Sarah Guo, founder of Conviction, spoke on Bloomberg Technology about the evolving AI space and the impact of open-source models. She noted that AI has developed rapidly since her firm launched, reinforcing its belief in its long-term significance. Initially, the firm invested in application companies and vertically integrated businesses, a strategy she believes remains relevant today. She pointed out that competition among foundation models has increased significantly in recent weeks.
Guo also discussed Deep Seek and described it as a powerful model with multiple layers, including a base model, an instruction-tuned version, and a reasoning model. While DeepSeek’s origins in a Chinese hedge fund surprised many, she sees its open-source nature as beneficial for developers and a challenge for the U.S. to stay competitive in AI. She also emphasized that no single country holds exclusive control over AI talent, making export restrictions less effective.
When the discussion shifted to investment trends, Guo explained that while AI is expanding economic opportunities across infrastructure, tooling, and model development, her firm prioritizes applications and industry-specific solutions. She noted that training large models remains costly, despite claims of lower expenses, and expects the most sustainable growth to come from application-focused companies.
Guo also discussed agentic AI and how it improves customer experiences in industries such as finance and travel. She explained that AI’s ability to handle more complex tasks increases its value to businesses, making applications that automate tasks more attractive. As AI continues to advance beyond simple responses, she expects companies working on industry-specific automation to capture significant market value.
For this article, we selected AI stocks by reviewing news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 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).
9. ZenaTech, Inc. (NASDAQ:ZENA)
Number of Hedge Fund Holders: N/A
ZenaTech, Inc. (NASDAQ:ZENA) develops cloud-based enterprise software for various industries and manufactures drones.
On February 6, ZenaTech announced that it will begin testing high-density batteries for its ZenaDrone 1000, a multifunction AI drone designed for defense and commercial use. The batteries, developed by ZenaTech’s affiliated Galaxy Batteries Inc., will provide longer flight times, increased reliability, and better performance for military applications. The ZenaDrone 1000 has already undergone trials with the US Air Force and Navy Reserve and it is part of ZenaTech’s effort to meet the rigorous requirements for Blue UAS certification to become an approved supplier to the US Department of Defense.
8. MicroCloud Hologram Inc. (NASDAQ:HOLO)
Number of Hedge Fund Holders: N/A
MicroCloud Hologram Inc. (NASDAQ:HOLO) offers holographic technology services, including LiDAR solutions, digital twin technology, and 3D holographic imaging for several industries.
On February 6, MicroCloud Hologram (NASDAQ:HOLO) announced that it integrated the DeepSeek large model API into its Holographic Digital Human GPT, improving AI-driven conversational interactions. This API, built on the Transformer architecture, improves language comprehension and generation to enable more accurate responses in areas such as text creation, Q&A systems, and dialogue completion.
The integration improves the realism and responsiveness of HOLO’s AI-powered holographic digital human by refining semantic understanding and improving expressive capabilities. It allows the system to detect user intent, engage in natural conversations, and generate high-quality text. Security measures, including encryption and access controls, have been implemented to protect user data.
7. Maris-Tech Ltd. (NASDAQ:MTEK)
Number of Hedge Fund Holders: 4
Maris-Tech Ltd. (NASDAQ:MTEK) designs and manufactures digital video and audio solutions for defense, security, and professional markets, with applications in drones, robotics, and more.
On February 6, Maris-Tech secured an order from its U.K. distributor for its Jupiter Nano system, intended for integration into a defense project in Eastern Europe. This marks an important step in the company’s expansion into the region’s defense sector. The order includes multiple Jupiter Nano units, which offer ultra-low-latency streaming, multi-video handling, and strong network support. Jupiter Nano is designed with AI-based edge computing and it excels in video and audio capture, encoding, decoding, and preprocessing, addressing the specific needs of modern defense systems.
6. Bit Digital, Inc. (NASDAQ:BTBT)
Number of Hedge Fund Holders: 6
Bit Digital, Inc. (NASDAQ:BTBT) is a Bitcoin mining company that also focuses on AI and HPC business.
On February 6, Bit Digital announced that it rebranded its HPC business as WhiteFiber, Inc., which now includes its GPU Cloud and Enovum Data Centers operations. The move shows the company’s focus on meeting the growing demand for advanced, sustainable HPC and AI cloud infrastructure. WhiteFiber’s platform is designed to provide high performance, reliability, and efficiency for demanding workloads, while Bit Digital’s bitcoin mining and ETH staking businesses will continue under the original brand. CEO of Bit Digital, Sam Tabar said:
“Rebranding our HPC business to WhiteFiber is an important step in establishing a distinct identity for this transformative venture. WhiteFiber represents the convergence of cutting-edge technology and seamless connectivity, underscoring our commitment to delivering vertically integrated HPC solutions. By combining data center colocation with GPU cloud services, we provide the high-performance infrastructure required for the most demanding AI workloads. With this rebrand, we signal to our customers, partners, and investors that we are focused on building a platform of unmatched reliability, efficiency, and innovation. Our WhiteFiber business is currently servicing more than 20 customers compared to just 1 at the start of 2024. We look forward to expanding both our customer base and existing partnerships through industry-leading performance and reliability.”
