The European Commission has recently issued guidelines intended to standardize rules across the AI industry in Europe. As reported by Reuters, employers will be banned from using artificial intelligence to track staff’s emotions. Similarly, websites will not be allowed to trick users into spending money. The Artificial Intelligence Act, which has been binding since last year, will be fully applicable on Aug. 2, 2026. The AI Act is deemed the most comprehensive set of rules governing AI globally. Some of these provisions, such as using the internet to create facial recognition databases, have already gone into effect on February 2nd.
“The ambition is to provide legal certainty for those who provide or deploy the artificial intelligence systems on the European market, also for the market surveillance authorities. The guidelines are not legally binding”.
-European Commission official
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Some practices banned under the guidelines include AI-enabled dark patterns embedded in services that are meant to manipulate users into making hefty financial commitments and AI-enabled applications that exploit users based on their age, disability, or otherwise. European Union countries have until Aug. 2 to designate market surveillance authorities to enforce the AI rules, Reuters noted.
The ban also comes with heavy fines, ranging from 1.5% to 7% of a company’s total global revenue, in case of AI breaches. However, the Financial Times has reported that Trump has threatened to target Europe in reaction to fines levied against American companies under the AI Act.
“There is definitely a worry in Brussels that the new U.S. president will raise pressure on the EU around the AI Act to ensure that U.S. companies don’t have to deal with too much red tape or potentially even fines”.
-Patrick Van Eecke, co-chair of law firm Cooley’s global cyber, data and privacy practice.
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).
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9. Cardio Diagnostics Holdings, Inc. (NASDAQ:CDIO)
Number of Hedge Fund Holders: 3
Cardio Diagnostics Holdings, Inc. (NASDAQ:CDIO) is an AI-driven precision cardiovascular medicine company that makes heart disease prevention more accessible, personalized, and precise. On February 4th, the company announced that it has partnered with seven new provider organizations, highlighting the growing adoption of its AI-driven blood tests, Epi+Gen CHD™ and PrecisionCHD™. These tests are designed to revolutionize the prevention, detection, and management of coronary heart diseases. The new providers the company has partnered with can leverage Cardo Diagnostic’s AI-driven technology to obtain actionable insights into coronary heart disease and risks, helping in both early detection and management.
“We continue to make meaningful strides in our mission to enable providers with actionable clinical intelligence that goes beyond proxy biomarkers such as cholesterol. By equipping practices with our Epi+Gen CHD™ and PrecisionCHD™ tests, we’re enhancing patient care, driving better outcomes, and making Precision Cardiovascular Medicine more accessible.”
-Meesha Dogan, Ph.D., CEO and Co-Founder of Cardio Diagnostics.
8. Lantronix, Inc. (NASDAQ:LTRX)
Number of Hedge Fund Holders: 14
Lantronix, Inc. (NASDAQ:LTRX) designs and sells IoT products and services globally. On February 4th, the company announced that it will be unveiling its new LM4 AI-powered Out-of-Band Management (OOBM) platform at Stand A10 during Cisco Live, February 10–14, 2025, at Amsterdam RAI. The OOBM platform leverages AI to monitor network infrastructure remotely even if the network is down. The innovation is developed for Intermediate Distribution Frames (IDFs) and compact environments like ATMs, kiosks, and network aggregation points. The platform will enable access, nonstop monitoring, automated remediation of issues, and control of network infrastructure devices regardless of whether the network is up or down.
“We’re excited to introduce the LM4 Out-of-Band Management platform, which enables our customers to leverage rules-based AI for secure, reliable and automated network infrastructure recovery and mitigation. At Lantronix, we are committed to enabling network management automation with innovative solutions that enable our customers to be more efficient, secure and bottom-line focused.”
-Mathi Gurusamy, chief strategy officer at Lantronix.
7. Samsara Inc. (NYSE:IOT)
Number of Hedge Fund Holders: 30
Samsara Inc. (NYSE:IOT) is the pioneer of the Connected Operations® Cloud, a platform enabling organizations that depend on physical operations to harness Internet of Things (IoT) data to develop actionable insights and improve operations. On February 4th, the company announced that thousands of transportation organizations have standardized on Samsara’s Connected Operations® Cloud platform. Transportation organizations have been able to leverage this platform to achieve an average of more than $2M in fleet-related benefits per organization annually. Trained on the world’s largest Connected Operations dataset, Samsara’s AI-powered platform empowers customers to reduce accident rates, lower fuel spending, decrease violations, improve compliance, and keep insurance costs down.
