In this article, we discuss the 33 Most Important AI Companies You Should Pay Attention To.
Artificial intelligence has led to a much-needed market rally in the technology industry over the past year. The benchmark S&P 500, dominated by tech giants, is up nearly 20% in the past year. The tech-heavy NASDAQ Composite is up over 21%. In light of easing inflation numbers and rate cuts, market analysts had forecast a jump in interest around growth options for 2024. However, the AI buzz has served to snowball this ordinary interest into an extraordinary wave of optimism around the whole economy. Although tech stocks have been the biggest beneficiary, there is little doubt that AI will soon penetrate other sectors of the economy, from manufacturing and supply chain, to transportation, entertainment, and retail.
There are numbers that illustrate this argument in quantifiable terms. Across the economic spectrum, investments in AI are increasing at a rapid pace. For example, according to a recent report on the AI industry by renowned investment bank Goldman Sachs, established businesses around the world are expected to spend nearly $1 trillion on developing AI infrastructure in the coming years. Investments in AI startups are also booming. So far in 2024, venture capital firms have made around 200 deals with AI firms, investing nearly $22 billion. The average size of a round of funding for AI startups is more than $100 million with an average valuation of more than $1 billion. In contrast, these numbers for non-AI startups are $20 million and $200 million.
Key players who were early to catch on to the AI trend have leapfrogged competitors. Stocks of companies that make graphics processing units (GPUs), specialized AI chips, and generative AI products have soared. In general, the median returns of AI-linked firms on the S&P 500 are 20% compared to 2% for non-AI stocks. On the NASDAQ Composite, AI firms are responsible for 90% of the overall returns on the border index. Analysts expect these gains to translate into earnings and GDP growth. Joseph Briggs, a senior global economist at Goldman Sachs, argues that in the next ten years, AI is likely to automate 25% of all work tasks and raise US productivity by 9% and GDP growth by more than 6%.
Research presented in the keynote address to the 2024 EMW Conference by Philippe Laffont of Coatue Management suggests that these gains may be the beginning of a new super cycle for the tech industry, following previous cycles such as PCs in the 1980s, networking in the 1990s, wired internet in the 2000s, and mobile internet in the 2010s that led to the popularity of the cloud. However, investors have more reason to be optimistic about this growth since it compares favorably to cycles of the past. Software and internet experts Kash Rangan and Eric Sheridan contend that tech companies seem to be investing in AI products by tying the spending to the revenues, ensuring a safety net that had not existed in previous cycles.
Since the beginning of the AI wave in early 2023 following the launch of ChatGPT by California-based Open AI, the focus of the industry has shifted from software towards AI hardware and infrastructure. AI infrastructure firms have added nearly $6 trillion to their market capitalization since the first quarter of 2023. Before a killer AI application can emerge or large scale AI automation can begin – Daron Acemoglu, a Turkish-American economist at MIT, predicts this will take more than a decade – new areas of AI infrastructure are emerging. These include utilities, energy, internet, and industrials (see 20 Industrial Stocks That Are Already Riding the AI Wave). The gains of prominent utility, industrial, energy, and internet firms critical to AI development rival the returns of traditional AI stocks.
Investments in energy and utilities are important if this AI potential is to be realized. Goldman analysts Carly Davenport and Alberto Gandolf expect the proliferation of AI technology and the accompanying need to maintain data centers to drive an increase in demand for utilities that has not been seen in a generation. It remains to be seen, however, if the pace at which AI is progressing will keep pace with investments in power. This is because the utilities sector is highly regulated and has supply chain constraints that will not be easily overcome. If investments are made at the levels needed, it might still be a few years before their full benefits make their way towards AI firms.
All this hullabaloo around AI has investors on edge, with ghosts of previous bubbles haunting their memories. Although comparisons to the past are the surest way of finding your footing in unfamiliar territory, data shows that this may not be the wisest strategy considering present market dynamics. For example, at the height of the dotcom bubble just before the turn of the millennium, some software firms were trading at 132x their earnings. The five-year average for this value in 1999 was only 37x. In contrast, in 2023, even the biggest AI stocks were trading at P/E multiples of around 39x. The five-year average for this last year was 40x, showcasing why AI valuations may not be overextended.
Indeed, AI firms can target multi-trillion dollar valuations, in line with some of the biggest software and internet firms on the market presently. That is the revolutionary power of AI technology. Over the past decade, tech giants have achieved a scale that few other businesses have before them. By combining billions in users, hundreds of billions in revenue, and tens of billions in net income, these handful of firms have reached 80% of the valuation of the Fortune 500. They are category leaders in fields such as smartphones, ecommerce, cloud, and software as a service (SaaS) – all of which AI promises to disrupt – and ahead of competitors in research and development spending. This is why many of these firms are aggressively incorporating AI into their business models, in hopes of holding onto their thrones.
