Leading companies across diverse industries, including electronics, IT infrastructure, surveillance, renewable energy, robotics, and cybersecurity, are heavily investing in AI and machine learning to leverage the technology for widescale innovation. In turn, companies are able to reduce operational costs, tackle workforce challenges, and transform client experiences.
For instance, in the IT infrastructure space, AI spending is expected to jump to $509.1 billion in 2027 from $175.9 billion in 2023, according to the IDC. The spending on AI platforms is expected to rise as they become increasingly important for business’s digital operations.
“Harnessing machine learning can be transformational, but for it to be successful, enterprises need leadership from the top. This means understanding that when machine learning changes one part of the business — the product mix, for example — then other parts must also change. This can include everything from marketing and production to supply chain, and even hiring and incentive systems,” said Erik Brynjolfsson, co-founder of Workhelix.
Elsewhere, PwC global chairman, Mohamed Kande, during his speech at the World Economic Forum in Davos urged people to not be afraid of AI in the workplace but embrace it as a digital colleague.
“People fear what they don’t understand, so exposing them to the technology, putting in their hands makes a big difference,” Kande said about AI, adding that doing so allows employees to view AI as a “digital colleague…You don’t fear your colleagues, you partner with them…So we are actually asking people to partner with the technology.”
For this article, we selected AI stocks by reviewing news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 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 scientist at a computer station, surrounded by a neural network of artificial intelligence code.
10. Palladyne AI Corp. (NASDAQ:PDYN)
Number of Hedge Fund Holders: N/A
Palladyne AI Corp. (NASDAQ:PDYN), a robotics developer, offers an advanced AI and ML software platform transforming the capabilities of robots in terms of observation, learning, reasoning, and acting with unprecedented agility akin to human intelligence with minimal data sets, lower power requirements, and reduced training time. The AI software can equip most commercial robots with real-time environmental awareness to facilitate rapid adaptability to task variances without reprogramming through constant cloud connectivity, fostering high levels of autonomy and safety even in remote settings.
On January 15th, Palladyne AI Corp. (NASDAQ:PDYN) and Red Cat Holdings (NASDAQ:RCAT) revealed that it completed the first successful flight involving Teal drones powered by Palladyne Pilot AI software, which autonomously coordinate to identify, prioritize, and track ground objects. The test demonstrated that Palladyne Pilot AI software enables multiple drones to autonomously collaborate and exchange sensor information seamlessly.
“The successful integration of Palladyne Pilot AI software into Teal drones to enable multi-drone autonomous collaboration is an important milestone in the partnership we announced with Red Cat last summer. We believe the force multiplier effect resulting from the autonomous collaboration capability of multiple drones will provide a substantial tactical advantage to the warfighter in the field,” said Matt Vogt, Chief Revenue Officer of Palladyne AI Corp.
9. ZenaTech Inc. (NASDAQ:ZENA)
Number of Hedge Fund Holders: N/A
ZenaTech Inc. (NASDAQ:ZENA) specializes in AI drones, Drone as a Service (DaaS), enterprise SaaS, and quantum computing solutions for diverse industries, such as defense and government, oil and gas, logistics and warehousing, mining and construction, as well as powerline inspection and renewable energy. The company’s software expertise, AI drone technology and hardware integration help streamline processes, reduce labor costs, and improve operations efficiencies for mission-critical applications while ensuring security and compliance.
On January 23rd, ZenaTech Inc. (NASDAQ:ZENA) announced the acquisition of KJM Land Surveying, marking its second takeover as part of a larger plan to disrupt the land survey industry. Moreover, the purchase will also form the base of the Southeast US region of its national Drone as a Service business, which leverages drone offerings from its subsidiary ZenaDrone.
8. VCI Global Ltd (NASDAQ:VCIG)
Number of Hedge Fund Holders: 1
VCI Global Ltd (NASDAQ:VCIG) is a diversified holding company that offers consulting, AI, robotics, and cybersecurity services through its various subsidiaries. The VCI Global AI Center focuses on deploying GenAI solutions, with a focus on creating tailored versions of large language models (LLMs) and developing emotion analysis and intention recognition capabilities. Elsewhere, the company’s Avarai post-harvest robotics system uses ML and AI algorithms to drive innovation in the agricultural sector.
