloudmed in a deal worth $4 billion. With the integration of Cloudmed, R1 can use artificial intelligence and automation to analyze large volumes of medical records, payment data and complex medical insurance models to identify opportunities to deliver additional revenue for healthcare providers. Cloudmed partners with more than 3,100 healthcare providers and helped recover more than $1.5 billion of underpaid or unidentified revenue for clients annually.
25. Medtronic plc (NYSE:MDT)
Number of Hedge Fund Holders: 52
Medtronic plc (NYSE:MDT) makes and sells device-based medical therapies. The company is using AI in medical domains like clinical decision support, creating new indications, and delivering personalized treatments. GI Genius is the most famous artificial intelligence product of the firm, but there are many others that investors might have overlooked. For example, the firm markets AI-AiBLE, a digital ecosystem for neurosurgery that helps surgeons plan, perform and analyze spinal and cranial procedures. Medtronic Diabetes uses machine learning for automatic insulin delivery in the MiniMed 780G System, which features a Meal Detection Technology algorithm.
Medtronic plc (NYSE:MDT) has invited bullish commentary from analysts. Barclays recently raised the price target on the stock to $105 from $104 and kept an Overweight rating, detailing that the company’s fiscal 2025 second half would feature accelerating earnings growth driven by a broad pipeline of innovative new products and easing currency hedging expense. The advisory added that these dynamics will drive increased investor interest and improve stock performance over the next 12 months.
24. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders: 67
Intuitive Surgical, Inc. (NASDAQ:ISRG) develops, manufactures, and markets products that enable physicians and healthcare providers to enhance the quality of and access to minimally invasive care. In addition to the use of AI in robotics, the firm is also exploring the use of AI to develop a machine learning tool that will make use of real-time artificial intelligence to help predict risks related to surgical complications. The fifth generation of the da Vinci robot, the premier robotic surgery tools marketed by the firm, incorporates AI into the platform that will enable the overall package to evolve over time with software updates. It has 10,000x compute power compared to the previous iteration.
Intuitive Surgical, Inc. (NASDAQ:ISRG) is one of the favorite healthcare stocks on Wall Street. Citi analyst Joanne Wuensch recently raised the price target on the stock to $560 from $512 and kept a Buy rating, noting that Q2 was another wild ride for the medical technology sector. The advisory underlined that the earnings prints brought several eye-opening and frankly shocking deliveries, changes to guidance, and stock price reactions.
23. Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX)
Number of Hedge Fund Holders: 24
Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) operates as a clinical-stage biotechnology company that engages in decoding biology by integrating technological innovations across biology, chemistry, automation, data science, and engineering to industrialize drug discovery. The company has become the hottest AI stock in the biotech world after NVIDIA, one of the leaders of the AI boom, invested $50 million in the company last year. Since then, Recursion has increased focus on AI products, recently revealing that it would be purchasing AI biotech startup Exscientia.
Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) is viewed with caution on Wall Street. Jefferies analyst Dennis Ding recently lowered the price target on the stock to $6 from $8 and kept a Hold rating, noting that new Phase 2 CCM data showed an encouraging trend on MRI at the high 400mg dose and appeared to improve with time, but there were no improvements in patient or physician reported outcomes at 12 months.
22. Jones Lang LaSalle Incorporated (NYSE:JLL)
Number of Hedge Fund Holders: 21
Jones Lang LaSalle Incorporated (NYSE:JLL) operates as a commercial real estate and investment management company. Christian Ulbrich, the CEO of the firm, outlined during the second quarter earnings call how the AI data center prospects were a tailwind for the stock in the long-term. The CEO underlined that the communications and technology sector had performed better than expected in the second quarter, largely because average lease prices had more than doubled as large tech companies took place to support data center operations. The CEO noted that despite a slower start to 2024 across many markets, demand for high-quality space with sustainable solutions and automated technology was expected to drive long-term growth.
Market experts are bullish about the long-term prospects for Jones Lang LaSalle Incorporated (NYSE:JLL). Raymond James analyst Patrick O’Shaughnessy recently raised the price target on the stock to $268 from $246 and kept a Strong Buy rating, underlining that US capital markets activity was up modestly in Q2, growing 2% year over year, according to MSCI Real Capital Analytics, a meaningful improvement from a 12% decline last quarter and snapped a streak of seven consecutive quarters of y/y declines in capital markets activity.
