We recently published a list of 10 Best Mid Cap AI Stocks to Buy Now. In this article, we are going to take a look at where EPAM Systems, Inc. (NYSE:EPAM) stands against other best mid cap AI stocks to buy now.
In 2025, the technology companies continue to focus on developing AI platforms that meet their enterprise customers’ needs for optimized performance, profitability and security, says Morgan Stanley. In doing so, they have been partnering throughout the AI ecosystem of chips companies, hyperscalers, large language models, and data and software companies while grappling with the US trade policy unknowns and resource constraints. The firm believes that the top trends in new AI frontiers and the emphasis on enterprises consist of AI reasoning, cloud migrations, custom silicon, systems to measure AI efficacy, and developing an agentic AI future.
Key Themes Likely to Shape the Industry
Morgan Stanley, while quoting executives from companies designing and making chips, stated that AI reasoning happens to be one of the biggest drivers of higher compute demand, and thus, semiconductors. Notably, AI reasoning goes over and above the basic understanding and into advanced learning and decision-making, which needs additional compute for pre-training, post-training, and inference. As per Marco Lagos Morales (Head of U.S. Semiconductor Investment Banking at Morgan Stanley), for chip companies, customer demand remains in the breadth of AI workloads for programmable infrastructure.
The next theme revolves around LLMs seeing potential in AI reasoning for enterprises. Morgan Stanley highlighted that companies that have developed the world’s biggest LLMs focus on using the most effective chips and building the best software to provide AI services that become critical for companies and consumers. As per LLM executives, while the early use cases for LLMs revolved around content generation, summarization, and classification, the biggest untapped potential is in AI reasoning for the enterprise data.
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Software Companies Focusing on Agentic AI, Says Morgan Stanley
The software executives mentioned regarding their current use of AI for the purposes of productivity gains in marketing and engineering and their longer-term prospects in a bid to gain market share in an agentic computing future. Morgan Stanley further highlighted that such companies continue to aim to create large systems deploying AI agents to make decisions, take autonomous actions, and adapt to dynamic environments for real-world applications throughout various industries. According to Brittany Skoda, Global Head of Software Banking, software companies continue to compete to create larger operating systems that harness machine learning, natural language processing, LLMs, GenAI, and decision-making algorithms to move towards an agentic future.
Our Methodology
To list the 10 Best Mid Cap AI Stocks to Buy Now, we used a screener and sifted through several media reports to shortlist the mid-cap companies catering to the AI industry. Next, we selected the stocks that are the most popular among hedge funds. We have mentioned the hedge fund sentiment around each stock, 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).
A close-up of a coder at a computer, coding away to bring the latest software service to life.
EPAM Systems, Inc. (NYSE:EPAM)
Market Cap as of March 27: $9.95 billion
Number of Hedge Fund Holders: 56
EPAM Systems, Inc. (NYSE:EPAM) has been using its software engineering expertise to become a leading global provider of digital engineering, cloud, and AI-enabled transformation services. With the demand for AI and machine learning solutions growing throughout several industries, the company remains well-placed to capitalize on this trend. EPAM Systems, Inc. (NYSE:EPAM)’s expertise in digital platform engineering and software development offers a healthy foundation for developing and implementing AI-driven solutions for clients.
Through investments in AI capabilities and integrating such technologies into the service offerings, the company can unlock new revenue opportunities and differentiate itself. EPAM Systems, Inc. (NYSE:EPAM)’s global presence and diverse client base offer significant opportunities to scale AI solutions throughout industries and geographies. The company’s partnerships with leading cloud and AI platforms offer access to cutting-edge technologies. EPAM Systems, Inc. (NYSE:EPAM) announced that it has expanded its strategic partnership with Google Cloud in a bid to deliver innovative industry solutions for clients throughout the media and entertainment, energy, and retail verticals. Its enhanced collaboration is expected to leverage Google Cloud’s Vertex AI platform to fuel measurable business outcomes for clients via generative AI, legacy modernization, and data analytics capabilities.
White Falcon Capital Management, an investment fund manager, released its Q4 2024 investor letter. Here is what the fund said:
“Our IT services holdings, Endava and EPAM Systems, Inc. (NYSE:EPAM), are showing positive inflections in key metrics. We believe these companies are entering a strong growth cycle, driven by the increasing need for businesses to modernize their core technology stacks in order to effectively implement AI solutions. Both holdings have significantly strengthened their operations through counter-cyclical acquisitions. In fact, EPAM made four acquisitions over the past 18 months, which, as the market cycle shifts, will substantially enhance their earnings potential.”
Overall, EPAM ranks 1st on our list of best mid cap AI stocks to buy now. While we acknowledge the potential of EPAM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than EPAM 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.
