We recently compiled a list of the 17 Latest AI News and Analyst Ratings You Should Not Miss. In this article, we are going to take a look at where Arm Holdings plc (NASDAQ:ARM) stands against the other AI stocks under hedge funds’ radar.
It is no surprise that companies in the United States and China are leading the rest of the world when it comes to artificial intelligence. Conservative estimates about the impact of AI on the global economy, made by market experts at professional services firm PwC, reveal that AI-related gains, equal to close to $11 trillion, will account for nearly 70% of total global economic impact by 2030. In China, AI is expected to contribute to a nearly 26% boost to the GDP within the next six years, while this figure in the US will likely be 15%. AI no doubt represents the biggest commercial investment opportunity in this fast-paced world economy.
Smart companies are seizing on this opportunity. According to market research firm IDC, investments in AI infrastructure will cross $30 billion this year and are projected to grow to $47 billion by 2028. This represents approximately 30% of the total global spending in AI. One of the most prominent AI use cases is in the customer service world. In this area, global businesses have spent more than $16 billion in 2024 so far. The impact of these investments in AI will be significant down the road. AI is likely to contribute to a $15 trillion boost to the global economy by 2030, up 14% from current levels.
Like other sectors of the economy, Wall Street is no stranger to AI. The debut of ChatGPT in November 2022 marked the beginning of the AI revolution in the world of finance. Since then, according to the International Monetary Fund (IMF), sales of software, hardware, and services for AI systems have climbed rapidly and will top $400 billion in 2027. Financial sector spending is likely to double to nearly $100 billion in 2027, with a compound annual growth rate of close to 30% — the fastest of five major industries. Hedge funds, often the pioneers of cutting-edge technology, are embracing generative AI as well.
Our Methodology
For this article, we selected AI stocks based on the latest news and analyst ratings. 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).
A close up of a technician working on a semiconductor chip in a clean room.
Arm Holdings plc (NASDAQ:ARM)
Number of Hedge Fund Holders: 38
Arm Holdings plc (NASDAQ:ARM) architects, develops, and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers. The firm is famous for designing energy-efficient microprocessors that have a key presence in the AI, cloud computing, and smartphone businesses. The company generally designs these processors and then gives away their rights to other firms, generating revenue from the products sold as well as royalties on the licenses. The company has had four straight quarters of record growth, managing to grow revenue by nearly 40% over this time. The firm has strategic partnerships with tech giants like Google and Amazon.
Arm Holdings plc (NASDAQ:ARM) can benefit from the possible rate cuts that are likely to happen in the coming months as well as high hopes of a soft landing for the economy. Analysts at Daiwa share this point of view. The investment advisory has an Outperform rating on the shares with a price target of $130, with analysts noting that the AI expectations for the company remained strong and tech names were settling down again after a recent selloff.
Overall ARM ranks 10th on our list of the best AI stocks to buy. While we acknowledge the potential of ARM 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 ARM 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 is originally published at Insider Monkey.