21. Iron Mountain Incorporated (NYSE:IRM)
Number of Hedge Fund Holders: 24
Iron Mountain Incorporated (NYSE:IRM) is a real estate investment trust that focuses on storage and information management services. The company is one of the best real estate plays in the AI universe. Some important numbers illustrate this observation. In the past quarters, data center storage revenue has been the fastest growing segment of the company, with growth figures of 30% year over year. The company now runs 26 hosting facilities related to data centers, up from 24 last year. It also leases 260 megawatts of electricity to customers. The current rapid expansion of AI data centers and the increase in demand for electricity could be an immediate catalyst for profits, supporting the premium valuation of the REIT.
Iron Mountain Incorporated (NYSE:IRM) has earned bullish calls from Wall Street. Wells Fargo recently raised the price target on the stock to $110 from $90 and kept an Overweight rating, noting that data center demand was solid in Q2, albeit not at records, although demand would re-accelerate again in the second half of 2024. The advisory underlined that hyperscale leasing slowed a bit in Q2 after a record Q1, but the stage was set for a massive second half of the year, with multiple gigawatt deals in the pipeline.
20. Equinix, Inc. (NASDAQ:EQIX)
Number of Hedge Fund Holders: 56
Equinix, Inc. (NASDAQ:EQIX) is a California-based real estate trust that operates data centers and other technology assets. It is hard to identify stocks that are exposed to AI growth trends but have strong fundamentals and consistent dividend growth to back up the AI hype. Equinix offers the perfect blend of growth and value in this regard. The company is well positioned to take advantage of AI trends that are supercharging rentals. Per real estate firm CBRE, the amount of data-center space in the US grew 26% last year, even as a record amount was under construction. The price of available space was also rising while vacancy rates were negligible — a sign that supply was not keeping up with demand.
Equinix, Inc. (NASDAQ:EQIX) has forced Wall Street analysts to pay attention to this aspect of the AI boom. Truist recently raised the price target on the stock to $935 from $915 and kept a Buy rating, noting that the price target increase was based on second quarter results and adjusted revenue growth and expense assumptions.
19. GE Vernova Inc. (NYSE:GEV)
Number of Hedge Fund Holders: 92
GE Vernova Inc. (NYSE:GEV) is an energy company that engages in the provision of various products and services that generate, transfer, orchestrate, convert, and store electricity. The company was recently named a top investment idea in the clean energy sector by investment advisory Jefferies. The advisory initiated coverage of the stock with a Buy rating and a price target of $261. In an investor note, Jefferies analyst Julien Dumoulin-Smith noted that positive estimate revisions and conservative guidance should make the shares shine versus peers, and forecast FY 2025 and 2026 EBITDA of $3.5 billion and $4.7 billion, respectively, compared to the FactSet consensus of $3 billion and $4.2 billion.
The demand for electricity is rising as hyperscalers construct AI data centers to support their AI software offerings. GE Vernova Inc. (NYSE:GEV), one of the leading power companies in the US, is well-positioned to capitalize on this surge. The company is also leveraging AI to enhance power management, having recently launched AI-powered autonomous inspection software aimed at revolutionizing energy asset inspections.
18. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 56
NRG Energy, Inc. (NYSE:NRG) operates as an energy and home services company in the United States and Canada. The firm is emerging as an important AI firm because it produces and sells electricity, vital for powering the AI needs of companies and consumers alike. Electricity demand has witnessed an increase in North America for the first time in almost four decades. Larry Coben, the CEO of NRG Energy, Inc. (NYSE:NRG), underlined during the first quarter earnings call that electrification trends compounded by GenAI data center growth forecast a signal of transformative rises in power demand. Coben noted that this enabled the firm to remain on track to achieve a 15% to 20% free cash flow growth target.
