LinkedIn co-founder Reid Hoffman said in a latest program on CNBC that the DeepSeek breakthrough was not “news” for him and many tech insiders as he believed sooner or later more efficient models would be launched. However, he sees China’s rise in the AI race as surprising:
“I do think that the thing that is news is, well, look, as we’ve been saying, China is in the game. This is actually, in fact, a game-on competition, and it was resoundingly demonstrated that way. There is good, useful work that comes out of it.”
The tech investor believes efficiency will lead to more use cases and usage:
“Say, for example, you can train a model on a thousand GPUs, but you can make it much better on 10,000 GPUs. You will, in a lot of cases, always spend for the 10,000 GPUs or the 100,000 GPUs because if your coding model is even 20% better with that and you think that there are billions of people who could be using and engaging with that around the world, that’s actually worth it at that kind of cost. So, the fact that you’re trying to do efficiency — that’s a good thing. All of the American companies will also get to points where they’re focusing on efficiency. I think there are things that we can learn from some of the stuff the Chinese are doing.”
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For this article, we picked 10 AI stocks currently making moves on the back of the latest news. With each stock, we have mentioned the number of hedge fund investors. 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. Nebius Group NV (NASDAQ:NBIS)
Number of Hedge Fund Investors: N/A
Alger’s Ankur Crawford in a latest program on CNBC talked about what she believes is an under-the-radar AI data center stock. Here is how she made the case for the Dutch technology company Nebius Group NV (NASDAQ:NBIS):
“Nebius Group NV (NASDAQ:NBIS) is a really interesting under-the-radar play. I call it under the radar because it actually has almost no coverage on the street. It used to be the former management of Yandex, which was the Google of Russia. They’ve basically corralled them and started a new company called Nebius. Nebius Group NV (NASDAQ:NBIS) is an AI data center play. In November of last year, NASDAQ called them and said, “We’re basically listing you in three days,” so they never actually got the chance to do an IPO roadshow and are now kind of meeting with investors. What I love about this is that it’s effectively a public CoreWeave. There is no other way to play an enterprise-type data center. They have a global footprint, expanding rapidly in the U.S. with some of the best engineers in the world.”
9. Palantir Technologies Inc (NASDAQ:PLTR)
Number of Hedge Fund Investors: 43
Brent Thill of Jefferies said in a latest program on CNBC that Palantir Technologies Inc (NASDAQ:PLTR) valuation is too high and at some point in the long term he sees a “trigger” that could cause a selloff around the stock. However, he believes Palantir Technologies Inc (NASDAQ:PLTR) fundamentals are strong and the company is doing very well compared to peers.
“I mean, we’re at a point right now where the stock is in la-la land on multiple. There’s nothing anywhere remotely close to this. Our team has been advocating there are better ways, safer ways for investors to own these themes around AI, whether it’s security in CrowdStrike or Cloudflare. You look at other stories, but when you start to look at this market cap, it’s the market cap of Palantir Technologies Inc (NASDAQ:PLTR), Adobe, and Snowflake combined. I mean, again, we’ve never seen a multiple like this. And I can just give you history—when Snowflake, Datadog, and others hit this multiple back during COVID, they didn’t hold that multiple, and it was not a good story on the other side of this mountain. They all imploded,”
Palantir Technologies Inc (NASDAQ:PLTR) valuation is concerning for many. The company’s revenue growth is expected to slow over the next two years, with estimates suggesting a 22% YoY growth rate, potentially bringing revenues to around $4 billion by fiscal 2026. If Palantir Technologies Inc (NASDAQ:PLTR) can improve margins by 100 basis points annually, it would be able to generate about $1.5 billion in adjusted operating income by FY26, with a present value of $1.3 billion when discounted at 8%. Applying an S&P 500-like growth multiple of 2.5 to 2.75 times earnings, Palantir Technologies Inc (NASDAQ:PLTR) would have a P/E of 46, translating to a price target of $27, significantly down from its current price.
Alger Mid Cap Focus Fund stated the following regarding Palantir Technologies Inc. (NASDAQ:PLTR) in its Q4 2024 investor letter:
“Palantir Technologies Inc. (NASDAQ:PLTR) builds advanced platforms for data integration, management, and security, enabling interactive, AI-assisted analysis for its users. Its core offerings include Palantir Gotham, designed for government clients, and Palantir Foundry, tailored for commercial customers. Originally focused on U.S. intelligence agencies, Palantir has expanded into defense contracts with western governments and entered the commercial market in 2016. During the quarter, shares contributed to performance after the company reported better-than-expected fiscal third quarter operating results, along with management raising its full year 2024 revenue guidance. Management noted that the recent launch of its AI platform (AIP), which leverages generative AI to optimize business operations, has driven significant growth and investor interest. Additionally, we believe Palantir could be a key partner for the U.S. government’s new Department of Government Efficiency (DOGE), as its AI-driven platforms are ideally suited to help identify inefficiencies, allocate resources effectively, and achieve cost reductions.”
