In this article, we will take a detailed look at the Top 10 AI News You Shouldn’t Miss.
All everyone could talk about in the technical AI landscape these days is DeepSeek-R1, a Chinese open-source LLM that analysts believe can give major American AI companies a run for their money. Why is DeepSeek making waves and why is it called a breakthrough in the AI race?
DeepSeek AI model is several times cheaper to use for professional purposes when compared to its American counterparts including OpenAI’s o1 model. Media reports also suggest the model beat almost all key AI models in the industry by significant margins.
CNBC’s Deirdre Bosa explained what makes these Chinese models a challenge for US tech companies:
“The cost, I mean, these models coming out of China are just built at a fraction of the price when you think about OpenAI. That’s spending $5 billion a year, burning through billions of dollars a year. These models, the DeepSeek for example, they say they built it for less than $6 million. ByteDance as well, you know, shows that it was built and you can access it at much, much lower prices. So, this really turns on sort of this truth that we have thought about generative AI for the last few years—that you need hundreds of millions of dollars to develop bigger and better models. What the Chinese labs and companies are doing is they’re going straight to the frontier. They’re building with sort of infrastructure and outputs that are already out there, built in many cases by American companies and startups, and they’re improving on it, they’re innovating on it, and producing models that are just as good, in some cases, at a fraction of the cost.”
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For this article, we picked 10 AI stocks currently in the news. With each company 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. Palantir Technologies Inc (NASDAQ:PLTR)
Number of Hedge Fund Investors: 43
Jim Cramer in a recent program on CNBC praised Palantir Technologies Inc (NASDAQ:PLTR) and its management and said the stock may turn out to be undervalued in the long term because of its growth.
“I have growing respect for what the company’s trying to do, and I think that even though it seems 100 times earnings, it may turn out to be much less in terms of the multiple. It is the highest—got the highest so-called rule of 40 about its growth and margins of any company. My hats off to these guys. If you go back and read the last couple of analyst reports, it really is the exciting AI company of our era.”
Cramer also appreciated Palantir Technologies Inc (NASDAQ:PLTR) CEO Alex Karp:
“I think what really is, this is a very, very high-growth company, and we really don’t know how to value it. We don’t know how to value it because Alex Karp, the CEO, is basically saying, “Listen, our valuation is confused. We’re the fastest growing, but we’re not really going to tell you everything that we do.” I am a believer in Alex Karp. I ordered his book, I’ve read a lot, I’ve seen his videos, and I think that what he’s got here is something that is much more special.”
ClearBridge Growth Strategy stated the following regarding Palantir Technologies Inc. (NASDAQ:PLTR) in its Q4 2024 investor letter:
“To promote balance, manage risk and augment the portfolio’s growth characteristics, we continued to take profits in some of our more established, larger holdings to seed new purchases. We believe that the arms race and value unlock from AI will provide a multiyear tailwind to a number of companies in our coverage. To maintain exposure to this theme, we used some of our profit taking in Broadcom to initiate new positions in AI-levered names AppLovin and Palantir Technologies Inc. (NASDAQ:PLTR).
Palantir is a software-as-a-service provider with an AI-powered operating system that connects data to existing customer applications. Palantir’s platform acts as a hub to improve business outcomes across government and commercial end markets, allowing users to synthesize diverse data sources into actionable insights in real time. The company is highly profitable and growing rapidly at scale with 80%+ gross margins. Given the stock’s more elevated valuation we are being mindful of position size.”
9. Cloudflare Inc (NYSE:NET)
Number of Hedge Fund Investors: 44
Cloudflare Inc (NYSE:NET) recently gained after Goldman Sachs upgraded the stock from Sell to Buy.
The investment firm projects a 28% upside, setting its new 12-month price target at $140.
Goldman Sachs identified two key factors driving Cloudflare Inc (NYSE:NET) potential in 2025: “an improving sales and marketing productivity cycle after two years of evolution to better address platform sales in the enterprise, and traction with Act III products for developer services, as Cloudflare Inc (NYSE:NET) applies its core edge network architectural advantages (being able to run software workloads on all commodity servers, points of presence across telcos) to new AI inferencing use cases,” said Goldman Sachs analysts, led by Gabriela Borges, in an in-depth investor note on U.S. cybersecurity stocks.
Goldman Sachs also noted that chief information officers view platform investment as a top priority for cybersecurity.
Parnassus Mid Cap Fund stated the following regarding Cloudflare, Inc. (NYSE:NET) in its Q3 2024 investor letter:
“In Software, we added Autodesk and Cloudflare, Inc. (NYSE:NET) while exiting Bill.com. Cloudflare has built its own internet network, providing its customers with lower latency and better security. Cloudflare allows companies to access the internet faster and with greater security. The company is building new offerings on top of its network, allowing it to widen its competitive moat with high incremental margins. Cloudflare has a large addressable market that we believe provides a long runway for growth.”
8. Oracle Corp (NYSE:ORCL)
Number of Hedge Fund Investors: 91
Charlie Bobrinskoy, Ariel Investments vice chairman, recently said on CNBC that Oracle Corp (NYSE:ORCL) is one of his favorite digital stocks.