NRG Energy, Inc. (NYSE:NRG) has invited bull calls from Wall Street in recent weeks. Wells Fargo recently raised the price target on the stock to $120 from $110 and kept an Overweight rating, noting that post Q2, the advisory caught up with CFO Bruce Chung and Treasurer Kevin Cole of the energy firm. In an investor note, the advisory stated that it sounded like the site opportunity was still in the early stages, and there were doubts that there would be any agreements struck in 2024, with colocation deals likely be front of meter, as on-site generation would probably require backup power from the grid.
17. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 71
Constellation Energy Corporation (NASDAQ:CEG) generates and sells electricity in the United States. The rising demand for power driven by AI data center construction has brought energy companies into the spotlight. Earlier this week, Morgan Stanley projected that increasing electricity prices would favor companies like Constellation Energy Corporation (NASDAQ:CEG) in the coming months. The investment bank anticipates that capacity prices in much of the PJM region could reach a $695/MW-day price cap, more than double the previous record of $270/MW-day set in the PJM July capacity auction, due to tight power supplies.
Constellation Energy Corporation (NASDAQ:CEG) has attracted a lot of attention on Wall Street. Argus recently lowered the price target on the stock to $200 from $240 but kept a Buy rating, noting CEG was a well-run, financially strong company that had an impressive history and valuable presence in the emerging industry. The advisory added that the company was poised to take advantage of the global transition to carbon-free energy, with recent results encouraging as electricity demand increases from data centers empowering AI.
16. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 92
Vistra Corp. (NYSE:VST) operates as an integrated retail electricity and power generation company. The energy consumption of data centers is projected to rise from 3% to around 10% of the total power grid in the coming years. Nuclear energy, a key asset of Vistra, is expected to benefit significantly as tech companies seek cleaner energy alternatives to fossil fuels for their AI-driven transformations. Jim Burke, the CEO of the company, mentioned during the first-quarter earnings call that in addition to the 35 gigawatts of extra power demand expected by 2030 from data center activities, several other factors were driving growth for the company. These included the ongoing reshoring of industrial production, highlighted by large chip manufacturing projects, increased electrification across industrial, commercial, and residential sectors, and robust population growth.
Vistra Corp. (NYSE:VST) is viewed with a bullish manner on Wall Street. Morgan Stanley recently raised the price target on the stock to $110 from $109 and kept an Overweight rating, highlighting that in July, utilities had outperformed the 1.22% return of the S&P by 560 bps, and the strong and stable free cash flow of Vistra was underappreciated at the current price.
15. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 100
QUALCOMM Incorporated (NASDAQ:QCOM) develops and sells foundational technologies for the wireless industry. Latest reports reveal that the company is exploring the possibility of buying the chip design business of Intel in a bid to improve the AI product line. One of the favored investments of the mobile chipmaker includes the design operations at the client PC design division of Intel. Analysts have predicted that the server business of Intel does not align with the long-term strategic goals of QCOM. Shipments for AI-enabled PCs are expected to rise in the coming months, with Microsoft and Apple dominating that market.
Wall Street remains bullish on QUALCOMM Incorporated (NASDAQ:QCOM) for the long term. Rosenblatt recently raised the price target on the stock to $250 from $240 and kept a Buy rating, noting the solid beat and raise quarter of the chipmaker as it aims to increase market share in premium Android handsets, Automotive cockpit, and the PC. The advisory further added that the next phase of AI growth was at the network edge, where the company was well positioned.
14. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 81
ASML Holding N.V. (NASDAQ:ASML) makes and sells advanced semiconductor equipment systems. The company has been in the headlines over the past few days after the business it had with China has come under scrutiny of the US and Dutch governments. Last week, Dutch authorities said they would expand export licensing requirements for the DUV immersion lithography systems sold by ASML, effectively aligning the policies of the US and Netherlands in this regard. China has expressed dissatisfaction over the move, even going as far as to say that it would damage the relationship between the two countries over cooperation in semiconductors.
ASML Holding N.V. (NASDAQ:ASML) continues to attract positive analysis from Wall Street. Argus recently raised the price target on the stock to $1,250 from $1,000 and kept a Buy rating, noting that the stock had sold off following Q2 results despite topping expectations on revenue and earnings on commentary signaling the potential for additional tightening on semiconductor exports and looked favorably valued at current prices. The advisory added that the comprehensive product portfolio of ASML was aligned with customers’ roadmaps, providing cost effective solutions in support of all applications from leading edge to mature nodes.
