The pace of artificial intelligence development and deployment is “pretty terrifying”. That’s the sentiment echoed by Steven Adler, a former safety researcher at OpenAI. The remarks come amid growing concerns that robust AI systems capable of evading human control could come into being with catastrophic consequences.
Amid the safety concerns raised, tech giants and emerging startups are not showing signs of slowing down on AI spending. They are allocating billions of dollars on capital expenditures to accelerate the development of powerful AI systems. Bloomberg expects capital expenditures in the development of various AI solutions to exceed $200 billion in 2025, representing a $90 billion increase from last year.
Higher capital expenditure should result in new innovations resulting in the widespread use of AI in many industries. Similarly, AI is predicted to transform various sectors, including healthcare, retail, finance, and the automotive industry.
Nevertheless, billionaire investor Steve Cohen believes AI’s transformational shift could take decades to realize. “This is a 10- to 20-year theme. It’s going to affect everybody in how they conduct their lives, how they do their business,” Cohen said. “We’re still in the first, second inning of something that’s going to be transformational for the economy and the world. … It is such a dramatic, important shift that to ignore it, I think it’s a mistake.”
The CEO and chairman of hedge fund Point72 maintains that there may be ups and downs in the AI boom and that the volatility surrounding investments related to AI may worsen due to a lack of reliable information. However, the increasing need for cutting-edge AI technologies like deep learning and robotics may present difficulties for hardware parts like AI chips. That’s because the high processing demands of AI algorithms and machine learning models are beyond the capabilities of conventional CPUs and GPUs. Top tech firms must increase their expenditures and production to overcome these obstacles.
Because AI applications like generative AI and large language models require massive data processing, energy efficiency is another issue. Potential remedies include quantum computing and high bandwidth memory, but each has drawbacks. Amid the ever-growing energy needs needed to power AI models and infrastructure, former Canadian Deputy Prime Minister Chrystia Freeland has urged President Donald Trump to take the threat of tariffs off the table definitively. According to Freeland, the US needs Canadian energy to achieve dominance in artificial intelligence. Freeland insists the US should thank Canada for being “a great partner” that can provide the much-needed power to dominate the AI space.
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For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 AI Stocks Sending Shockwaves on Wall Street Following DeepSeek Scare
8. Kingsoft Cloud Holdings Limited (NASDAQ:KC)
Number of Hedge Fund Holders: 5
Kingsoft Cloud Holdings Limited (NASDAQ:KC) provides cloud services to businesses and organizations. Its product portfolio includes cloud products infrastructure as a service (IaaS). The stock rallied by more than 20% on February 3rd amid reports that Xiaomi had poached top talent from artificial intelligence sensation DeepSeek.
A major player in China’s consumer electronics landscape, Xiaomi is looking to strengthen its AI prospects. Kingsoft Cloud Holdings Limited (NASDAQ:KC) rallied because its chairman, Lei Jun, is also Xiaomi’s founder. Additionally, the stock has been rising amid growing expectations that it will attract big business for its cloud solutions, which should receive a significant boost on AI integration, given its close ties to Xiaomi. The talent poaches ads to the excitement around the intersection of AI and cloud computing, of which Kingsoft Cloud is a big player.
7. Maxlinear Inc (NASDAQ:MXL)
Number of Hedge Fund Holders: 18
MaxLinear Inc. (NASDAQ:MXL) designs and builds highly integrated radio-frequency, analog, and mixed-signal chips to enable multi-gig connectivity in broadband communications applications, wired and wireless infrastructure and data centres. On January 31st, David William of Benchmark Company reiterated a Buy rating on the stock with a $28 price target. The bullish rating comes as the company remains well-positioned to benefit from the AI boom.
MaxLinear Inc. (NASDAQ:MXL) unveiled a Software-Defined Storage (SDS) solution in partnership with Quantum Cloud Technology. The solution combines MaxLinear ZFlush™, Panther III and QCT’s robust storage platform to enable a high-performance solution optimized for AI and HPC workloads. The company has also designed its Keystone PAM4 digital signal processor to connect the world of cloud and AI data centers.
6. Genpact Limited (NYSE:G)
Number of Hedge Fund Holders: 31
Genpact Limited (NYSE:G) provides business process outsourcing and information technology services. Its financial services segment offers retail customer onboarding, customer service, collections, card servicing operations, and loan and payment operations. On February 3rd, the company was recognized as a Horizon 3 Market Leader in the HFS Horizons: Generative Enterprise Services 2025 report.