8. Reddit Inc (NYSE:RDDT)
Number of Hedge Fund Investors: 52
Joshua Brown, co-founder and CEO of Ritholtz Wealth Management, said in a latest program on CNBC that he’s still bullish on Reddit Inc (NYSE:RDDT) despite a higher valuation.
“I am staying long Reddit Inc (NYSE:RDDT), rolling up my stop higher. Valuation is now higher than when I got in, but it’s a better business.”
7. Dell Technologies Inc (NYSE:DELL)
Number of Hedge Fund Investors: 60
Bryn Talkington, Managing Partner of Requisite Capital Management, said in a latest program on CNBC that she is bullish on Dell Technologies Inc (NYSE:DELL) ahead of the company’s earnings.
“Dell Technologies Inc (NYSE:DELL) earnings come out on February 25th. Their Infrastructure Solutions Group is on fire—it’s the heart of the data centers. I like the stock going into earnings.”
In the last quarter, Dell Tech Inc (NYSE:DELL) experienced a shift in AI server demand toward the next-generation Blackwell architecture. Dell Tech Inc (NYSE:DELL)’s management highlighted that there was a dramatic shift in orders toward Nvidia’s (NVDA) Blackwell-based systems during Q3, which impacted short-term shipments as these products ramp up production. This shift shows Dell Tech Inc (NYSE:DELL)’s competitive position, as customers are willing to wait for the latest tech solutions. Dell secured $3.6 billion in AI server orders this quarter, an 11% increase from the previous quarter. Dell Tech Inc (NYSE:DELL) also signed over 2,000 enterprise customers for their AI solutions.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its Q2 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) was a top contributor despite reporting disappointing first-quarter earnings results, because investors looked through the near-term disappointment and expected strong growth from AI-related servers and personal computers. We expect Dell to participate in the growth of artificial intelligence hardware, especially as enterprises invest more aggressively. We like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
6. Qualcomm Inc (NASDAQ:QCOM)
Number of Hedge Fund Investors: 74
Ben Bajarin, Creative Strategies CEO, said in a latest program on CNBC that following the launch of DeepSeek, we are expected to see new apps and this cycle could benefit smartphone equipment makers.
“I think having these reasoning models being shown they can run at the edge, which have particularly been compute constrained, is a positive. I think the key now is what developers do with that. I think we’re on the cusp of a developer frontier to start to develop these apps, which is going to again benefit everybody. The names we’re talking about here— Qualcomm Inc (NASDAQ:QCOM) and Arm—will benefit from that as well.”
Fidelity Dividend Growth Fund stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q3 2024 investor letter:
“At the stock level, QUALCOMM Incorporated (NASDAQ:QCOM) was a major detractor, returning about -14% the past three months. The firm develops and manufactures semiconductors, software and services used in mobile phones, and other wireless technologies. On July 31, the company reported second-quarter results, and issued guidance for Q3, both of which solidly exceeded expectations. The stock slid, however, on concerns about a slow recovery for smartphones. Additionally, shares dipped this quarter in step with other semiconductor-related names.”
5. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
Eric Jackson, EMJ Capital founder, was recently asked on CNBC why he sold Tesla Inc (NASDAQ:TSLA) shares a few weeks back. The analyst said they sold the stock amid tariff-related concerns, among other reasons.
“Two reasons really—an incredible run since the election, I mean, it’s straight up basically. So I just felt like it was time to consolidate some of those gains. But obviously, I knew there was this potential for looming China tariffs, which has played out just in the last day or so. And obviously, out of the MAG stocks, Apple and Tesla Inc (NASDAQ:TSLA) are going to be the two names that get hurt the most on fears about that going on for a long time. I don’t think it will. I think what we’ve learned this week is that President Trump wants deals, he wants to log wins. He sees Mexico and Canada as wins. I think he wants to log a deal with China. And I think what was probably most promising on that front is the reaction of the Chinese to the tariffs and what they counter-proposed in terms of retaliatory tariffs. It could have gone much stronger, much steeper—they didn’t. That signals to me that they want a deal as well.”
However, the analyst said in the same program that he believes Tesla Inc (NASDAQ:TSLA) shares can “track up” this year.
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q4 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) detracted from performance in the fourth quarter of 2024. The stock had a strong performance in the fourth quarter, and our portfolio has an underweight position relative to the benchmark weight. Tesla reported better-than-expected third quarter earnings in late October. Given the CEO of Tesla’s position as an advisor to President-elect Trump, performance in the shares accelerated following the U.S. presidential election. There are expectations that regulation for autonomous driving will be centralized with the federal government. There have been reports in the press that tax incentives for electric vehicles will be eliminated or reduced, which could have a negative impact on Tesla’s subscale competitors.”