13. KLA Corporation (NASDAQ:KLAC)
Number of Hedge Fund Holders: 55
KLA Corporation (NASDAQ:KLAC) markets process control and yield management solutions for the semiconductor industry. The company is well-positioned to benefit from the CHIPS Act, a legislative initiative aimed at revitalizing chip manufacturing in the US. Additionally, it stands to gain from the growing AI trend as firms invest in AI data centers, which rely heavily on these chips. The firm is expected to offer services like wafer inspection systems for advanced nodes and strengthen its presence in testing and packaging segments. In the final three months of fiscal 2024, the company’s AI services business reached $614 million, reflecting a 4% increase sequentially and 14% growth year-over-year.
Richard Wallace, the CEO of KLA Corporation (NASDAQ:KLAC), noted during the fourth-quarter earnings call that long-term drivers, such as foundry logic, continued technology scaling, and the gradual rise in capital intensity, remain favorable for the company. He also mentioned that memory markets are expected to return to growth in 2025, driven by technological developments in AI, high-bandwidth memory, and an improving supply-demand balance.
12. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) supplies semiconductor infrastructure software solutions. The company recently posted earnings for the third quarter of 2024, reporting earnings per share of $1.24, beating market estimates by $0.03. The revenue over the period was more than $13 billion, up nearly 47% compared to the revenue over the same period last year and beating analyst expectations by $110 million. The firm revealed fourth quarter fiscal year 2024 revenue guidance of approximately $14 billion, including contribution from VMware, an increase of 51% from the prior year period. The fourth quarter fiscal year 2024 adjusted EBITDA guidance was approximately 64 percent of projected revenue.
Broadcom Inc. (NASDAQ:AVGO) earned bullish calls from Wall Street following the results. Benchmark reiterated a Buy rating on the stock with a price target of $210, noting that the earnings report of the company was solid, without any material soft points, but the AI business lacked the clear upside momentum the Street was looking for. However, the advisory recommended that investors take advantage of the near-term share price volatility with Broadcom remaining a key vehicle for participation in the industry’s AI adoption.
11. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders: 52
NXP Semiconductors N.V. (NASDAQ:NXPI) makes and sells various products related to semiconductors. Latest reports indicate that the European Commission has approved the construction of a new microchip manufacturing plant in the German city Dresden. The plant will cost $5.5 billion and will be built as a joint venture between Taiwan Semiconductor Manufacturing, NXP Semiconductors, and Infineon Technologies. The project mainly aims to serve chip demand for automotive and industrial applications. These two sectors have witnessed a surge in AI chip demand as AI drives revolutions in driving and automation.
NXP Semiconductors N.V. (NASDAQ:NXPI) is viewed with guarded optimism on Wall Street. TD Cowen recently lowered the price target on the stock to $310 from $330 and kept a Buy rating, noting that the slope of the recovery for the firm was disappointing, but stock reaction felt overblown, amplified by a view of investors that the shares were a place to hide within choppy broad-based semis.
10. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 120
Micron Technology (NASDAQ:MU) makes and sells memory and storage products. Despite significant investments in AI technology, the firm’s financial health remains robust, continuing to offer strong value compared to its competitors. Analysts predict the company’s third-quarter revenue will surge by over 90% year-over-year, with an expected earnings per share (EPS) increase of more than 200% for the same period. Projections suggest the firm will maintain a year-over-year revenue growth rate of over 40% for at least the next six quarters. Micron has already sold out high bandwidth memory capacity until 2025.
Micron Technology (NASDAQ:MU) has thus garnered positive attention from Wall Street due to its impressive performance. KeyBanc has given the stock an Overweight rating and a price target of $145. In a note to investors, the advisory expressed confidence in Micron’s ability to capture a larger share of the high-bandwidth memory market, potentially surpassing its share in traditional DRAM products. This is partly driven by concerns that Samsung may struggle to match Micron’s manufacturing yields in this area.
9. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 108
Advanced Micro Devices, Inc. (NASDAQ:AMD) operates as a semiconductor manufacturer. AMD CEO Lisa Su spoke during a recent Goldman Sachs conference, highlighting that the AI technology arc was a once in 50 years type of thing, and so her company had to invest in the huge opportunity before it. As part of this jump into AI, the company has been building an AI profile over the past few years that rivals top chipmakers. The market share of the firm as a provider of infrastructure for data centers has grown from single digits to about 30% in just a few years. Data center infrastructure has also expanded to more than 50% of the revenue of the company, per the latest quarterly earnings.
Advanced Micro Devices, Inc.’s (NASDAQ:AMD) data center business posted a record $2.8 billion in revenue during the second quarter, representing an 115% year-over-year increase. Under a larger plan to further cement a top position as an AI infrastructure provider, the company also announced last month it was acquiring ZT Systems in a deal worth close to $5 billion. ZT Systems designs and markets servers for AI data centers.
8. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 77
Applied Materials, Inc. (NASDAQ:AMAT) provides equipment, services, and software for the semiconductor industry. The shares have registered a steep fall in the past few days amid a broader selloff in the chip sector due to concerns about slowing growth. Applied Materials has also been impacted by a recent US government decision to add several technologies to an export control list, including quantum computing, advanced semiconductor manufacturing equipment, and additive manufacturing items, including equipment and components that can produce metal or metal alloy components. The export controls are likely to discourage firms like Applied Materials from doing business with Chinese entities.
Despite the negative headlines, Wall Street remains bullish on Applied Materials, Inc. (NASDAQ:AMAT) in the long term. JPMorgan analyst Harlan Sur recently raised the price target on the stock to $250 from $240 and kept an Overweight rating, noting that the company reported solid July quarter results driven by accelerating demand in advanced foundry/logic, DRAM, high bandwidth memory and ICAPs combined with sustained strength in services. The analyst added that the firm was well positioned to benefit from multiple upcoming technology inflections that should drive continued outperformance versus wafer fab equipment over the next several years.
7. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) makes and sells integrated circuits and semiconductors. In a recent media interview, one of the key suppliers of the company has pointed out that the boom in the AI industry has just begun, and TSM, as well as partners in the chip world, would likely witness a spur in demand for AI chips in the coming months, even as fears of a slowdown in growth spark a selloff in chip stocks. Hsu Ming-Chi recently revealed that his firm Scientech expected sequential quarterly sales growth in the back half of the year. Scientech provides chip-on-wafer-on-substrate packaging, an important element in chip manufacture which has been in short supply amid the AI boom.
Amid the high demand for chips, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is expected to achieve key production yield targets at a new Arizona facility on par with established plants in Taiwan. This would translate to the commencement of mass production of TSM chips in Arizona by 2025. According to reports, the yield rate in trial production at the first advanced US chip plant in Arizona is similar to comparable facilities in the southern Taiwanese city of Tainan.
6. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 165
Alphabet Inc. (NASDAQ:GOOG) is a California-based technology company that owns and runs the internet search engine Google. Latest reports indicate that the tech giant has partnered with electronics firm Samsung and chipmaker QUALCOMM to develop mixed reality smart glasses that can be linked to the AI power of smartphones. The project builds on an existing partnership between the three companies to develop mixed reality technology, which refers to the combination of augmented and virtual reality. The glasses would offer competition to similar products from Google rivals like Meta and Apple. The glasses aim to be more user-friendly compared to VR headsets made by Meta and Apple.
Alphabet Inc. (NASDAQ:GOOG) is one of the top AI picks on Wall Street. Wedbush has an Outperform rating on the stock with a price target of $025. In a recent investor note, the advisory acknowledged near-term headline risk to the shares associated with a pending antitrust trial, but noted that the overall risk to the business was limited based on recent financial disclosures related to adtech products.
5. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. Anthropic, the generative artificial intelligence company that is backed by Amazon, recently announced that it would be launching a version of Claude geared towards large businesses. Claude is an array of large language models developed by Anthropic. The move comes after OpenAI, a rival of Anthropic, launched ChatGPT for Enterprise in August. Both companies offer monthly subscriptions to their AI tools. Amazon has pledged more than $4 billion towards the AI startup over the past few months.