Some investors remain concerned about AI firms bullying software companies on the market in the near and long term. A cursory glance at the Price-to-Sale (PS) ratios for software stocks in the past decade reveals that after topping out in 2021, the valuations for SaaS firms are near their all time lows. Some of this pessimism around software can also be attributed to slower earnings growth. Coatue research shows that over the next twelve months, only 1% of SaaS stocks expect 30% earnings growth, down from 30% at the peak of the Saas craze. As the future of human-machine interaction moves towards communication in natural language, software firms who adapt to AI changes are more likely to survive than those that do not.
As the markets become decoupled from rate hikes, inflation figures go down, and the prospects of a soft landing become brighter, the macro outlook for AI looks favorable as well. The main driver for future S&P 500 growth in terms of earnings remains AI. According to Coatue research, in the next three years, AI-linked stocks will grow at a compound annual rate of almost 20%, beating their non-AI counterparts by nearly 14 percentage points. 40% of the earnings from tech will be accelerated by AI tailwinds in the period. All indicators point towards a brighter future for AI investors in the long term.
Our Methodology
For this article, we selected AI infrastructure stocks with more than 25% gains in 2024 that are also popular among hedge funds. These are the best AI stocks to buy according to the market participants and 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).
A scientist at a computer station, surrounded by a neural network of artificial intelligence code.
33 Most Important AI Companies You Should Pay Attention To
33. Fabrinet (NYSE:FN)
Number of Hedge Fund Holders: 33
YTD Return as of August 1: 16%
Fabrinet (NYSE:FN) offers optical packaging, along with precision optical, electro-mechanical, and electronic manufacturing services. The company produces fiber-optic cables that power telecommunications, AI data centers, and the global Internet infrastructure. While demand in the telecom sector remains relatively soft, the surge in AI activity has helped alleviate these concerns. Fabrinet’s datacom segment, focused on providing cables for AI data centers, has experienced rapid growth over the past two years. Starting at $88 million per quarter in 2022, the company recently reported that datacom revenue has surged to over $305 million.
In the third quarter earnings call, Seamus Grady, the CEO of Fabrinet (NYSE:FN), underlined how this 150% jump in datacom revenue had benefited from the rise in demand for 800 gigs technology for AI applications. NVIDIA, one of the biggest winners of the AI craze, is the flagship customer for Fabrinet.
32. Cognex Corporation (NASDAQ:CGNX)
Number of Hedge Fund Holders: 32
YTD Return as of August 1: 23%
Cognex Corporation (NASDAQ:CGNX) delivers machine vision products designed to capture and analyze visual data, automating manufacturing and distribution processes globally. The company is leading the integration of AI into machine vision technology. Earlier this year, Cognex introduced the Insight L38, the world’s first AI-enabled 3D industrial vision system. According to the company, this new product has already garnered twice the customer interest compared to its predecessor. Additionally, Cognex offers AI-powered modular tunnel vision systems and has integrated AI into its barcode readers for faster scanning capabilities.
Robert Willett, the CEO of Cognex Corporation (NASDAQ:CGNX), said during the second quarter earnings call that the company expected growth in semis as well as memory as AI made customers invest in chips and related offerings for growth in the latest tech domain. Willett noted that efforts to localize chip production bode well for the long term future of the company.
31. Teradyne, Inc. (NASDAQ:TER)
Number of Hedge Fund Holders: 34
YTD Return as of August 1: 25%
Teradyne, Inc. (NASDAQ:TER) designs, develops, manufactures, and sells automated test systems and robotics products globally. Recently, investments in advanced semiconductor manufacturing and fabrication have surged, exceeding $100 billion, as manufacturers scramble to meet the rising demand for complex chips essential for powering AI applications. This surge has driven up the demand for automated test equipment (ATE), a key area of expertise for Teradyne. ATEs are crucial for rapidly bringing AI devices to market, optimizing their yield, and enhancing silicon performance.
In the second quarter earnings call, Greg Smith, the CEO of Teradyne, Inc. (NASDAQ:TER), explained how Cloud AI products were driving strong demand for ATEs across chip and memory markets. In the first half of 2024, the company was able to exceed the revenue it had made from chipmakers in all of 2023.
30. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 150
YTD Return as of August 1: 25%
Apple Inc. (NASDAQ:AAPL) is a consumer electronics firm. The company is working to include AI products into the consumer electronics it markets, most notably the iPhone, expected to be released later this year. Some reports indicate that the firm will debut Apple Intelligence in the new phone. At a tech event earlier this year, the firm revealed some of the capabilities of the new AI offering, which included massive changes to popular iPhone applications like Siri, Genmoji, and Image Playground. There are rumors that the firm may put advanced features of the AI software behind some kind of a paywall.