5. Symbotic Inc. (NASDAQ:SYM)
Number of Hedge Fund Holders: 15
Symbotic Inc. (NASDAQ:SYM) develops automation technologies to improve operational efficiency in warehouses and distribution centers.
On February 6, Raymond James analyst Brian Gesuale downgraded Symbotic (NASDAQ:SYM) to Market Perform from Outperform, after weaker-than-expected 1Q results and a 2Q guidance miss. The company’s flat backlog and slower system deployment pace, along with minimal improvement in deployment time have raised concerns. Despite Symbotic’s strong AI and robotic technology and large market potential, inconsistent execution has dampened confidence. The company must significantly increase system deployments and improve margins to sustain rapid revenue growth and attract new clients, the analyst noted.
4. AST SpaceMobile, Inc. (NASDAQ:ASTS)
Number of Hedge Fund Holders: 18
AST SpaceMobile, Inc. (NASDAQ:ASTS) develops a space-based cellular broadband network to provide smartphone connectivity beyond terrestrial coverage.
On February 6, Cantor Fitzgerald initiated coverage on AST with an Overweight rating and a price target of $30. The firm views AST’s strategic partnerships with major telecom and tech companies, its potential in defense, and its supply chain positioning as significant positive factors. Although the company’s valuation appears high relative to 2027 estimates, the success of AST depends on meeting important milestones and demonstrating growth. Cantor Fitzgerald also sees long-term potential in integrating AI and large language models within the tech sector and benefiting from government contracts, including those with the Space Development Agency.
3. IREN Limited (NASDAQ:IREN)
Number of Hedge Fund Holders: 28
IREN Limited (NASDAQ:IREN) operates Bitcoin mining data centers and offers high-performance computing (HPC) and AI cloud services.
On February 6, IREN Limited reported strong progress in January 2025, with its Bitcoin mining business continuing to generate substantial hardware profits. The company is on track to reach 50 EH/s within five months and is also installing direct-to-chip liquid cooling for AI and HPC. The construction at its 1.4GW Sweetwater Project is also advancing, and its multi-GW development pipeline is progressing as well. Moreover, IREN launched a new at-the-market facility to support investments and explore funding options. The company has also observed increased demand for its cloud and colocation services, especially after the release of DeepSeek.
2. Arm Holdings plc (NASDAQ:ARM)
Number of Hedge Fund Holders: 38
Arm Holdings plc (NASDAQ:ARM) designs and licenses semiconductor technologies, including microprocessors and system IP products, serving markets like automotive, computing, and IoT.
On February 6, Bernstein maintained its Underperform rating on Arm with a price target of $100, due to concerns about cyclical challenges. Arm’s Q3FY25 revenues reached a record $983 million, exceeding expectations, driven by strong licensing and royalties. However, v9 adoption has stalled at 25% of royalties, missing earlier growth projections. While Q4 guidance aligns with expectations, full-year revenue was only slightly revised upward. Bernstein highlighted the company’s increasing reliance on related parties revenue, especially from China, and remains cautious on short-term performance, despite long-term growth potential in AI and related sectors. The firm said:
“There was significant commentary on AI traction, expectations for Compute Subsystems (CSS), and the broader ecosystem, indicating continued long-term potential. Arm emphasized its focus on building capacity to address these opportunities, suggesting a continued commitment to R&D spending. However, in the near term, even with the slight uptick in full-year guidance now slightly ahead of expectations, we believe the response from investors may be muted given current valuation levels. We remain cautious on cyclical headwinds for now, though we acknowledge the long-term story continues to develop positively.”
1. Confluent, Inc. (NASDAQ:CFLT)
Number of Hedge Fund Holders: 39
Confluent, Inc. (NASDAQ:CFLT) provides a data streaming platform with real-time and cloud-native solutions for various industries.
On February 6, TD Cowen raised Confluent’s (NASDAQ:CFLT) price target to $37 from $31 while maintaining a Buy rating. The firm is optimistic about the company’s 4Q performance and FY25 outlook, and mentioned growth in GenAI and improved Flink go-to-market strategies. Solid demand trends and the increasing adoption of GenAI applications are expected to drive growth, along with stronger cross-selling opportunities. The firm expects a solid 4Q beat and sees the stock as attractive given its growth potential and AI-driven catalysts.
While we acknowledge the potential of Confluent, Inc. (NASDAQ:CFLT) as an investment, our conviction lies in the belief that 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 CFLT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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