Amazon.com, Inc. (NASDAQ:AMZN) is viewed with bullish sentiment on Wall Street. Cantor Fitzgerald recently initiated coverage of the stock with an Overweight rating and $230 price target, citing retail margin expansion and AWS acceleration. The advisory said it saw a runway in both, but added that the magnitude was likely to moderate compared to trends over the past two years and the path was unlikely to be linear.
4. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a Washington-based technology company. Latest reports indicate that OpenAI, the generative artificial intelligence startup backed by Microsoft, has crossed the 1 million paid users barrier in the ChatGPT for business section. OpenAI launched ChatGPT in late 2022 to kickstart the AI boom. The tech giant has invested more than $10 billion in the AI startup already, and is potentially considering another large investment, along with Apple and NVIDIA, as the valuation of the startup touches close to $100 billion. OpenAI is considering higher-priced subscriptions to ChatGPT, perhaps $2,000 per month, as it launches new models like Strawberry and Orion.
Microsoft Corporation (NASDAQ:MSFT) was recently added to the Signature Picks list of investment advisory Wells Fargo. The advisory has an Overweight rating on the shares with a $515 price target. In an investor note, the advisory detailed that Microsoft was a leader and share gainer in cloud infrastructure and was positioned to benefit from a significant artificial intelligence-enabled product cycle forming. It added that there was a favorable setup ahead for the tech giant, as incremental server supply coming online would drive an Azure growth reacceleration in the second half of 2024.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 219
Meta Platforms, Inc. (NASDAQ:META) engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. AI deployments have already started benefiting the fundamentals of the company, evidenced by the strong performance in the ad market in the second quarter of 2024. Investment advisory Cantor Fitzgerald has taken note of these developments, recently naming the company among a basket of firms that the advisory considers top picks in the internet sector for 2024, even after accounting for micro and macro level risks in the space on a global scale.
Meta Platforms, Inc. (NASDAQ:META) earned an Overweight rating at Cantor Fitzgerald in a recent research report, where the advisory noted that the firm had plenty of levers to capture share gains as AI deployment could deliver incremental engagement, monetization, and revenue growth over the next 2–3 years. The advisory added that despite strong performance over the last 18 months, valuations in internet names were fairly reasonable and would benefit from the expectation for upcoming rate cuts, tempered by decelerating top-line growth.
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
Apple Inc. (NASDAQ:AAPL) is a consumer electronics firm. The company debuted the much-hyped iPhone 16 models earlier this week, launching the new models with Apple Intelligence, a suite of AI features that the firm hopes will result in a stronger upcycle for the new phones. Apple Intelligence will be available on new iPhones by this October. Some AI features of the new product include letting users create new emoji by typing a description of what they want, or pulling photos and movies automatically to create a storyline. Other examples include letting Siri automatically delete duplicate photos or updating contact information, adding photos to an album or more.
In an investor note, analyst Michael Ng of Goldman Sachs had earlier pointed out that Apple Inc. (NASDAQ:AAPL) stock had historically underperformed the S&P 500 by an average of 70 bps on the day of the iPhone announcement. Ng backed the event this year expect to be similarly immaterial to the stock price. However, Ng acknowledged that some surprises might still have an impact on the share price, including a price increase in new iPhone models and the debut of some earlier-than-expected AI features.
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) provides graphics, computing and networking solutions. The company is positioned well for mid-teens returns in the coming months due to a variety of factors, including strong AI chip demand, reasonable valuation, and robust earnings growth. The stock price has dropped amid a broader sell off in the tech sector, offering a buying opportunity for shrewd investors who have noticed that the P/E ratio of the firm is now in line with peers in the tech world, even as NVIDIA offers better growth prospects. An important catalyst that might spur the shares is the launch of Blackwell chips, possibly in the fourth quarter, driving strong demand from companies looking towards AI advancements.
Wall Street analysts are also overwhelmingly bullish on NVIDIA Corporation (NASDAQ:NVDA). Bank of America has a Buy rating on the stock with a price target of 165. In a recent investor note, the advisory named NVIDIA as the top sector pick, highlighting that near-term headwinds for the company could potentially create an enhanced buying opportunity with the stock trading within the lowest quartile of valuation in the past five years, even as it offers compelling growth at a compelling valuation.
While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA) 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 NVIDIA Corporation (NASDAQ:NVDA) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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