The accolade demonstrates Genpact Limited’s (NYSE:G) capacity to provide enterprise clients with value when implementing AI and cutting-edge technologies. Genpact’s AI Factory is highlighted in the report as a leading AI accelerator, created to assist businesses in scaling AI solutions from pilot to production. The company has established itself as a trustworthy partner for fostering long-term growth and producing transformative, quantifiable results thanks to a potent blend of deep expertise and cutting-edge AI capabilities.
5. Celestica Inc. (NYSE:CLS)
Number of Hedge Fund Holders: 40
Celestica Inc. (NYSE:CLS) is an electronic component company that provides supply chain solutions. It offers a range of product manufacturing and related supply chain services, including design and development. With its specialized chips, the company is attracting attention in the rapidly evolving field of artificial intelligence.
Barclays analyst George Wang reiterated on January 30th that Celestica Inc. (NYSE:CLS) is one company well positioned to benefit owing to its focus on product manufacturing and supply chain services. The analyst reiterated a Buy rating on the stock and increased the price target to $139 from $91. The analyst expects the company to experience strong demand for its application-specific integrated circuits (ASICs).
4. Hewlett Packard Enterprise Company (NYSE:HPE)
Number of Hedge Fund Holders: 64
Hewlett Packard Enterprise Company (NYSE:HPE) is a technology company that provides high-performance computing (HPC) systems, AI software, and data storage solutions. While the company also offers solutions that allow customers to capture and analyze data, it has set its sights on the Indian market.
On February 3rd, reports emerged that Hewlett Packard Enterprise Company (NYSE:HPE) had joined forces with Advanced Micro Devices and Nvidia and held discussions with the Indian government. The talks are part of an effort that seeks to help design and develop an indigenous graphics processing unit, which is one of the building blocks of AI. The GPU up for development would play a crucial role in helping accelerate the growth of India’s AI ecosystem. HPE hopes to play a key role in supporting India’s ambition to strengthen its AI capabilities and digital infrastructure and, in the process unlock new growth opportunities.
3. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 91
Oracle Corporation (NYSE:ORCL) offers products and services that address enterprise information technology environments worldwide. Its Oracle cloud software as a service offering includes various cloud software applications. The company moved to strengthen its growth prospects in the supply chain sector with the unveiling of a new set of AI-powered solutions on January 30th.
The addition of role-based artificial intelligence agents into the cloud supply chain and manufacturing suite is part of Oracle Corporation’s (NYSE:ORCL) push to help ease the administrative burden. The solution is designed to streamline workflows and automate routine tasks to enable greater efficiency and accuracy in supply chain networks. Procurement professionals can create, process, and fulfill purchase requisitions more quickly and accurately with the assistance of the new AI agent.
2. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 116
Salesforce, Inc. (NYSE:CRM) is a customer relationship management heavyweight that has been investing heavily in artificial intelligence as it looks to strengthen its growth metrics. On February 3rd, Bloomberg reported that the company is in the process of cutting 1,000 roles as part of a reorganization that seeks to enhance focus on artificial intelligence ambitions.
Amid the proposed cuts, Salesforce, Inc. (NYSE:CRM) also plans to hire thousands of sales personnel and assign them the responsibility of selling its AI agent products. The hiring spree comes on Chief Executive Officer Marc Benioff confirming that Salesforce has closed more than 1,000 paid deals for its AI-powered platform Agentforce. Salesforce has actively promoted the technology and has hailed its AI agents as the next big sales driver in the upcoming quarters.
1. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 123
Adobe Inc. (NASDAQ:ADBE) is a software company that offers services, and solutions that enable individuals to create, publish, and promote content. The company continues to release more generative artificial intelligence features for its software as it looks to take advantage of the AI boom. Consequently, it unveiled new intelligent contract capabilities in Acrobat AI assistant on February 3rd.
The new features seek to make it easy for people to work on contracts. Users can now grasp complex terms and spot differences in various agreements. By using Acrobat AI Assistant’s contract intelligence features, business owners can easily find important dates in vendor contracts or get ready to go over a new partnership agreement with their lawyer. Among other things, finance teams can expedite sales contract reviews.
Acrobat AI Assistant should revolutionize how individuals and organizations handle their documents while allowing Adobe Inc. (NASDAQ:ADBE) to tap new growth opportunities. In the last quarter of 2024, customer conversations in the Acrobat AI Assistant app doubled from quarter to quarter due to new features and increasing usage.
While we acknowledge the growth potential of Adobe Inc. (NASDAQ:ADBE), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ADBE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