On January 23rd, VCI Global Ltd (NASDAQ:VCIG) made progress in acquiring digital marketing firm Roots Digital for $2.2 million to bolster its capabilities in social media advertising, paid media, and SEO capabilities.
“With this acquisition, we are excited to expand in Singapore, with this move paving the way for future acquisitions that will broaden our offerings and add greater value to clients. The acquisition also serves as a strategic move that will synergize our other key strengths, such as IPO consultancy and AI-related services,” said Dato’ Victor Hoo, CEO of VCI Global.
7. Iris Energy (NASDAQ:IREN)
Number of Hedge Fund Holders: 28
Iris Energy (NASDAQ:IREN) operates 360MW of operational next-gen data centers, each powered by 100% renewable energy and capable of running over 70kW racks. These data centres are optimized for Bitcoin mining, AI cloud services, and power-dense applications. The company chooses data centres locations close to abundant and low-cost renewable energy sources to meet the growing demand for high-performance computing applications. Iris Energy (NASDAQ:IREN) has partnered with data service platform software providers for GPU optimization in data centers to offer data storage and management solutions for GenAI workloads.
On January 21st, Roth MKM retained a “Buy” on the Iris Energy (NASDAQ:IREN) stock, describing it as the firm’s top pick in Digital Assets as US President Donald Trump’s crypto stance should favor miners with US-based operations. The analysts added that the administration could focus on AI and cyber security, the former of which should benefit hybrid HPC/AI/BTC coverage names. The brokerage explained that the company mines bitcoin at or near the industry low cost of about $29,000 all-in cost at 31 EH/s and power cost of about $22,800 as of December per BTC while having a flexible and available interconnect capacity.
6. Cirrus Logic Inc. (NASDAQ:CRUS)
Number of Hedge Fund Holders: 28
Cirrus Logic, Inc. (NASDAQ:CRUS) is a fabless semiconductor supplier of low-power, high-precision audio components and mixed-signal processing solutions such as DSP integrated circuits, smart codecs, boosted amplifiers, and camera controllers for mobiles, laptops, and home theater systems. The company maintains a robust intellectual property portfolio, including its nine AI patents. In Q1 2024, it filed a new AI patent on using biometric authentication to personalize audio playback on personal audio devices for a customized listening experience.
On January 17th, Barclays analyst Tom O’Malley reiterated its target price of $105 for Cirrus Logic, Inc. (NASDAQ:CRUS) shares with a “Hold” rating. Analysts have previously revealed concerns about the company’s soft fiscal year guidance, which could mean flat unit expectations for H2 2024.
5. Rockwell Automation Inc. (NYSE:ROK)
Number of Hedge Fund Holders: 38
Rockwell Automation Inc. (NYSE:ROK) is leading industrial automation and digital transformation globally with flagship products like Allen Bradley and FactoryTalk that enable production monitoring and easy application of ML concepts to overcome product quality issues while ensuring process integrity. The company also partnered with leading AI firms like Nvidia (NASDAQ:NVDA), integrating APIs to provide data interoperability, process automation, and live collaboration to industrial clients while addressing workforce shortages.
On January 16th, Stephens upgraded Rockwell Automation Inc. (NYSE:ROK) to “Overweight” from “Equal-Weight” and also raised its target price to $350 from $275. The brokerage is of the view that it is time to include the stock in investment portfolios due to growing visibility to sales and earnings returning to growth by the second half and progress toward a reinvigorated cost-management and operational excellence program. Analysts added that wish list names like Rockwell “rarely come cheap,” but the stock has generally outperformed markets during the early phase of earnings recoveries.