“I think value stocks can do okay in that environment with the productivity improvements that come from digital and AI. And of course, I’m going to point you to my favorite digital stock, which is Oracle Corp (NYSE:ORCL), still trading at a sub-20 P/E and the dominant player in data software, which is going to do very well in an AI world. But you’re absolutely right—small companies and value stocks are not going to be the dominant players in AI.”
Parnassus Value Equity Fund stated the following regarding Oracle Corporation (NYSE:ORCL) in its Q3 2024 investor letter:
“Oracle Corporation (NYSE:ORCL) announced second-quarter results that exceeded consensus expectations, driven by growth in its cloud infrastructure business, which is benefiting from demand for AI applications. Investor sentiment was further bolstered by the company’s announcement of a new partnership with Amazon.”
7. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
David Nicholson from The Futurum Group said while talking to Schwab Network in a latest program that Tesla Inc (NASDAQ:TSLA) is facing headwinds from multiple fronts and the only thing that can help the company’s fundamentals is the possible launch of a sub-$30,000 EV.
“I think Tesla Inc (NASDAQ:TSLA) faces headwinds from all fronts. Domestically, you have Elon’s support of an administration that is probably not popular among the core audience for EVs in the U.S. Then you have China with its dominance in the sub-$30,000 U.S. EV range. That’s more of a global threat. We’ll see what happens with the looming China-U.S. kind of economic Cold War that’s underway.
You have an administration that, generally speaking, does not want to support EV subsidies in the U.S., so all of those things are negatives from a fundamental perspective. But the one thing that doesn’t get reported on a lot—and I think people are afraid to say it publicly, but it’s a really big deal for a lot of folks looking at EVs—is that, yes, there are alternatives, but they just don’t like Elon Musk’s public persona. And so that’s a hit.”
The only thing they have working in their favor is the whole vision around what they claim to be delivering. So, we’ll see if they deliver a sub-$30,000 vehicle in the next six months. That would be just about the only thing that I can imagine helping the fundamentals.”
Delaware Ivy Core Equity Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q3 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) – Though it isn’t a holding within the portfolio, Tesla continues to be a cult-like stock with weak fundamentals dependent on highly speculative development of autonomous driving technology. The company’s share price moved higher during the quarter after weakness in the year-to-date period.”
6. Micron Technology Inc (NASDAQ:MU)
Number of Hedge Fund Investors: 107
Evercore ISI analysts recently updated their “AI Enablers, Adopters, and Adapters” stock list.
Micron Technology Inc (NASDAQ:MU) was part of the list.
These stocks, selected from the Russell 3000 (IWV), have a market cap exceeding $3B and have mentioned artificial intelligence more frequently in their third-quarter 2024 earnings calls than the average Russell 3000 stock over the past year. Additionally, they saw a positive reaction after their earnings reports.
The stocks are trading at a 2025 P/E discount compared to their five-year average forward P/E and are expected to see an EPS growth of over 9.6%, according to Evercore ISI analysts.
“These companies have started to build a ‘competitive moat’ around their business by either enabling AI in others, adopting the technology, or adapting to the changing nature of business, information, and labor force composition better than their peers,” wrote Julian Emanuel, head of the Equity, Derivatives & Quantitative Strategy team at Evercore ISI.
Delaware Ivy Core Equity Fund stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q3 2024 investor letter:
Micron Technology, Inc. (NASDAQ:MU) – Fundamentals here also appear solid though concern about global demand for handsets and PCs drove the shares down during the quarter. We expect Micron to be a significant beneficiary of growth in AI demand as investment in new data centers is extremely memory (semiconductor) intensive.”
5. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 116
Evercore ISI analysts recently updated their “AI Enablers, Adopters, and Adapters” stock list.
Salesforce Inc (NYSE:CRM) was part of the list.
These stocks, selected from the Russell 3000 (IWV), have a market cap exceeding $3B and have mentioned artificial intelligence more frequently in their third-quarter 2024 earnings calls than the average Russell 3000 stock over the past year. Additionally, they saw a positive reaction after their earnings reports.
The stocks are trading at a 2025 P/E discount compared to their five-year average forward P/E and are expected to see an EPS growth of over 9.6%, according to Evercore ISI analysts.
“These companies have started to build a ‘competitive moat’ around their business by either enabling AI in others, adopting the technology, or adapting to the changing nature of business, information, and labor force composition better than their peers,” wrote Julian Emanuel, head of the Equity, Derivatives & Quantitative Strategy team at Evercore ISI.
Polen Focus Growth Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q3 2024 investor letter:
“In the third quarter, we purchased new positions in Apple and Oracle and eliminated our small positions in Nike and Salesforce, Inc. (NYSE:CRM). We exited our position in Salesforce to fund better opportunities in Shopify and MSCI. Salesforce is seeing slower revenue growth than we would have expected, given the weakening macroeconomic environment. Furthermore, since its core end markets in customer relationship management (“CRM”) and Service are fairly mature, a lower growth level versus our expectations could persist for some time.”