Tim Cook, the CEO of Apple Inc. (NASDAQ:AAPL), praised the performance of in-house chips during the second quarter earnings call, noting that Mac computers were powered by Apple silicon with a powerful neural engine and privacy built in at the chip level. He said these computers would be able to take advantage of Apple Intelligence with Mac OS Sequoia, two new AI products of the firm.
29. Juniper Networks, Inc. (NYSE:JNPR)
Number of Hedge Fund Holders: 45
YTD Return as of August 1: 28%
Juniper Networks, Inc. (NYSE:JNPR) designs, develops, and sells network products and services worldwide. The company is playing the AI space through the manufacture and marketing of networking and cybersecurity products. The shares of the company have jumped after it received regulatory approval to be acquired by tech giant Hewlett Packard Enterprise. The latter hopes to use the AI profile of the former to capitalize on AI growth trends. The deal, worth nearly $14 billion. The networking products of Juniper are focused on AI-driven automation and cloud-based management.
Juniper Networks, Inc. (NYSE:JNPR) has differentiated itself in the AI space since it takes a broader approach towards the business, relying on network automation and diverse market segments for long-term growth. Competitors of the firm, like Arista, are more focused towards the increasing demand for high-speed data center networks and cloud computing.
28. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 302
YTD Return as of August 1: 30%
Amazon.com, Inc. (NASDAQ:AMZN) operates as a technology conglomerate with core interests in the ecommerce business. Contrary to public opinion, the company is investing heavily in incorporating AI into the tools it already markets, in line with efforts of competitors like Google and Microsoft. AI tools can improve the user experience on software offerings of these firms, enabling instant responses and pictorial representations of complex queries and prompts. In mid-July, the company announced that it would be adding more memory to so-called virtual agents that automate work for businesses. This would allow users to build on new requests with AI-enabled processing of prior ones.
Andrew Jassy, the CEO of Amazon.com, Inc. (NASDAQ:AMZN), said during the second quarter earnings call that the firm had invested in custom silicon in Trainium for training and Inferentia for inference. The firm has an eye on generative AI as it develops these chips. He added that the second versions of those chips with Trainium coming later this year were very compelling on price performance.
27. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 124
YTD Return as of August 1: 31%
Advanced Micro Devices, Inc. (NASDAQ:AMD) operates as a semiconductor manufacturer. It offers AI-enabled chips for several industries, including data center and cloud, personal computers, adaptive and embedded devices, and gaming. Recently, the CEO of tech giant Microsoft praised the Instinct MI300X AI accelerators, one of the premier AI offerings of AMD, as the best price-to-performance AI chip on the market. This is important for the latter since the former has projected that it could sell up to 50 million AI-enabled personal computers in the coming months.
Lisa Su, the CEO of Advanced Micro Devices, Inc. (NASDAQ:AMD), said during the second quarter earnings call that the firm was continuing to accelerate the AI traction as leading cloud and enterprise providers expanded availability of Instinct MI300X solutions marketed by the firm. She added that there were positive demand signals for general-purpose compute in both the client and server processor businesses.
26. GE Vernova Inc. (NYSE:GEV)
Number of Hedge Fund Holders: 18
YTD Return as of August 1: 32%
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. There has been an increase in demand for electricity as hyperscalers build AI data centers to power their AI software offerings. GE Vernova, as one of the foremost power firms in the US, is in a good position to take advantage of this boom. The company is also using AI to manage power more efficiently, recently releasing AI-powered autonomous inspection software designed to transform energy asset inspections.
Scott Strazik, the CEO of GE Vernova Inc. (NYSE:GEV), said during the first quarter earnings call that macro trends were continuing to create meaningful opportunities for the company to lead in energy transition. He noted that there was increasing demand for power generation driven by manufacturing growth, industrial electrification, and emerging AI data center needs. He added that there was a significant need for grid infrastructure investments to support both energy security and reliability goals.
25. Amphenol Corporation (NYSE:APH)
Number of Hedge Fund Holders: 51
YTD Return as of August 1: 32%
Amphenol Corporation (NYSE:APH) specializes in designing, manufacturing, and marketing electrical, electronic, and fiber optic connectors. The company offers a diverse range of products for AI companies, including chipsets, networking solutions, and server and GPU components. Additionally, it provides high-speed power connectors for data centers that handle AI computations for major software firms. Driven by the rising demand for AI-related products, Amphenol achieved over a 56% organic increase in datacom sales during the second quarter. To meet the growing volume and quality of orders from AI-enabled customers, the company plans to expand capital investments in the coming months.