4. Varonis Systems Inc. (NASDAQ:VRNS)
Number of Hedge Fund Holders: 42
Varonis Systems Inc. (NASDAQ:VRNS) is a cybersecurity firm that offers a security software platform to automate the management and protection of unstructured data with patented AI and ML algorithms. The AI software performs user behavior analytics and forensic analysis via platforms like data advantage, data privilege, and the data classification engine for automated threat detection and response. The company focuses on safeguarding enterprise data, financial records, intellectual property, and confidential data of individuals.
On January 16th, Citi lowered the company’s stock price target to $46 from $57 and retained a “Neutral” rating. The brokerage also opened a “30-day negative catalyst watch” on the shares. It said the company’s installed base conversions will trend up, but declining net revenue retention optics are likely for 2024, which is being under-appreciated, risking a negative headline read from the Q4 report. Citi sees “limited upside scope from here,” citing stiff competition and its “un-inflecting demand fieldwork.”
3. TE Connectivity PLC (NYSE:TEL)
Number of Hedge Fund Holders: 44
TE Connectivity PLC (NYSE:TEL) designs and manufactures cutting-edge connectors and sensor components for industries including automotive, aerospace, defense, medical, and energy. The company is integrating AI into its engineering workflows to optimize product designs and accelerate product deployments in markets. TE Connectivity PLC (NYSE:TEL) also manufactures highly-engineered backplane, OTB, power, and internal cabled connectors for data centres and AI applications.
On January 23rd, Truist trimmed the firm’s price target to $163 from $165 and retained a “Hold” rating on the stock following its Q4 results. Analyst William Stein wrote that TE Connectivity PLC (NYSE:TEL) showcased robust execution with decent margins as its AI projects lifted performance. However, the brokerage was concerned about the drag on the auto business and adverse FX impacting results.
2. Axon Enterprise, Inc. (NASDAQ:AXON)
Number of Hedge Fund Holders: 46
Axon Enterprise, Inc. (NASDAQ:AXON) is a weapons and surveillance technology firm popular for developing and supplying stun guns, bodycams, and dashcams to police departments, prison agencies, immigration authorities, and private security in the US and worldwide. The company also offers the Axon Evidence software boosted by AI to manage surveillance cam recording data to reduce report writing time, speed up evidence review and license plate scanning, and improve incident response time.
On January 7th, Raymond James hiked Axon Enterprise, Inc.’s (NASDAQ:AXON) target price to $645 from $515 and retained an “Outperform” rating. Although the stock jumped 130% in 2024, the brokerage attributed the recent price retreat to profit-taking, valuation, and concerns that Q4 results and 2025 guidance could be a difficult “encore to the chorus” of strong results in recent times. Analysts view this scenario as an entry point for a story accelerating its mix to software and AI and expect positive estimate revisions in the company’s Q4.
1. Vertiv Holdings Co. (NYSE:VRT)
Number of Hedge Fund Holders: 91
Vertiv Holdings Co. (NYSE:VRT) offers hardware, software, and analytics services to solve the challenges of data centers, communication networks, and industrial facilities. Its AI-ready power, cooling, and IT infrastructure offerings, such as battery-energy storage systems and rack power distribution units, are designed to match demanding AI workloads even during outages, reducing dependency on utility providers. Vertiv Holdings Co.(NYSE:VRT) also partnered with Nvidia (NASDAQ:NVDA) and Intel Corp. (NASDAQ:INTC) to develop new-age AI cooling solutions to keep AI systems running regardless of the cluster size.
On January 17th, Evercore ISI reduced Vertiv Holdings Co.’s (NYSE:VRT) stock price target to $145 from $150 while retaining an “Outperform” rating. The brokerage is constructive on companies linked to the broader enterprise IT and AI-related infrastructure spending and thinks the setup for calendar Q4 “remains favorable”, with expectations for in-line or modest beats. However, analysts see a chance of companies taking “a more prudent and cautious stance” for calendar 2025 guidance, given ongoing uncertainty on the public spending side.
While we acknowledge the potential of Vertiv Holdings Co. (NYSE:VRT) as an investment, our conviction lies in the belief that 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 VRT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stock To Buy Now and Complete List of All AI Companies Under $2 Billion Market Cap.
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