According to a study presented at a European Central Bank conference, companies that manage to survive the upheaval caused by the adoption of artificial intelligence will eventually leverage AI to help them thrive in the longer run. Using data from the U.S. Census Bureau and surveys covering the period between 2017 and 2021, authors of the study found that companies that had adopted AI early on in the manufacturing sector saw their productivity drop after they replaced human workers with robots.
These findings are undoubtedly against the notion that technology, particularly AI, makes work more productive. However, Kristina McElheran, one of the authors of the paper, highlighted how there is a lot of pain in the short run. This pain, particularly the drop in productivity, has been due to the interference of AI with manufacturers’ established practices, such as keeping low inventories. Over time, these firms begin to outperform in all areas, including sales, productivity, and employment, as noted in the study.
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While traditional companies are rushing to adopt AI in their operations, artificial intelligence companies such as OpenAI are in turn racing to advance AI research and enhance their tools. Last Monday, the company said it would it would raise $40 billion in a new funding round led by SoftBank Group at a $300 billion valuation. While the firm has agreed to fund OpenAI with $10 billion in mid-April and an additional $30 billion in December, it has done so on the condition that OpenAI will transition to for-profit by the end of the year.
In the case that OpenAI’s restructuring fails, the tech investment group’s investment will drop to $20 billion. With the firm having closed a $6.6 billion funding round in October, the new funding will nearly double the valuation of the AI startup.
“OpenAI has very ambitious plans on many fronts and needs a lot of capital to achieve these goals. The list of investors wanting to support that scope has shrunk and may be largely limited to Soft Bank, which itself may not have the necessary capital.”
– D.A. Davidson & Co analyst Gil Luria.
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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10. 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 31, the company announced the availability of Intel® Gaudi® 3 AI accelerators on IBM Cloud at Intel Vision 2025. Intel Gaudi 3 will be available in a public cloud environment for production workloads. The collaboration will enable IBM Cloud to help clients cost-effectively scale and deploy enterprise AI. Currently, Intel Gaudi 3 AI accelerators on IBM Cloud are available in Frankfurt (eu-de) and Washington, D.C. (us-east) IBM Cloud regions.
“By bringing Intel Gaudi 3 AI accelerators to IBM Cloud, we’re enabling businesses to help scale generative AI workloads with optimized performance for inferencing and fine-tuning. This collaboration underscores our shared commitment to making AI more accessible and cost-effective for enterprises worldwide.”
-Saurabh Kulkarni, Vice President, Datacenter AI Strategy and Product Management, Intel.
9. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 63
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. On April 1, Daiwa initiated coverage of the stock with a “Neutral” rating and $90 price target. With generative AI inference software taking hold at an accelerated pace, the firm believes that Palantir has “remarkably achieved success” in applying the technology to manufacturing. However, there are concerns regarding the sustainability of the stock due to its “excessively high valuations.”
8. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 95
AppLovin Corporation (NASDAQ:APP) provides a leading marketing platform powered by AI technology. Recently, the company fell victim to a few short seller reports that claimed that AppLovin has been misrepresenting its AI platform. Discussing this issue, investment firm Citi noted how they claimed that AppLovin ingests data from social media rivals and e-commerce platforms, using it to create a persistent identity graph of the user.
This may impact Apple’s policies and lead to AppLovin being de-platformed, it said. Moreover, the reports also claimed that 23% of e-commerce pilot customers churned during Q1. According to Citi, both these claims are not “particularly credible.” The analysts told investors in a research note that these claims focus on AppLovin’s “much smaller” e-commerce business. Moreover, the use of social media pixels does not constitute fingerprinting. The firm also mentioned how the two claims seem to contradict each other. If the company is ingesting data to have an edge over rivals, it is unlikely that customers would churn at such high rates. The firm kept a “Buy” rating on the shares with a $600 price target.
7. 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 April 1, Wells Fargo added Tesla stock to its “Tactical Underweight” second quarter list, stating that it is sticking with its underweight rating heading due to too many negative catalysts.
“We have an Underweight rating on TSLA. We continue to see delivery growth declines & diminished return on price cuts driving a ~280bps y/y decline in 2025 auto [gross margin] ex credits. We remain skeptical on the CyberCab Deployment in Austin.”
6. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology company. On March 31, Barclays reiterated the stock as “Underweight,” stating that it has a “challenging growth backdrop, undefined AI strategy and a premium valuation.”
“According to our sell-through checks, iPhone sell-through in China has been muted since the IP16 launch. AAPL continues to experience market share losses in China. Especially in Feb when Android were strong, relatively muted iPhones imply additional points of share losses.”
Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $254 implies a 25% upside, however, the Street-high target of $325 implies an upside of 60%.
5. 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. On March 31, Cantor Fitzgerald reiterated Nvidia, Broadcom, Marvell, Micron, and ASML as “Overweight”, stating that it is sticking with its overweight ratings on a slew of semis stocks.
“Our Top Picks remain NVDA (sustained AI spend + product cycle), AVGO (custom silicon ramp + networking), MRVL (custom silicon ramp + networking), MU (HBMrelated upside), ASML.”
Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $175 implies a 72% upside, however, the Street-high target of $235 implies an upside of 132%.
4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 234
Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses. On March 31, Wells Fargo analyst Ken Gawrelski lowered the firm’s price target on the stock to $167 from $184 and kept an “Equal Weight” rating on the shares. The firm is staying cautious on Alphabet shares amid recent trough multiples and bearish investor sentiment. This caution exists because Google’s search business could be disrupted by new technologies such as AI and also because of below-consensus estimates.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On April 2nd, Cantor Fitzgerald analyst Deepak Mathivanan reiterated an “Overweight” rating and $790.00 price target on the stock. Meta holds a strong position in the burgeoning AI Agent era, and the firm is highly optimistic about the company’s AI capabilities. In particular, the company’s upcoming AI models, computing infrastructure, and significant user base have reinforced the firm’s confidence in its competitive edge. According to the analysts, AI agents will revolutionize consumer interactions within the next few years, and the transition to these agents will be very prominent. Meta is poised to benefit significantly from this transition, and it has all the necessary components to become a dominant force in the AI agent space.
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 31, Brent Thill from Jefferies maintained a “Buy” rating on the stock and lowered the price target from $550 to $500.00. The firm lowered price targets across its US software coverage due to recent multiple compression and signs of softening macro factors. The analyst told investors in a research note that it believes “we may have another ‘mullet’ year in software” with a first half chop followed by a second half flow.
Microsoft is one of Jefferies’ favorite large caps. The firm views multiple drivers for the stock to reboot. These include the likelihood of growth in Azure and M365 Commercial Cloud to stabilize/ inflect as AI revenue becomes more significant. Microsoft is gaining ground in Azure against competitors, and Microsoft 365 is also gaining steady adoption, which is likely to become “more material” in Fiscal 2026. Thill is also optimistic that with growing AI revenues and moderating capital expenditure growth, its cash flow estimates are bound to improve.
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 31, the company released a new AI model, Nova Act, which can take actions in a web browser on a user’s behalf. The model aims to help developers build agents, or AI software that can complete multi-step tasks for users without supervision. With many companies building their own AI agents, the model is an important step forward for the company in the race toward AI supremacy. The move puts it in direct competition with competitors such as OpenAI and others that have developed such “agents.”
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. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. 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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