Are we in an artificial intelligence hype cycle, and will the cycle ever turn into meaningful value for enterprises?
That’s the big question as investors question whether revolutionary technology has been hyped out of proportion. Amid the concerns, Silicon Valley investors and tech giants remain optimistic that the technology at the heart of the fourth industrial revolution will one day deliver trillions of dollars in business value.
“We are definitely in a hype cycle, especially for generative AI,” said Konstantine Buhler, a partner at Sequoia Capital, speaking on a panel at The Wall Street Journal’s CIO Network Summit on Monday.
Some corporate technology leaders claim they cannot wait for AI to improve or demonstrate its long-term worth despite the technology’s return on investment taking longer. Customer service and code writing are currently the first fields where AI is promising, but the revolutionary developments that will yield those trillions may still be some time off.
If there is something history has shown is that generating returns from new technology investments is a high-pressure game that takes some time. According to Buhler, it took many years to generate significant returns from AI’s first and second eras despite trillions of dollars in market capitalization being created in the 2000s.
Despite the growing concerns about how long it will take to generate returns from AI investments, companies and businesses are increasingly integrating the revolutionary technology to enhance operations and efficiency. While American banks have been using AI for years to spot frauds, it’s only now that most are betting big on the technology.
In the past year, banks led by JPMorgan have rolled out large language models for more employees. Additionally, the banks use generative artificial intelligence in call centers for agents. At JPMorgan, over 200,000 people have an AI tool at their desks.
According to Teresa Heitsenrether, JPMorgan’s chief data and analytics officer, it is still early to start seeing productivity gains across the bank in integrating AI.
“It’s very early innings. First we want to put the tool in people’s hands, and let them be able to ask questions and get answers. That already starts to spawn ideas, innovation, some productivity,” Heitsenrether said.
While the focus has been on AI’s monetary value, the International Monetary Fund notes that AI will affect 40% of jobs worldwide. While technology is expected to complement most jobs, it will replace some.
“In advanced economies, about 60 percent of jobs may be impacted by AI. Roughly half the exposed jobs may benefit from AI integration, enhancing productivity. For the other half, AI applications may execute key tasks currently performed by humans, which could lower labor demand, leading to lower wages and reduced hiring,” IMF said in a blog post.
AI stands out for its capacity to influence highly skilled occupations. As a result, compared to emerging markets and developing economies, advanced economies face more risks from AI but also have more opportunities to take advantage of its advantages.
For this article, we selected AI news updates by going through news articles, stock analyses, and press releases. These stocks are also popular among hedge funds 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 financial analyst studying market trends on a laptop, surrounded by graphs and charts.
10. ImmunoPrecise Antibodies Ltd. (NASDAQ:IPA)
Number of Hedge Fund Holders: 1
ImmunoPrecise Antibodies Ltd. (NASDAQ:IPA) is a biotechnology company that helps pharmaceutical and biotechnology companies discover and develop therapeutic antibodies. The company leverages AI to develop therapeutic antibodies. On February 24, the company moved to strengthen its leadership realm with the appointment of Dr. Kamil Isaev to its board of directors.
Isaev joins the AI-driven biotherapeutic research company with over 30 years of experience in AI and semiconductor technologies. His deep expertise in AI, R&D leadership, and commercialization of cutting-edge technology should be invaluable as ImmunoPrecise Antibodies continues to expand its AI-driven biologics platform.
“Kamil’s proven track record in developing go-to-market strategies and his experience in bringing emerging technologies to commercial success aligns perfectly with our mission. His insights will be crucial as we navigate the complex landscape of AI in biologics and accelerate our path from innovation to market impact,” said Dr. Jennifer Bath, President and CEO.
9. XPeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 17
XPeng Inc. (NYSE:XPEV) designs, develops, manufactures, and sells smart electric vehicles (EVs). It focuses on creating advanced driver-assistance systems and intelligent in-car operating systems, aiming to be a leader in the future of AI-driven mobility. On February 24, analysts at UBS upgraded the stock to Neutral, buoyed by growing investor interest in the company’s artificial intelligence initiatives.
According to the analysts, XPeng has strengthened its prospects by focusing on software and autonomous driving. That’s because the company has allocated at least 50% of its annual research and development budget to artificial intelligence initiatives.