Adam Norwitt, the CEO of Amphenol Corporation (NYSE:APH), commented during the second quarter earnings call that between March and June, bookings for the firm were particularly strong from IT datacom customers focused on artificial intelligence, even though traditional datacom orders also saw a nominal increase.
24. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 165
YTD Return as of August 1: 34%
Alphabet Inc. (NASDAQ:GOOG) is a California-based technology company that owns and runs the internet search engine Google. The firm is investing heavily in the AI space, developing several AI products, building AI data centers to power these products, and developing AI-focused chips. In late July, media reports indicated that Apple, one of the rivals of Alphabet in the software space, used AI chips designed by Google, a subsidiary of Alphabet, to build two key components of AI software infrastructure for a forthcoming suite of AI tools and features. This was in contrast to other tech giants who turned to NVIDIA for these chips.
Sundar Pichai, the CEO of Alphabet Inc. (NASDAQ:GOOG), said during the second quarter earnings call that year-to-date, the AI infrastructure and generative AI solutions for cloud customers offered by the company had already generated billions in revenues and were being used by more than 2 million developers.
23. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders: 78
YTD Return as of August 1: 43%
Lam Research Corporation (NASDAQ:LRCX) markets semiconductor processing equipment. The company is the third leading supplier of wafer fab equipment. This equipment is used by chipmakers in their chip manufacturing process. The demand for these chips has skyrocketed as firms seek to power their data centers with these chips for AI tasks. Over the past few years, the company has benefited from a focus on etch and deposition, two of the fastest-growing segments within the wafer market. These segments are growing faster than others due to increased demand in leading edge logic and memory.
Timothy Archer, the CEO of Lam Research Corporation (NASDAQ:LRCX), commented during the second quarter earnings call that the power of AI as a transformative business tool was still yet to be fully realized. He noted that the focus on AI model training was driving strong demand for GPUs and HBM. He added that as AI use cases expanded, investments for AI-enabled edge devices would play particularly well to the strengths of his firm in the long term.
22. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 246
YTD Return as of August 1: 44%
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. The firm has been aggressively marketing several AI products, including Meta AI, a virtual assistant powered with AI, as well as smart devices, like Meta Smart Glasses and Meta Quest, that use AI to provide computational power to individual users at their fingertips. The firm is also investing heavily in developing AI data centers that will serve individual customers and businesses with their AI needs on Meta devices across the world.
Mark Zuckerberg, the CEO of Meta Platforms, Inc. (NASDAQ:META), addressed the advertising market during the second quarter earnings call, as his company derives a significant portion of revenue from advertisements that run on the platforms it owns. He noted that AI was going to drive a change in advertising markets in the coming years, as even the creatives needed for marketing shifted towards AI assistants.
21. Flex Ltd. (NASDAQ:FLEX)
Number of Hedge Fund Holders: 44
YTD Return as of August 1: 44%
Flex Ltd. (NASDAQ:FLEX) offers manufacturing solutions across Asia, the Americas, and Europe, and is making significant strides in the AI sector. The firm is important to the AI world since it can provide up to 80% coverage of data center needs for large and hyperscale customers that are building their AI profiles. The company is also one of the few AI-focused industrial stocks with global reach and exposure to the automotive industry. This AI power translates into earnings, as data center and power-related revenues account for over 25% of the total revenue for the firm. A key competitive edge for the company lies in the power pods it makes for data centers, which have lower build costs and shorter lead times, enabling Flex customers to scale more quickly than their competitors.
In the first quarter earnings call, Revathi Advaithi, the CEO of Flex Ltd. (NASDAQ:FLEX), remarked that there was strong demand for cloud solutions in the CEC business of the firm as AI helped drive a transition in data center development and working. She also added that this was helping the demand for power products made by the company.
20. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 78
YTD Return as of August 1: 46%
QUALCOMM Incorporated (NASDAQ:QCOM) develops and sells foundational technologies for the wireless industry. The company is famous for providing consumer electronics firm Apple with the chips needed to power their devices, like smartphones, laptops, and PCs. However, Apple has started to develop their own chips, threatening the core business of the chipmaker. However, AI-fueled tailwinds have served to offset some of these concerns as hyperscalers engage in a race to develop AI data centers, powered by chips. Concerns around export controls to China are also offset by the increased government spending on chip manufacturing inside the United States.
