As reported by Reuters, Wall Street’s major indexes started the final trading session of 2024 on a high note, continuing the two-year-long bull market. This was marked by economic recovery after the pandemic, hopes for lower interest rates, and excitement about the AI boom. All three major stock market indexes, the S&P 500, Dow, and Nasdaq, are near record highs and ready for their second consecutive year of gains.
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Despite an overall good year, late 2024 saw a pullback in artificial intelligence stocks. From profit-taking and investors locking in gains from the year’s substantial rallies to concerns over high valuations and the Federal Reserve’s cautious stance signaling fewer interest rate cuts in 2025, the sector was a bit “choppier” than usual these last few weeks.
However, Wall Street analysts expect that the artificial intelligence sector will be in full gear in 2025, with a $2 trillion surge in AI-related capital expenditure over the next three years. Moreover, regulatory discussions around AI ethics and safety, spearheaded by global governments, are creating a supportive environment for innovation.
“We believe tech stocks will be robust in 2025 on the shoulders of the AI Revolution and $2 trillion+ of incremental AI capex (spending) over the next 3 years”.
-Wedbush Securities analyst Daniel Ives.
According to Ives, tech stocks are anticipated to rise 25% in 2025 as Wall Street and investors deal with “a less regulatory spiderweb” under the administration of President-elect Donald Trump. He also believes that stronger artificial intelligence initiatives in the federal government should give the sector a boost. However, there may be “white-knuckle moments” in the year ahead over Federal Reserve decisions, uncertainty over U.S.-China tariffs, and concerns from critics who believe stock valuations are too high.
“This will create the opportunities to own the tech theme and key names which has been our core investing tech playbook the last 2 years”.
-Dan Ives.
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.
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).
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10. Oklo Inc. (NYSE:OKLO)
Oklo Inc. (NYSE:OKLO) is a nuclear technology company leveraging the growing demand for clean energy to power AI-driven data centers. On December 19, analysts led by Daniel Ives initiated coverage of Oklo Inc. with an “Outperform” rating and set a price target of $26. The analysts quoted Oklo’s “momentum into 2025” and its ability to benefit from the artificial intelligence boom behind the rating. The rating is also derived from the company’s attractive “build, own, and operate business model,” which the firm states differs from its competitors. Oklo has also announced a partnership to sell energy to Switch, a privately held company operating data-center campuses. All in all, Wedbush states that the AI boom has put “OKLO in a great position to capitalize on this elevated demand”.
9. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 7
BigBear.ai Holdings, Inc. (NYSE:BBAI) is an artificial intelligence specialist that provides decision intelligence solutions. On December 30, H.C. Wainwright analyst Scott Buck raised the firm’s price target on BigBear.ai to $7 from $3 and kept a “Buy” rating on the shares. The analysts told investors in a research note that several factors are responsible for Big Bear’s rally, including the increasing demand for the company’s artificial intelligence-enabled services across multiple sectors. Moreover, the company recently announced a convertible note exchange which extends $182.3M of 2026 convertible senior notes to new 2029 senior convertible notes. HC Wainwright anticipated that this would remove a potential near-term investor concern. Big Bear is also benefiting from better conditions for small growth companies, supported by declining interest rates. Additionally, the analyst also affirmed that pure-play companies such as BigBear.ai deserve a higher valuation since they are rare. The firm believes that BigBear.ai has a scalable platform that will help its revenue, profits, and earnings grow to match its increasing valuation over time.
8. Monolithic Power Systems, Inc. (NASDAQ:MPWR)
Number of Hedge Fund Holders: 38
Monolithic Power Systems, Inc. (NASDAQ:MPWR) is a global semiconductor company that designs, develops, markets, and sells semiconductor-based power electronics solutions. On December 16, Truist analyst William Stein lowered the firm’s price target on Monolithic Power to $762 from $887 and kept a “Buy” rating on the shares. While the firm is cautious about the semiconductor and artificial intelligence sector, it remains optimistic about stocks such as Monolithic Power. The analysts told investors in a research note that even though there are doubts about Monolithic’s role in Nvidia’s current products, the firm is confident that it will be designed into Blackwell. (Monolithic provides power management solutions for Nvidia’s GPUs). Truist significantly lowered enterprise data revenue estimates for Q1, but highlighted Monolithic’s “likely top position across a breadth of AI customers, supporting solid growth over the next few years”.
7. MongoDB, Inc. (NASDAQ:MDB)
Number of Hedge Fund Holders: 49
MongoDB, Inc. (NASDAQ:MDB) provides a general-purpose database platform worldwide that integrates operational, unstructured, and AI-related data to streamline building applications. On December 18, Tigress Financial raised the firm’s price target on MongoDB to $430 from $400 and kept a “Strong Buy” rating on the shares. The analyst told investors in a research note that MongoDB will continue to see growing developer adoption and increasing momentum in its Atlas Database-as-a-Service platform. The Atlas Database-as-a-Service platform is a multi-cloud developer data platform that streamlines how you build with data. This increase is driven by burgeoning AI capabilities as the company continues to capture market share in the most critical and strategic areas of the enterprise software sector. The firm also said that the company’s ongoing AI integration and entry into new industries will lead to greater enterprise adoption, customer penetration, international expansion, and acceleration in Business Performance trends.
6. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 43
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. On December 30, Wall Street bull Dan Ives from Wedbush said that he anticipates tech stocks to climb another 25% in 2025. From “a less regulatory spider web” under President-elect Donald Trump to “stronger AI initiatives”, there are several factors that will be responsible for the tech rally. In particular, Ives pointed out big data company Palantir Technologies, one of the best-performing S&P 500 stocks in 2024. Palantir has the potential to surge thanks to Trump slashing red tape and the rise of artificial intelligence, Ives noted. Ives maintained his “Outperform” rating on Palantir with a target of $75.
5. Reddit, Inc. (NYSE:RDDT)
Number of Hedge Fund Holders: 52
Reddit, Inc. (NYSE:RDDT) is a social media platform that leverages AI to strengthen search functionality and improve user engagement. On December 18, JPMorgan raised the firm’s price target on Reddit to $142 from $110 and kept a “Neutral” rating on the shares. The analyst told investors in a research note that they are positive about the internet group heading into 2025. They also anticipate the artificial intelligence sector to continue dominating the investment narrative, with significant focus shifting toward agents and applications. Previously, the analysts had raised the price target on Reddit, driven by structural improvements in the company as it advanced its strategy across product, users, and monetization.
4. Amphenol Corporation (NYSE:APH)
Number of Hedge Fund Holders: 69
Amphenol Corporation (NYSE:APH) designs, manufactures, and markets electrical, electronic, and fiber optic connectors. As reported by CNBC on December 27, LSEG data shows that 11 of the 20 analysts covering Amphenol have assigned either strong buy or buy ratings, while nine maintain a neutral stance. Notably, Amit Daryanani, an analyst at Evercore ISI, expressed optimism about the information technology hardware and networking sector as it heads into 2025. The stock that is likely to benefit from the artificial intelligence boom is “under-the-radar” Amphenol Corporation. Amphenol, which produces connectors and cables for mobile networks and automobiles, is anticipated to have an upside of 10% or more to earnings per share estimates next year. This is going to be driven by factors such as potential merger and acquisition activity, upside around artificial intelligence, and a cyclical recovery in the industry. Amit Daryanani maintained a “Buy” rating on the stock with an $80 price target.
“APH can sustain double-digit revenue growth and mid-teen EPS growth with high consistency and low volatility”.
-Evercore ISI
3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 99
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 December 27, UBS analyst Joseph Spak maintained a Sell rating on Tesla and set a price target of $226.00. The analyst anticipates 510,000 vehicle deliveries, a 5% year-over-year increase but slightly below the consensus of 512,000 units. Historically, Tesla’s delivery figures have influenced stock performance. However, the firm notes that investor focus is shifting toward the company’s advancements in artificial intelligence (AI) and autonomous driving technologies. Consequently, Tesla’s valuation has pushed higher, emphasizing future potential over current metrics. At the same time, the firm remains skeptical about Tesla’s ability to steadily meet high growth expectations amidst rising competition in the EV market and uncertainties around AI-driven profits. This implies that Tesla’s current market valuation doesn’t fully account for the risks and uncertainties ahead.
2. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 128
Broadcom Inc. (NASDAQ:AVGO) is a technology company that offers custom chip offerings and networking assets. On December 22, Broadcom Inc. disclosed a new risk in the Share Price & Shareholder Rights category. The company has been facing significant stock price volatility due to factors such as market fluctuations, analyst reports, and industry dynamics, including AI product demand. The custom-chip maker reported that its AI revenues had surged 220 percent in its 2024 fiscal year, projecting massive growth in the sector. Such volatility can pose risks to investors, as rapid price fluctuations may lead to unexpected losses. Due to this significant volatility, investors may not be able to realize gains, or even lose out on their investments. The company may also be subject to securities class action litigation, especially if historical volatility trends continue. Such legal challenges could levy substantial costs and sidetrack management.
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a technology company that has strengthened its mark in the AI realm with the launch of Apple Intelligence, its personal intelligence system, that enhances its devices and services worldwide. On December 26, Wedbush analyst Daniel Ives raised the firm’s price target on Apple Inc. to a Street-High of $325 from $300 and kept an “Outperform” rating on the shares. According to the firm, Apple is heading toward a multi-year AI-driven iPhone upgrade cycle. Additionally, the firm predicts a major boost from a new multi-billion-dollar yearly revenue stream from AI-powered apps, as well as iPhone upgrades over the next 12 to 18 months.
While we acknowledge the potential of AAPL 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 AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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