“XPeng launched its first large multimodal model, XGPT, in late 2023, and as of now is the only Chinese EV maker that is working on a humanoid robot,” UBS noted.
8. ExlService Holdings, Inc. (NASDAQ:EXLS)
Number of Hedge Fund Holders: 27
ExlService Holdings, Inc. (NASDAQ:EXLS) is an information technology services company that offers digital operations and solutions and analytics-driven services. The company also helps businesses leverage data and artificial intelligence to become more efficient and profitable. On February 25, the company unveiled EXLerate.AI, an advanced agentic AI platform.
The AI powered platform seeks to help enterprises integrate AI solutions into their business operations. The platform comes with 10 industry specific AI agents designed to enhance efficiency, customer experience and scalability across business operations in various sectors from insurance to healthcare retail and financial services.
“We invested in EXLerate.AI with three core principles in mind: a strong data and domain foundation, flexibility for rapid innovation and the ability to integrate AI seamlessly into enterprise operations,” said Anand “Andy” Logani, EXL’s chief digital and AI officer.
7. CommScope Holding Company, Inc. (NASDAQ:COMM)
Number of Hedge Fund Holders: 32
CommScope Holding Company, Inc. (NASDAQ:COMM) is a technology company that designs, manufactures, installs, and supports network infrastructure products. Its products include hardware and software that enable digital communication. It also leverages AI in the realm of network infrastructure management to analyze data from network components and predict potential issues.
CommScope Holding Company, Inc. (NASDAQ:COMM) unveiled new AI-driven solutions through Ruckus Network on February 24. The new solutions integrate generative edge and intent-based AI features, strengthening RUCKUS competitive edge in the high-growth WiFi 7 market segment. CommScope also inked a partnership that paved the way for merging Nokia’s optical LAN solution with RUCKUS WiFi APs and the RUCKUS One® platform, promising to reduce the total cost of ownership by 50%. RUCKUS is positioned as a strong competitor in the rapidly expanding WiFi 7 market segment thanks to its integration of generative AI and edge computing capabilities.
6. Rivian Automotive, Inc. (NASDAQ:RIVN)
Number of Hedge Fund Holders: 40
Rivian Automotive, Inc. (NASDAQ:RIVN) designs, develops, manufactures, and sells electric vehicles and accessories. The company also utilizes artificial intelligence to develop advanced driver assistance systems (ADAS) within its electric vehicles. Research firm Guggenheim reiterated its Buy rating on the stock on February 24 but cut the price target to $16 from $18.
The research firm reiterated a buy rating in Rivian Automotive, Inc. (NASDAQ:RIVN), buoyed by its fourth-quarter financial results that showed success in achieving a gross profit of $170 million on improvements in variable costs. The California carmaker is quickly enhancing driver-assist features on the R1T pickup and R1S crossover by utilizing its second-generation vehicle platform and software advancements from artificial intelligence.
5. Riot Platforms Inc. (NASDAQ:RIOT)
Number of Hedge Fund Holders: 37
Riot Platforms Inc. (NASDAQ:RIOT) is a company that mines Bitcoin and develops digital infrastructure. Its goal is to become the world’s leading Bitcoin-driven infrastructure platform. Additionally, the company is exploring artificial intelligence and high-performance computing (HPC) to diversify and strengthen its revenue streams.
Riot Platforms Inc. (NASDAQ:RIOT) delivered impressive fourth quarter and full year 2024 results characterized by record revenue of $376.7 million on February 24. Riot Platforms also delivered a net income of $109.4 million as it benefited from an increase in the global hash rate of 67%. Riot has already engaged financial advisors as it looks to pursue growth opportunities around AI and HPC while leveraging power assets at the Corsicana facility.
“Due to our efforts over the prior year, we are in an exceptionally strong position and focused on executing on the exciting opportunities ahead of us to maximize shareholder value, particularly on the AI/HPC front,” said Jason Les, CEO of Riot.