Cristiano Amon, the CEO of QUALCOMM Incorporated (NASDAQ:QCOM), remarked during the third quarter earnings call that continued expansion of AI features was a precursor to next-generation smartphones which will become AI-centric with pervasive on-device AI working across applications in the cloud. The CEO added that Qualcomm was very well-positioned to help drive this transformation across the industry in the coming years.
19. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 75
YTD Return as of August 1: 52%
ASML Holding N.V. (NASDAQ:ASML) makes and sells advanced semiconductor equipment systems. One of the premier customers of the company is Taiwan Semiconductor Manufacturing (TSM), the leading chip supplier in the world. In the second quarter, TSM saw a 40% year over year growth in revenue, driven mostly by strong demand for AI chips from hyperscalers. This, in turn, benefited ASML too as the stock skyrocketed in anticipation of a similar bump in earnings. ASML is important to the AI world since it provides lithography systems that are needed to produce microchips. These microchips can be found in smartphones, computers, tablets, cars, industrial equipment, and other consumer electronic products.
Peter Wennink, the CEO of ASML Holding N.V. (NASDAQ: ASML), said during the second quarter earnings call that there was healthy growth this year for the firm, primarily driven by AI-related demand for both Logic and Memory but also expected from other end markets as inventory levels improved. He added that there were secular growth drivers for the company in the semiconductor end markets, such as energy transition electrification and AI.
18. KLA Corporation (NASDAQ:KLAC)
Number of Hedge Fund Holders: 58
YTD Return as of August 1: 54%
KLA Corporation (NASDAQ:KLAC) markets process control and yield management solutions for the semiconductor industry. The firm is poised to benefit from the CHIPS Act, a legislation that aims to jumpstart chip manufacturing in the US. It is also likely to ride the AI wave sweeping the market as companies invest in AI data centers that are based around these chips. The company is expected to market services like wafer inspection systems for advanced nodes, as well as strength in testing and packaging segments. The firm recently revealed that during the last three months of the fiscal year 2024, AI service business grew to $614 million, up 4% sequentially and 14% year over year.
Richard Wallace, the CEO of KLA Corporation (NASDAQ:KLAC), remarked during the fourth quarter earnings call that foundry logic, a continuation of scaling and incorporation of new technologies and slowly rising capital intensity continued to be a long-term tailwind for the firm. He added that In memory, technology development investments for AI, high-bandwidth memory, and the improving supply demand environment supported an expected return to growth for memory markets in 2025.
17. Arista Networks, Inc. (NYSE:ANET)
Number of Hedge Fund Holders: 69
YTD Return as of August 1: 56%
Arista Networks, Inc. (NYSE:ANET) engages in the development, marketing, and sale of data-driven, client to cloud networking solutions for data center, campus, and routing environments. The company has been focusing on scalability and reliability in AI networking infrastructure, partly in an effort to target new hyperscale customers. The firm is marketing an Ethernet architecture based on merchant silicon. Per the firm, this new system helps facilitate rapid deployment. This rapid deployment is the need of the hour for many leading hyperscalers and Tier-2 cloud providers as the AI race heats up.
Jayshree V Ullal, the CEO of Arista Networks, Inc. (NYSE:ANET), detailed during the second quarter earnings call that data centers were evolving to holistic AI centers, where the network was the epicenter of AI management for acceleration of applications, compute, storage, and the wide area network. Ullal noted that these AI centers needed a foundational data architecture to deal with the multimodal AI datasets. Artista was providing the differentiated Extensible Operating System (EOS) network data link systems for running these datasets.
16. Analog Devices, Inc. (NASDAQ:ADI)
Number of Hedge Fund Holders: 65
YTD Return as of August 1: 57%
Analog Devices, Inc. (NASDAQ:ADI) designs, manufactures, tests, and markets integrated circuits (ICs), software, and subsystems products. The firm provides high performance solutions that integrate analog, digital and memory in a reduced form factor. This helps companies in various sectors, including the industrial, where AI is fueling extraordinary demand for high bandwidth memory and high performance compute solutions. This catalyst has been driving a fresh surge in demand for the instrumentation and test business for the company, particularly in System on a Chip (SoC) and memory test.
Vincent Roche, the CEO of Analog Devices, Inc. (NASDAQ:ADI), said during the second quarter earnings call that data center customers were investing in new vertical power architectures to meet the intensified energy and processing demands of AI compute systems. Per Roche, the solutions offered by his firm in this regard reduced power losses by up to 35% compared to existing architectures. This product is now gaining traction with hyperscalers.
15. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 115
YTD Return as of August 1: 57%
Broadcom Inc. (NASDAQ:AVGO) supplies semiconductor infrastructure software solutions. The firm has become famous in the AI space over the past few years as it leads the industry in developing application-specific integrated chip (ASIC), a specialized 5 nanometer chip that is designed to run AI tasks. Chinese internet-tech firm ByteDance recently announced that it would be partnering with Broadcom for the production of these chips, with the designs of the latter helping the former with manufacturing outside the US. Tech giants like Amazon, Alphabet, and Meta, all customers of Broadcom, are set to increase their spending on these chips for the development of their AI data centers in the coming months.
Hock E Tan, the CEO of Broadcom Inc. (NASDAQ:AVGO), said during the second quarter earnings call that despite continued cyclical weakness in semiconductor revenue from enterprises and telcos, the firm managed to grow organic revenue, excluding that from recently purchased cloud firm VMware, by 12% year-on-year. The growth was attributed to AI spending, with the firm posting over $3 billion in AI revenue, a 280% year on year increase compared to the same period in the previous year.
14. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 44
YTD Return as of August 1: 58%
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. This increase could prove to be a meaningful growth driver in revenues for power firms like NRG that are already using AI models within to improve sales and energy management strategies. The company is also investing heavily in renewables to make this transition easier for ESG investors.
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 15% to 20% free cash flow before growth per share CAGR target.
13. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 79
YTD Return as of August 1: 58%
Applied Materials, Inc. (NASDAQ:AMAT) provides equipment, services, and software for the semiconductor industry. One of the key businesses of the firm is the development, manufacture, and marketing of manufacturing equipment that is used to fabricate semiconductor chips. These chips are then used by firms across the world to develop their AI products. Some of the major customers of the firm include giants such as Intel, Samsung, and Apple, among others. The company has also made a name for itself in the storage market, offering packaging services for high-bandwidth memory (HBM). The surge in demand for HBMs as a result of increased AI data center development translates to an expected four-time increase in HBM packaging revenues for the firm this year when compared to last year.
Gary Dickerson, the CEO of Applied Materials, Inc. (NASDAQ:AMAT), said during the second quarter earnings call that across all device types, the firm expected revenue from the advanced packaging product portfolio to grow to almost $1.7 billion this year. Looking further ahead, he noted that he saw opportunities for this business to double again as heterogeneous integration was more widely adopted beyond the AI data center.
12. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 115
YTD Return as of August 1: 62%
Micron Technology (NASDAQ:MU) makes and sells memory and storage products. These memory and storage products, like DRAM and NAND, form the base of AI data centers through which AI software firms market products like real-time natural language processing, personal assistants, and AI artwork, among others. One of the premier memory products of the firm is high-bandwidth memory (HBM) solutions. In the latest earnings call, the company revealed that the HBM production was sold out for 2024 and 2025. Many hyperscalers rely on Micron memory products, including tech giant Apple that is emerging as a major AI software firm.
Sanjay Mehrotra, the CEO of Micron Technology (NASDAQ:MU), said during the third quarter earnings call that despite near-steady demands for memory in PCs and smartphones over the past few months, the firm expected the price of the products it sold to jump in the next few months, primarily because robust AI-driven demand for data center products was causing tightness on leading-edge nodes.
11. Coherent Corp. (NYSE:COHR)
Number of Hedge Fund Holders: 50
YTD Return as of August 1: 65%
Coherent Corp. (NYSE:COHR) develops, manufactures, and markets engineered materials, optoelectronic components, and devices worldwide. The firm has emerged as an important player in the AI space, marketing 800G transceivers which read and write data at a speed of 800 gigabytes per second. This rapid processing is crucial to software companies who base the computational power of their AI products on this speed. The previous track record of the firm is also impressive, indicating it can deliver on the promises it makes to investors. It has innovated at every step of the way over the course of twenty years, leading optoelectronic markets through booms in telecom, enterprise data centers, and web hyperscalers.
In the third quarter earnings call, Chuck Mattera, the CEO of Coherent Corp. (NYSE:COHR), detailed how the AI revolution was helping the company grow earnings, noting that the rise in demand for 800G transceivers had led to a 50% sequential increase in non-GAAP earnings per share for his business during the quarter. He further said that AI tailwinds would continue to bolster earnings of the company in the fourth quarter and into 2025.
10. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 45
YTD Return as of August 1: 69%
Palantir Technologies Inc. (NYSE:PLTR) builds and deploys software platforms for the intelligence community to assist in counterterrorism investigations and operations. The firm is aggressively marketing the Artificial Intelligence Platform (AIP), a comprehensive AI product designed to seamlessly integrate with other software offerings of the firm. The firm hopes to grow the commercial side of the business with AIP, which currently accounts for around 25% of the total revenue. In the second quarter of 2024, the firm signed more than 27 deals worth $10 million or more, and closed nearly $1 billion in technology cross ventures. Most of this business came due to the rise in demand for AIP.
