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.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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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.”
7. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Number of Hedge Fund Holders: 77
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a leader in AI-driven endpoint and cloud workload protection. On March 24, the company announced new CrowdStrike Falcon® Exposure Management innovations, particularly its Network Vulnerability Assessment capability, to extend the Falcon platform’s AI-driven risk prioritization to network assets. The new capability allows security teams to identify and resolve high-risk vulnerabilities in network devices, including routers, switches, and firewalls, in real-time, without the need for additional scanners, agents, or hardware. The platform leverages AI-powered risk prioritization to show which risks matter most so that they can be remediated before they lead to a breach. Falcon Exposure Management customers receive free scanning for up to 10% of assets to immediately experience the benefits.
“Network scanning is a staple in virtually every security stack, and bringing it to the Falcon platform—and replacing legacy solutions—is one of our top customer demands. For too long, organizations have had to rely on hardware-dependent, difficult-to-deploy solutions with outdated risk models and static CVSS scores, requiring external threat feeds to even attempt prioritization. With the Falcon platform, everything is built in natively—the industry’s richest adversary intelligence, patented AI, and a lightweight agent adapted as a network scanner—allowing teams to extend adversary-based risk mitigation to network devices with a single click, meeting the demand for even greater consolidation on CrowdStrike.”
-Elia Zaitsev, chief technology officer, CrowdStrike.
6. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 126
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 March 24, the company said it would release its smart driving-assistance feature in China after completing regulatory approval. The announcement follows complaints about the temporary pause of a limited-time free trial of its Full Self-Driving service.
“All parties are actively advancing the relevant process and we will push it to you as soon as it is ready. We are also looking forward to it, please wait patiently.”
-Tesla’s customer support said on social media platform Weibo.
FSD, or Full Self Driving, is a suite of driving-assistance technologies developed with generative artificial intelligence to manage complicated traffic conditions. Previously, Reuters reported how the company has been aiming for a full roll out of FSD this year. It is working with Chinese tech giant Baidu to improve the performance of the system.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology company. On March 23, TF International Securities analyst Ming-Chi Kuo on Sunday reiterated his prediction that the Apple (AAPL) iPhone 18 is going to be powered by TSMC’s (TSM) 2nm chips. According to Kuo, TSMC’s 2nm R&D trial yields reached 60%-70% three months ago, and they’re now “well above that.”
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 223
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services. One of the most notable analyst calls on Monday, March 24, was for Nvidia Corporation. Melius Research analyst Ben Reitzes reiterated the stock as “Buy”, stating that Nvidia is “now arguably defensive.”
“The clouds over the AI semis space mentioned above are winning this year despite Nvidia having tailwinds from inferencing and a clear line of sight on hyperscaler orders through year-end.”
Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $175 implies a 44% upside, however, the Street-high target of $235 implies an upside of 94%.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On March 24, Bloomberg reported that Korean chip startup FuriosaAI had reportedly turned down an $800 million takeover offer from Meta Platforms Inc. Local media reports revealed that there were disagreements over post-acquisition business strategy and organizational structure, which caused the negotiations to break down. Consequently, the company has chosen to grow its business further as an independent company. FuriosaAI designs and develops data center accelerators for AI models and applications.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 317
Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements. On March 24, Jefferies reiterated the stock as “Buy”, stating that Microsoft is among the firm’s favorite large-cap stocks.
“Recent weakness has created attractive risk/reward.”
The analyst believes that Azure, Microsoft’s cloud computing platform, will continue to gain market share against competitor Amazon Web Services driven by artificial intelligence-powered growth. Microsoft 365 Commercial Cloud fundamentals also look strong. Furthermore, despite its ramp-up of AI investments, the company’s profit margins are anticipated to continue growing.
“MSFT’s margin in the mid-40s are still well above large cap peers in the mid 30s,”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 339
Amazon.com Inc. (NASDAQ:AMZN) is an American technology company offering e-commerce, cloud computing, and other services, including digital streaming and artificial intelligence solutions. On March 24, TipRanks reported that Monness analyst Brian White has maintained a “Buy” rating on the stock. White’s buy rating stems from Amazon’s strategic positioning and growth potential. Even though the company is facing some short-term challenges, AWS is poised to capitalize on long-term trends in artificial intelligence.
It has already reaped benefits from generative AI, particularly from training large language models, with growth drivers expected to boost further. In addition, AWS and other cloud service providers are likely to benefit from significant capital expenditures. Amazon’s growth potential is poised to experience further growth through increased inferencing as it is anticipated to surpass training in scale.
While we acknowledge the potential of AMZN 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 time frame. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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