“Samsara’s focus has and will continue to be delivering for our customers. We achieve this by understanding the back office, the cab, the warehouse, and everywhere they operate so we can build solutions that best support them. We’re excited to continue innovating alongside our transportation customers and to increase the safety, efficiency, and sustainability of this critical industry.”
-Robert Stobaugh, Chief Customer Officer at Samsara.
6. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 43
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. On February 4th, UBS raised the firm’s price target on the stock to $105 from $80 and kept a “Neutral” rating on the shares. Following the earnings report, the firm is “impressed with the fundamentals” of Palantir, and the new price target implies a 25% upside. The neutral rating, however, remains amid the emergence of DeepSeek.
“In light of DeepSeek, Palantir reaffirmed its views that model costs are falling fast and performance gaps are narrowing. In our view, Palantir’s pricing structure may help to insulate it from any resulting AI price deflation”.
– Analyst Karl Keirstead
The analyst also told investors in a research note that even though Palantir is priced to perfection, it delivered 36% growth on the back of artificial intelligence demand.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 99
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives. On February 4th, Reuters reported that China has imposed targeted tariffs on U.S. imports, putting several companies on notice for possible sanctions. The move marks China’s response to duties on Chinese imports imposed by President Donald Trump. These new measures from China also include a 10% levy for crude oil, farm equipment, and a small number of trucks and big-engine sedans shipped to China from the United States. Reuters reported that the 10% duty that the country has announced on electric trucks imported from the United States could apply to Elon Musk’s Cybertruck. The Cybertruck is a niche offering from Tesla equipped with AI features, notably its Full Self Driving (FSD).
4. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 107
Advanced Micro Devices, Inc. (NASDAQ:AMD) develops semiconductors, providing processors and graphics technologies for gaming, data centers, and AI-driven high-performance computing. On February 4th, Morgan Stanley analyst Joseph Moore lowered the firm’s price target on the stock to $147 from $158 and kept an “Equal-Weight” rating on the shares. The rating has been issued ahead of the earnings report for AMD today, after markets close. The analyst told investors in a preview that expectations are lower in artificial intelligence. Moreover, stronger servers are anticipated to support revenue growth, but the next catalysts “feel further out in time”.
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a technology company that has recently launched Apple Intelligence, its personal intelligence system. On February 4th, the company announced the launch of Apple Invites, a new application for iPhones that allows users to create custom invitations to gather friends and family for any occasion. Users can use the app to create and share invitations, RSVP, contribute to Shared Albums, and even interact with Apple Music playlists. Apple Invites also includes Apple Intelligence, which can help users generate images for invites and even write the invitation with the company’s Writing Tools. Apple Intelligence can also share a photo album or playlist with an event’s guest list, the company noted.
“With Apple Invites, an event comes to life from the moment the invitation is created, and users can share lasting memories even after they get together. Apple Invites brings together capabilities our users already know and love across iPhone, iCloud, and Apple Music, making it easy to plan special events”.
-Brent Chiu-Watson, Apple’s senior director of Worldwide Product Marketing for Apps and iCloud.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On February 4th, Argus raised the firm’s price target on the stock to $775 from $686 and kept a “Buy” rating on the shares. Increased advertising revenue and significant margin expansion are coming out to favor Meta, with the latter being a result of robust cash flow and deep cost cuts. Meta has also been racing with tech giants such as Microsoft and Google to develop models and applications before monetization. The market may indeed be taken aback by the company’s ramped-up investments in generative AI. However, the firm pointed out that Meta is already leaning on GenAI to improve targeted advertising. This is one of its critical monetization features, the analyst told investors in a research note.
1. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 202
Alphabet Inc. (NASDAQ:GOOGL) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses. On February 3rd, Reuters reported that the company will be facing scrutiny over its massive AI spending after it reports its earnings today, after markets close. This is because revenue growth likely slowed in the holiday quarter due to a slowdown in its advertising and cloud businesses. Alphabet has been facing scrutiny after the emergence of Chinese startup DeepSeek, which has claimed to launch low-cost AI models and caused investor concerns over huge AI investments, power needs, and valuation risks. According to LSEG, Alphabet’s capital expenditure is estimated to have been $50 billion last year. It is anticipated to be even higher in 2025 to support its cloud expansion and AI-driven search features. These are important to defend its market share and attract more ad revenue. On the other hand, Google Cloud growth is expected to slow down in the fourth quarter amid high expectations.
“Although (the cloud unit’s) rate of growth is expected to slow, elevated investment is expected to continue, but efficiency gains have so far kept profits buoyant. Sustaining this balancing act will be a critical and investors will want to see evidence of this”.
-Susannah Streeter, head of money and markets, Hargreaves Lansdown.
While we acknowledge the potential of GOOGL 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 GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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