5 Most Promising AI Stocks According to Hedge Funds

In this article, we discuss the 5 most promising AI stocks according to hedge funds. To read the detailed analysis of the AI industry, go directly to the 11 Most Promising AI Stocks According to Hedge Funds.

5. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 180

NVIDIA Corporation (NASDAQ:NVDA) develops and sells computer graphics processors, chipsets, and related multimedia software. With a few AI-integrated solutions and products like NVIDIA AI and HGX H200 under its belt, the company recently announced that it will be unveiling new AI innovations at CES 2024.

34 Wall Street analysts covered NVIDIA Corporation (NASDAQ:NVDA), and 31 kept a Buy rating on the stock. The average price target of $661.35 had an upside of 34.45% at the time of writing on December 19.

On December 11, NVIDIA Corporation (NASDAQ:NVDA)’s CEO Jensen Huang said that the company is interested in setting up a chip production base in Vietnam. The company plans to support the country in advancing its AI ecosystem through talent training and partnering up with local tech firms.

Ave Maria mentioned NVIDIA Corporation (NASDAQ:NVDA) in its third quarter 2023 investor letter. Here is what it said:

“The Fund added two new positions in the quarter. The Fund initiated a position in Apollo, which grew to be 5.9% of the Fund’s assets by the end of the quarter. The Fund also initiated a small position in NVIDIA Corporation (NASDAQ:NVDA), which is the leading manufacturer of graphic processing units that are the computing power behind much of the artificial intelligence industry environment supporting the broader group of energy infrastructure stocks.”

4. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Holders: 221

Alphabet Inc. (NASDAQ:GOOGL) is a holding company and it is focused on innovation through AI, as evident in its AI-focused products and solutions like its chatbot Bard and more. The company’s Class-A shares are represented by the ticker symbol GOOGL.

On December 13, Alphabet Inc. (NASDAQ:GOOGL) launched its Gemini Pro large language model. While the large language model is free for clients as of now, the company mentioned that it plans on it being “competitively priced” later.

On December 13, Alphabet Inc. (NASDAQ:GOOGL)’s Google launched MusicFX as part of its AI Test Kitchen. The AI tool can be used by customers to create music and it utilizes Google’s MusicLM and DeepMind’s watermarking technology and SynthID.

Alphabet Inc. (NASDAQ:GOOGL) was mentioned in White Brook Capital Partners’ third quarter 2023 investor letter. Here is what it said:

“The magnificent seven, that underpin the S&P 500 performance, which includes Alphabet Inc. (NASDAQ:GOOG), now comprise almost 30% of the market capitalization of the S&P500. At least three of the seven stocks have heightened downside risk and suffer from already high penetration, weakening end markets, competitive risk, and lofty valuation. They have been remarkably resilient to increased interest rates and the potential for slowing growth. Small and midcap stocks, on the other hand, have been systemically penalized by fears of recession and continue to price that eventuality even as significantly better outcomes have become more probable. Today, it’s relatively easy to find attractive investments in this segment.”

3. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Holders: 234

Meta Platforms, Inc. (NASDAQ:META) is a tech conglomerate and one of the leading companies in today’s AI race with its AI-integrated features in social networking apps, Meta AI, and more.

On December 8, BofA maintained a Buy rating and $384 price target on Meta Platforms, Inc. (NASDAQ:META)’s stock. The firm highlighted the company’s recurring revenue models owing to its AI-focused innovations.

According to Insider Monkey’s database, the hedge fund sentiment was quite positive toward Meta Platforms, Inc. (NASDAQ:META) in Q3. In the quarter, 234 funds were bullish on the stock, up from 225 funds in the previous quarter. Rajiv Jain’s GQG Partners was the most significant investor in the company and increased its stake by 33% to 11.1 million shares worth $3.34 billion.

White Brook Capital Partners commented on Meta Platforms, Inc. (NASDAQ:META) in its third quarter 2023 investor letter. Here is what it said:

“The magnificent seven, that underpin the S&P 500 performance, which includes Meta Platforms, Inc. (NASDAQ:META), now comprise almost 30% of the market capitalization of the S&P500. At least three of the seven stocks have heightened downside risk and suffer from already high penetration, weakening end markets, competitive risk, and lofty valuation. They have been remarkably resilient to increased interest rates and the potential for slowing growth. Small and midcap stocks, on the other hand, have been systemically penalized by fears of recession and continue to price that eventuality even as significantly better outcomes have become more probable. Today, it’s relatively easy to find attractive investments in this segment.”

2. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 286

Amazon.com, Inc. (NASDAQ:AMZN) is a Washington-based tech company that is driven to integrate AI in its numerous services and tools like its generative artificial intelligence (AI) powered assistant called Q, Amazon Polly, and more.

On December 18, it was reported that Amazon.com, Inc. (NASDAQ:AMZN) is pushing to obtain more sports media rights by considering investing in Diamond Sports Group. The sports group owns the media rights for several major league baseball teams and several national hockey league teams.

On November 28, Amazon.com, Inc. (NASDAQ:AMZN)’s Amazon Web Services unveiled a new generative artificial intelligence chatbot known as Q.

Amazon.com, Inc. (NASDAQ:AMZN) was mentioned in Polen Capital’s third quarter 2023 investor letter. Here is what it said:

“Amazon continues to showcase its place as one of the most competitively advantaged companies in the world. The company has made significant progress in managing costs and better leveraging existing capacity, driving a strong recovery in its profitability. We think there’s additional room for improvement.

AWS growth seems to be stabilizing even while management continues to work with clients to optimize their infrastructure spend. Roughly 90% of global IT spending remains on premise. We believe this will eventually flip, with most IT spending ultimately moving to the cloud over time. We think AWS will be a significant beneficiary of this transition.

Further, our investment case on company profitability driven by AWS and advertising continues to unfold, delivering nearly $8 billion in free cash flow over the trailing twelve months and a net margin of 5%. We expect both to move higher with the mix shift of more profitable businesses growing fastest continuing to take effect.

At Amazon’s current price, we believe the company is well positioned to deliver a mid-teens or higher total shareholder return for our clients over the next five plus years without a Herculean effort from the business. It simply needs to continue executing on current businesses and growing into the capacity it built during and immediately after the pandemic.”

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 306

Microsoft Corporation (NASDAQ:MSFT) is a leading tech company that provides AI-integrated platforms, products, and tools like Azure AI.

On December 19, it was announced that Microsoft Corporation (NASDAQ:MSFT) and ASGN Incorporated (NYSE:ASGN) will be collaborating on NextGen artificial intelligence (AI) technologies, including Copilot for Microsoft 365 and Azure OpenAI Service.

On December 19, it was reported that Microsoft Corporation (NASDAQ:MSFT) and Elevat Inc. entered a technical partnership to bring innovation to the Internet of Things (IoT) landscape through Elevat Machine Connect and Microsoft Azure Edge.

Claret Asset Management mentioned Microsoft Corporation (NASDAQ:MSFT) in its Q3 2023 investor letter. Here is what the firm said:

“We have mentioned in the last letter that the “magnificent seven”, including Microsoft Corporation, dominated the performance of the S&P 500. We might have left you with the feeling that we are bearish because we don’t find the Magnificent 7 attractive. Let us make it clear: we are just not so pessimistic as to believe there are only 7 growth opportunities in the entire global equity market. In fact, we are optimists and think opportunity is abundant. Just not in everyone’s current 7 favorite stocks.”

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