Ryan Taylor, the chief revenue officer of Palantir Technologies Inc. (NYSE:PLTR), highlighted during the second quarter earnings call that the revenue expectations from AI infrastructure build-out have grown from $200 billion to $600 billion per year in just nine months, noting that his firm was uniquely positioned to take advantage of this as it delivered enterprise AI solutions on a scale unlike any other firm, most of whom were still testing AI prototypes and had not started large-scale production of products, a significant barrier to entry in the AI universe.
9. Celestica Inc. (NYSE:CLS)
Number of Hedge Fund Holders: 38
YTD Return as of August 1: 85%
Celestica Inc. (NYSE:CLS) offers a range of product manufacturing and related supply chain services. It is playing the AI market through the manufacture and marketing of connectivity products for AI data centers, which include 400G and 800G switches, and storage solutions. Mega customers like Google and Amazon are building their AI computational capacity by investing in these connectivity solutions. The annual revenue of the firm is estimated to be around $8 billion this year, the highest it has been in over a decade. The revenue from generative AI and machine learning for the company comprises over $1.2 billion, more than triple from 2022, before the AI wave swept the market.
In the second quarter earnings call, Rob Mionis, the CEO of Celestica Inc. (NYSE:CLS), noted that there was strong demand for the Hardware Platform Solutions marketed by the firm, comprising storage, compute, and networking products. This healthy demand, likely to increase in the coming months as hyperscalers invest in AI data centers, had helped the firm post a more than 50% year-to-year increase in connectivity revenues in the second quarter.
8. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 135
YTD Return as of August 1: 86%
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) makes and sells integrated circuits and semiconductors. The company dominates the semiconductor manufacturing industry, controlling 90% of the market for leading process nodes. These nodes underpin the success of companies like NVIDIA and Broadcom who rely on the technical and manufacturing expertise of TSM for their AI chip success. The rapid integration of AI into computers and smartphones is likely to bolster the dominant position of the firm in the AI world. This position has increased the pricing power of TSM, and the new N2 node marketed by the firm, designed to be faster while requiring less power, will be close to 20% higher in price than the predecessor.
CC Wei, the CEO of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), said during the second quarter earnings call that the foundry business was likely to grow globally by 10% year-on-year in 2024. The CEO detailed that strong AI and high-end smartphone-related demand would fuel further upside for his company in the coming months.
7. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Holders: 82
YTD Return as of August 1: 88%
Dell Technologies Inc. (NYSE:DELL) designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services. In the first quarter of the 2025 fiscal year, the company revealed that orders for the AI-optimized servers it markets had increased to $2.6 billion, with shipments up more than 100% sequentially to $1.7 billion. The firm has shipped more than $3 billion of these AI servers over the last three quarters as the demand for AI products skyrockets. The AI server backlog is $3.8 billion, growing sequentially by almost $900 million.
Michael Dell , the CEO of Dell Technologies Inc. (NYSE:DELL), highlighted the future plans of the company as AI adoption increased. He noted that his firm was partnering with NVIDIA to deliver the next generation of technology to customers. The remarks hinted at Dell using the new Blackwell chips made by NVIDIA in their new devices. Prominent companies like Tesla will be using Dell devices to power their AI startups.
6. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 54
YTD Return as of August 1: 89%
Constellation Energy Corporation (NASDAQ:CEG) generates and sells electricity in the United States. Tech giants who are building data centers have linked their power purchase efforts with sustainability initiatives. Constellation is one of the leading sustainable energy producers in the US and has impressive reliability. For example, in the earnings report released in June, the firm revealed that the sites it generated power from were operational 94.4% of the time. The firm also recently announced a partial ownership stake in the South Texas Electric Generating Station, a 2,645 MW dual-unit nuclear plant located in Texas.
Joseph Dominguez, the CEO of Constellation Energy Corporation (NASDAQ:CEG), said during the second quarter earnings call that data centers, linked to AI development, were crucial to the national security and economic competitiveness of the US. He noted that colocation of data centers with nuclear power plants was the fastest and most cost-effective way to develop critical digital infrastructure without burdening customers with expensive upgrades.
5. Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Holders: 85
YTD Return as of August 1: 97%
Vertiv Holdings Co (NYSE:VRT) designs, manufactures, and services critical digital infrastructure technologies and life cycle services for data centers, communication networks, and commercial and industrial environments. It is one of the early entrants in the data center market, and as a result, has a multitude of strategic partnerships and brand value in the arena as AI leads to a surge in demand for the products offered by the company. Some of these products include power management solutions, protecting data centers against surges and blackouts, as well as thermal management solutions that protect against the overheating of powerful computing networks.