4. Zeta Global Holdings Corp. (NYSE:ZETA)
Number of Hedge Fund Holders: 39
Zeta Global Holdings Corp. (NYSE:ZETA) is a technology company that operates an Omni channel data-driven cloud platform. The company offers data-driven marketing technology that leverages AI and proprietary consumer data to help brands acquire, grow, and retain customers. The company delivered exceptional fourth-quarter and full-year 2024 results on February 25.
A 50% year-over-year increase in revenue to $315 million in Q4 signals the company’s AI marketing solutions are gaining traction and strengthening the revenue base. Full-year revenue was also up 38% to $1.006 billion as Zeta Global bounced to a GAAP net income of $15 million from a net loss of $35 million a year ago. Zeta Global Holdings Corp.’s (NYSE:ZETA) remarkable 2024 and Q4 results support the focus on AI-driven marketing tools based on first-party data. Expansion in customer value coupled with growth in customer counts should result in a compounding effect on revenue growth.
David A. Steinberg, Co-Founder, Chairman, and CEO of Zeta, stated, “At Zeta, we’ve consistently skated to where the puck is going. Our early investments in AI and first-party data are resonating with customers and prospects, fueling our record fourth quarter results and contributing to our market share gains.”
3. Lumen Technologies Inc. (NYSE:LUMN)
Number of Hedge Fund Holders: 44
Lumen Technologies Inc. (NYSE:LUMN) is a communication services company that offers integrated products and services to business and residential customers. It offers dark fiber, edge cloud services, internet protocol, managed security, and software-defined wide area networks. On February 25, the company confirmed it had selected Ciena as its preferred optical vendor to enhance its network infrastructure for AI workloads.
The partnership will enable the implementation of WaveLogic 6 Extreme (WL6e) technology, which features the industry’s first 1.6 Tb/s coherent transceiver powered by 3nm silicon. As a result, Lumen will be better equipped to provide highly customized, scalable connectivity services to leading cloud and data center providers trying to keep up with the rise in workloads related to artificial intelligence (AI) and related traffic.
In addition, Lumen Technologies Inc. (NYSE:LUMN) should enjoy significant benefits, including a 50% reduction in space and power per bit. As data center operators deal with growing power limitations and sustainability demands in the midst of the AI boom, these efficiency gains are especially important.
2. Zoom Video Communications, Inc. (NASDAQ:ZM)
Number of Hedge Fund Holders: 48
Zoom Video Communications, Inc. (NASDAQ:ZM) is an AI-first work platform for human connection. It offers Zoom Meetings with HD video, voice, chat, and content sharing. The company is increasingly investing in AI, going by Zoom AI Companion, a virtual assistant within the Zoom platform, helping users summarize meetings and draft emails.
Zoom Video Communications, Inc. (NASDAQ:ZM) delivered solid fourth quarter and full year 2024 results on February 24, showing modest growth as AI monetization takes shape. Revenue in the quarter was up 3% year over year to $1.18 billion, as full-year revenue increased 3.1% to $4.66 billion. The robust growth came as Zoom AI Companion accelerated Zoom Communications’ transformation into an AI-first company.
CEO Eric Yuan highlighted the company’s shift to an AI-first platform and reported a 68% increase in AI Companion users from quarter to quarter. Zoom plans to make money from its AI solutions by automating office tasks and integrating with other technologies, which will streamline procedures. Zoom plans to launch Custom AI Companion add-ons in April 2025.
1. Confluent Inc (NASDAQ:CFLT)
Number of Hedge Fund Holders: 48
Confluent Inc (NASDAQ:CFLT) is a technology company that provides a cloud-native data streaming platform, that allows organizations to continuously stream, connect, process, and manage data in real-time across various systems. Additionally, the company provides data streaming infrastructure that powers real-time AI applications. It also offers a platform for building next-generation data-intensive AI applications. Citi analyst Tyler Radke reiterated a Neutral rating on the stock on February 24 and increased the price target to $37 from $33.
The price hike comes on Confluent Inc (NASDAQ:CFLT) delivering solid fourth-quarter results for fiscal 2024, demonstrating solid cloud revenue performance. Similarly, acquiring Databricks should strengthen the company’s position in the streaming markets. The analyst also awaits the company’s update on the progress of AI within its DSP offerings at its forthcoming investor day.
While we acknowledge the potential of Confluent Inc (NASDAQ:CFLT) 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 CFLT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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