With the AI arms race getting more intense than ever, it seems that some people are increasingly realizing that cooperation, rather than competition, is key. The president of the National Committee on United States-China Relations (NCUSCR) is bringing this into focus more recently. According to Stephen Orlins, who participated in the annual China Development Forum in Beijing, China and the United States must cooperate in artificial intelligence. He also said that duplication of efforts in the area could be avoided.
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Since artificial intelligence is becoming a key area of competition between the two countries, and China has come neck-to-neck in competition with its rapidly advancing AI breakthroughs, the need to cooperate becomes even more pressing. Washington has been levying successive rounds of sanctions against China’s AI and chip sectors to slow down its advancement, while China has in turn been open-sourcing its technology; posing a threat to its Western counterpart.
Chinese tech giants such as Baidu, Tencent, and Alibaba have been flooding the markets with their AI models that can be downloaded, modified, and even integrated with other solutions. The advent of DeepSeek was a breakthrough moment in itself, presenting the tech world with efficient and low-cost AI models that wreaked havoc in the tech world.
In the West, the policy has been to keep artificial intelligence exclusive. Users typically have to pay to access advanced models. On the contrary, China has been retaliating by using available resources for mass AI development. Provided that open-source AI becomes powerful enough, the West’s strategy to monetize AI will collapse. The contrast in the policies and strategies between the two countries highlights how the West is focused on profit-driven innovation while China is focused on mass adoption. This way, China is not only boosting its technological capabilities smartly but also challenging Western dominance in the AI space.
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. The hedge fund data is as of Q4 2024.
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9. Lumentum Holdings Inc. (NASDAQ:LITE)
Number of Hedge Fund Holders: 57
Lumentum Holdings Inc. (NASDAQ:LITE) is a technology company that manufactures and sells optical and photonic products. On March 24, Raymond James analyst Simon Leopold upgraded the stock from Outperform to “Strong Buy”, and lowered the price target to $82.00 from $96.00. The firm said that the telecom equipment companies are well positioned within Nvidia’s supply chain.
“We upgrade Coherent and Lumentum to Strong Buy from Outperform following Nvidia’s GTC and Corning’s analyst day meetings.”
The analyst believes that the market has overreacted to concerns surrounding Co-Packaged Optics (CPO). His commentary also highlighted the firm’s Datacom optical model, which now includes robust 800G demand, Nvidia’s product roadmap, and emerging CPO/LPO form factors. According to the updated model, A.I. backend transceiver sales are expected to reach $22.2 billion by 2030. Meanwhile, the 2027 sales estimate forecast has been revised upward to $7.5 billion from $7.1 billion. Leopold also highlighted that Nvidia’s Blackwell order disclosures are a reason to expect an upside to near-term 800G estimates.
8. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 60
International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products. On March 24, Wedbush added IBM to its best ideas list.
“With AI expected to drive $4.4 trillion in annual productivity gains by 2030, we believe that IBM is well-positioned to capitalize on the current demand shift for hybrid and AI applications as more enterprises look to implement AI to drive efficiencies across operations.”
The firm said that it’s getting more constructive on shares of IBM.
“We are now adding IBM to the Wedbush Best Ideas List reflecting our incremental confidence in this name. In a nutshell, investors remain nervous about the AI spending trajectory in this backdrop yet to the contrary we see many enterprises accelerating their strategic paths for 2025 which is bullish for the software ecosystem.”