Gio Albertazzi, the CEO of Vertiv Holdings Co (NYSE:VRT), detailed during the second quarter earnings call that the demand for high density liquid-cooled chips was a reality that was accelerating demand for AI infrastructure not only in North America, but across other large markets, especially in China. The CEO noted that the firm had a leading position in the chip-focused liquid cooling domain with a diversified product range and a strong customer base.
4. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 79
YTD Return as of August 1: 141%
Vistra Corp. (NYSE:VST) operates as an integrated retail electricity and power generation company. As the demand for AI increases, the power needed to keep AI data centers running has led to a surge in demand for electricity, benefiting the stocks of power firms like Vistra. The demand for power is so significant that hyperscalers are building their AI data centers near Vistra power plants. The total energy share of data centers in the overall power grid is expected to increase from 3% to around 10% in the coming years. Nuclear energy, one of the core assets of Vistra, is likely to be the biggest beneficiary of this as tech giants look to relatively cleaner sources of power than fossil fuels for their AI transformation.
Jim Burke, the CEO of Vistra Corp. (NYSE:VST), said during the first quarter earnings call that in addition to the 35 gigawatt of additional power demand by 2030 due to data center linked activities, there were multiple other growth drivers for the firm, including continued reshoring of industrial activity, as evidenced by multiple large chip manufacturing site build outs, as well as increased electrification of commercial industrial and residential loads, and strong population growth.
3. Arm Holdings plc (NASDAQ:ARM)
Number of Hedge Fund Holders: 29
YTD Return as of August 1: 163%
Arm Holdings plc (NASDAQ:ARM) architects, develops, and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers. The microprocessors marketed by the firm are used by companies who make smartphones, laptops, automotive systems, and cloud data centers. The firm licenses the designs to manufacturers, generating revenue from these licenses and from royalties on the products sold. It has a strong presence in the AI market, evidenced by recent AI-linked agreements with tech giants like Google and Amazon. The company is expected to grow revenues at a compound annual rate of over 30% in the coming months due to AI demand.
Rene Haas, the CEO of Arm Holdings plc (NASDAQ:ARM), said during the first quarter earnings call that companies everywhere were investing in AI, driving revenue and bookings for his firm which posted a fourth consecutive quarter of record earnings, growing revenue by 39% year-on-year. License revenue during the period was up 70% year-on-year while royalty revenue was up 17% year-on-year.
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 186
YTD Return as of August 1: 168%
NVIDIA Corporation (NASDAQ:NVDA) provides graphics, computing and networking solutions. In addition to manufacturing world-class GPUs for AI, some of the other AI products of the firm include generative AI, cybersecurity AI, data analytics, conversational AI, and vision AI. The company also markets full stack innovation to turn any organization into an AI enterprise. In the fourth quarter of the fiscal year, the firm beat revenue estimates by a whopping $1.5 billion. The revenue grew by 262% year-on-year, and the non-GAAP earnings per share jumped from $0.88 to $5.16. The firm was able to deliver these numbers as it dominates the GPU market with 88% market share in the category.
Jensen Huang, the COO of NVIDIA Corporation (NASDAQ:NVDA), said during the first quarter earnings call that the industry was going through a major transformation as companies shifted from an existing trillion-dollar traditional data center base to AI data centers. Huang detailed that beyond cloud service providers, generative AI had expanded to consumer Internet companies and enterprise, sovereign AI, automotive, and healthcare customers, creating multiple multibillion-dollar vertical markets.
1. Super Micro Computer, Inc. (NASDAQ:SMCI)
Number of Hedge Fund Holders: 35
YTD Return as of August 1: 219%
Super Micro Computer, Inc. (NASDAQ:SMCI) develops and manufactures high performance server and storage solutions based on modular and open architecture. Some of the AI products it offers include complete server, storage systems, modular blade servers, blades, workstations, full racks, networking devices, server subsystems, server management software, and security software. In the fourth quarter of 2024, the firm posted a record revenue of more than $5.3 billion, up 143% year-on-year, and exceeding the full year revenue for 2022. AI SuperClusters, an interconnected network of computing resources especially designed for AI, are a specialty product of the company.
Charles Liang, the CEO of Super Micro Computer, Inc. (NASDAQ:SMCI), highlighted during the fourth quarter earnings call that AI SuperClusters were helping the company build a prominent profile among hyperscalers. Liang revealed that his company was using the latest DLC liquid cooling technology in these clusters, helping customers reduce deployment times.
While we acknowledge the potential of Super Micro Computer, Inc. (NASDAQ:SMCI) 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 but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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