In this article, we will take a detailed look at the Top 10 AI News You Shouldn’t Miss.
JPMorgan Asset Management’s Kerry Craig said in a latest program on CNBC that investors are looking beyond the top AI companies amid valuation and spending concerns following the launch of DeepSeek. The analyst said he remains bullish on the “secular theme” of AI and believes there are still opportunities for the market.
“I think playing it now through the market could be a little bit more of less around the hyperscalers and the producers of this technology and then thinking a little bit further along the AI value chain so the users of this technology, the software companies, maybe utilities, and thinking about energy providers and those further opportunities that may be a little bit better valued when it comes to the prospects and the equity market and where you might see better upside. It’s very difficult to keep repeating these very large returns we’ve seen across these names for the last couple of years.”
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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).
10. Palantir Technologies Inc (NASDAQ:PLTR)
Number of Hedge Fund Investors: 43
Talking about different AI companies during a program on Schwab Network, Joe Tigay from Rational Equity Armor said that he “loves” Palantir Technologies Inc (NASDAQ:PLTR) and was an early investor. However, he believes the current valuation of the stock is high.
“Don’t get me wrong, I love Palantir. Early, early owner of Palantir Technologies Inc (NASDAQ:PLTR) . I think it’s a fantastic company, but right now at $115, I can’t really justify buying Palantir.”
What makes Palantir Technologies Inc (NYSE:PLTR) one of the top AI stocks? Its technologies are actually solving the problems of businesses. Palantir’s data technology Ontology is solving the famous hallucination problem for AI systems, thanks to the company’s years of experience with military and defense systems. Last year, Palantir Technologies Inc (NYSE:PLTR) shared some specifics on how its customers can reduce costs and increase profits due to its artificial intelligence platform (AIP) that was launched about a year ago.
Airbus accelerated A350 production by 33%, BP reduced costs per barrel by 60%, and Jacobs Connect cut power usage by 30%. Panasonic decreased waste by 12%, ESI Group sped up ERP harmonization by 70%, and PG&E reduced transformer ignitions by 65%. Eaton boosted productivity by 25%, while Tyson Foods achieved $200 million in cost savings.
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.”
9. IBM Common Stock (NYSE:IBM)
Number of Hedge Fund Investors: 56
Jim Cramer in a recent program on CNBC talked about IBM:
“Next, IBM Common Stock (NYSE:IBM), right? This one’s a bit of a shocker, many missed it coming. What you had to be watching with the integration of Red Hat, a powerful enterprise software platform, a few years ago, the spin-off of their old IT infrastructure business asKyndryl, and the conversion of one’s big hardware company into one that gets more than 40% of its business from recurring software revenue. Those moves have transformed IBM Common Stock (NYSE:IBM) into a company with much more consistent earnings, and Wall Street’s always willing to pay up for consistency. Most investors had left this one for dead. It didn’t die.”
8. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
CFRA’s Garrett Nelson said in a latest program on Schwab Network that he remains bullish on Tesla Inc (NASDAQ:TSLA) despite the latest weakness that came following lackluster numbers from China.
“We remain bullish on Tesla Inc (NASDAQ:TSLA) because we’re optimistic as far as regulatory approvals and getting a regulatory framework related to autonomous driving in the United States. I think that will come sooner rather than later. It became clear after Tesla Inc (NASDAQ:TSLA) Robo Taxi Day back in October that the story was all about autonomous driving going forward, and you look at the value of the company on our view, it’s still trading at a fraction of the market opportunity here, which we estimate to be, you know, north of $5 trillion, if you look at the global autonomous driving opportunity. So, you know, we’re buyers on this dip that we’ve seen in the stock this week.”
Analysts are still trying to look beyond Elon Musk’s claims and find out the specifics of the company’s EV and robo-taxi plans.
Tesla Inc’s (NASDAQ:TSLA) product lineup is showing signs of stagnation, with over 95% of sales still coming from the Model 3 and Model Y. Meanwhile, competitors are rolling out more advanced models. According to Reuters, Tesla’s market share in Europe is slipping as legacy automakers like BMW post stronger sales. Chinese competitor BYD is also gaining ground in Europe, despite talk of tariffs.
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.”
7. Micron Technology Inc (NASDAQ:MU)
Number of Hedge Fund Investors: 107
Joe Tigay from Rational Equity Armor said in a latest program on Schwab Network that the market is underestimating the importance of memory chips sold by Micron Technology Inc (NASDAQ:MU) in the backdrop of the AI boom.
“I think people are just kind of forgetting. Everyone’s talking about the semiconductor chips — that’s the most important, it’s the most expensive, it’s the most high-tech component of a data center. But people will need to have memory cards as a part of this whole picture, and Micron Technology Inc (NASDAQ:MU) is right there. They’re going into these data centers. I think this is just a critical component of the whole ordeal, and I think being down on the weakness from some of the semiconductors is just kind of wrong, in my opinion. There’s a need, there’s a demand for these products, for all the money that is being dumped out of these chips and into some of the companies.”
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.”
6. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 128
Joe Tigay from Rational Equity Armor said in a latest program on Schwab Network that Broadcom Inc (NASDAQ:AVGO) will benefit from the rising spending in AI chips space. He mentioned the latest Capex guidance from major companies and said firms are spending “hand over fist” to amass chips.
“It’s just a never-ending fight for the ability to process more data, so the whole community needs to be lifted here… Broadcom Inc (NASDAQ:AVGO) a company that is absolutely a big part of that mix. Their networking capability is really important, it’s really crucial to that mix, and it doesn’t really matter which chips go in there. Broadcom Inc (NASDAQ:AVGO) is going to be a winner on this data center buildout.”
Broadcom Inc (NASDAQ:AVGO) continues to be a leader in the AI ASCI and networking chips market. Broadcom Inc (NASDAQ:AVGO) has 3nm AI ASIC chip deals with Alphabet and Meta in addition to many other tech giants aiming massive spending for AI hyperscaling.
However, the stock could face the impact of what Nvidia is facing today: too high expectations.
In the last quarterly report, Broadcom Inc (NASDAQ:AVGO) revenue was largely in line with estimates. The company has narrowly exceeded revenue expectations by less than 5% in most cases. Some analysts suggest Broadcom’s growth rates will moderate to below 20% CAGR starting the first quarter of 2025. In fiscal Q4, it was +50% topline growth. The market won’t be kind to the stock when the revenue growth rate slows. Broadcom has about $58 billion in net debt, which is relatively high.
Aristotle Atlantic Core Equity Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q4 2024 investor letter:
Broadcom Inc. (NASDAQ:AVGO) contributed to performance in the fourth quarter as the company’s third quarter results demonstrated continuing strength for its AI networking and custom accelerator semiconductor business. The company also gave long-term guidance for the service addressable market (SAM) opportunity for its AI-related business, indicating a market opportunity of $60 billion to $90 billion, which only includes contributions from its current three customers. This long-term outlook for AI semiconductor content exceeded investor expectations. Broadcom’s quarterly results also showed the company is ahead on its VMware integration timeline to achieve $8.5 billion in EBITDA, which will support long-term gross and operating margin expansion for the company.
5. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Dan Niles, Niles Investment Management founder and portfolio manager, said in a latest program on CNBC that Apple Inc (NASDAQ:AAPL) is facing competition issues from other companies and it has a high multiple despite lower growth.
“This is a company that has grown revenues 5% over three years, so you have to think about that and go, how well are they really doing? They grew revenues 3% last year, and that wouldn’t be a problem except the fact that you’ve got a stock that’s trading at 31 times versus the S&P at 22 times. Every year, people are counting on an upgrade cycle, and the problem is they’ve got competition issues and they’re losing market share in China, which is a big problem. The AI rollout has been slow, and what they’re offering people aren’t really all that excited about. And that’s why you’ve got these really slow-growing top lines. The question is, can they get out of that? To some degree, DeepSeek, which came out, means that, hey, you know, costs are dropping a lot on the hardware side. Maybe that ends up helping Apple Inc (NASDAQ:AAPL), where they can free ride on some innovations that others have done, like ChatGPT in the US or DeepSeek in China. But for right now, that’s the situation you’re in: a low-growth stock with a high multiple.”
Apple’s results were helped by Services revenue in the latest quarter, but the key challenges haunting the company remain as they were. Many analysts believe just a few AI apps would not be enough to trigger a broader upgrade cycle for iPhone. Apple is dealing with currency headwinds as the stronger US dollar is expected to reduce top-line growth by 2.5% next quarter. For Q2 FY2025, management expects overall revenue to grow in the low to mid-single digits. Apple’s stock is trading at a premium valuation, with a price-to-earnings ratio of 39-40x, a price-to-free-cash-flow ratio of 33-34x, and a PEG ratio exceeding 3x. Upcoming quarters would be difficult for Apple and its current valuation is not justified.
Tsai Capital stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:
“We initiated our investment in Apple Inc. (NASDAQ:AAPL) in 2016 and elevated it to a core holding in 2018, the same year the company introduced its redesigned 13-inch and 15-inch MacBook Pro models. Under Tim Cook’s visionary leadership, Apple has consistently redefined innovation in hardware and software.
The September 2024 launch of the iPhone 16, with its groundbreaking AI capabilities, including enhanced image generation tools, marks another inflection point. We believe this transformative device is the foundation for an AI-driven supercycle and could entice approximately 100 million consumers to upgrade, reinforcing Apple’s leadership in the industry.
Today, Apple’s ecosystem spans over two billion active devices, supported by a rapidly-growing base of subscription services. This strategy has helped to turbocharge customer engagement and spending. In the most recent fiscal year, which ended in September 2024, Apple’s high-margin services division accounted for 39.3% of total gross profits, up from 32.8% just two years ago.
Apple’s financial footing remains exceptional, with approximately $50 billion in net cash and marketable securities. Looking ahead, we expect earnings-per-share growth to outpace revenue growth, driven by margin expansion and continued share buybacks.”
