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. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Investors: 56
Jim Cramer in a recent program on CNBC talked about IBM:
“Next, International Business Machines Corporation (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 International Business Machines (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.”
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Investors: 160
Chris Versace from Thematic Signals podcast said in a latest program on Schwab Network that the $75 billion Capex guidance from Alphabet Inc (NASDAQ:GOOG) shows the company is seeing strong demand.
“I think it’s kind of the same story that we’re seeing with Microsoft, which is the business is ramping but so fast that they’re actually capacity constrained. And when that happens, in order to book more revenue, you have to ramp your capacity. Hence the big uptick in their capital spending, 75 billion. You know, folks were looking for around 60 billion in 2025. So that’s another 15 billion. That tells you that demand is strong.”
Alphabet shares slipped following the company’s latest quarterly results. The market was spooked by the massive $75 billion Capex guidance for 2025. However, GOOG bulls believe these investments will pay off. The company needs to spend to maintain its dominance in search. Its Gemini model has an edge over competitors because of the huge ecosystem Alphabet already has. For the end user, it’s easier to switch from traditional search to Geminin instead of moving to a completely new app like ChatGPT or Perplexity. So far AI competition hasn’t dented the company’s search revenue.
In the fourth quarter, Alphabet’s operating margin rose 32%. YouTube ad revenue jumped 14% and Cloud revenue skyrocketed by 30.1%. Google raked in $12.8 billion in FCF, marking a roughly 215% growth compared to the same period last year, despite heavy investments in AI. The stock has a forward (2026) P/E ratio of 20.8x, which makes it about 22% cheaper than the average company in its sector.
Merion Road Capital Management stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q4 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG): We have held GOOG for a long time (since 2018) on the basis of its immense business quality paired with an undemanding valuation, improving treatment of minority shareholders, and multiple options for value creation. Recently we have seen Alphabet bashed for losing the AI race to now heralded for its progress. I remain excited about their prospects with several near-term, mid-term, and long-term tailwinds. Near-term, Google Cloud continues its rapid growth and their latest large language model, Gemini 2.0, appears to have made significant progress to better serve consumer needs and improve GOOG’s other product offerings. Mid-term, Waymo is on the cusp of becoming a real value driver for the company; there are abundant articles discussing Waymo stealing share from the ride-share economy and launching in new geographies. Long-term, GOOG’s recently announced quantum computing chip positions it well for a future (many, many years away) where computing process are fundamentally different than today. All of these options are embedded in a company that already has an established and dominant earnings stream.”
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Ben Inker, GMO co-head of asset allocation, explained in a recent program on CNBC why he believes NVIDIA Corp (NASDAQ:NVDA) is vulnerable and talked about the impact of high expectations on the stock.
“When you have a company where the vast majority of its value is based on growth expectations for the future, there’s a vulnerability there if people change their mind about what they think the future is going to be. So, NVIDIA Corp (NASDAQ:NVDA) is a very high-quality company; they have an amazing franchise. The reason why they have been vulnerable is because people have assumed that the world is just going to continue to want more and more of those chips at extraordinarily high gross margins for them, and suddenly that may not be so true. It is a tricky problem. You’ve got an amazing company with amazing products. They might not be an amazing investment because that valuation is high.”
Simply beating earnings estimates is not enough for NVIDIA Corporation (NASDAQ:NVDA) anymore, and the impact of high expectations will continue to weigh on the stock as growth cools.
Nvidia’s forward P/E ratio for the fiscal year ending January 2026 is around 31. An EPS surprise of 8.5% was not able to help the stock. A similar trend occurred following the second-quarter earnings after a 5.6% EPS surprise. It’s difficult to see Nvidia maintaining a mid-70s gross margin by the end of 2026. Over the last two quarters, Nvidia has already reported a drop in its gross margin from 78% to 74.5%.
Then there’s competition. Amazon (AMZN) recently disclosed its Trainium 3 chip, which is set to be released by the end of 2025. The chip is expected to be twice as fast with 40% more power efficiency than the previous generation, manufactured on TSMC’s (TSM) cutting-edge N3 technology. Reportedly, technology giant Apple (AAPL) will be a consumer of Amazon’s new silicon.
Alger Spectra Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a leading supplier of graphics processing units (GPUs) for a variety of end markets, such as gaming, PCs, data centers, virtual reality, and high-performance computing. The company is leading in most secular growth categories in computing, and especially artificial intelligence and super-computing parallel processing techniques for solving complex computational problems. In our view, Nvidia’s computational power is a critical enabler of AI and therefore essential to AI adoption. Shares contributed to performance during the quarter, driven by strong demand for its data center products, especially the Hopper H200 chips, which generated double-digit billions in revenue, marking the fastest product ramp in the company’s history. Management provided fiscal fourth-quarter revenue guidance above analyst estimates, along with resilient operating margins supported by robust demand and limited competition. In our view, Nvidia’s leadership in scaling AI infrastructure, including advancements in inference and test-time scaling (i.e., reasoning during inference), is driving adoption among enterprises and startups, providing continued demand for its high-performance chips and software solutions. As older-generation chips are repurposed for inference and new clusters are deployed, we believe Nvidia is well-positioned to capitalize on growing compute needs across AI applications.”
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Dan Niles, Niles Investment Management founder, said in a latest program on CNBC that DeepSeek breakthrough will help improvements in Meta Platforms (NASDAQ:META)’s Llama and called the model the “best” in the industry.
“By the way, all of the innovations—remember, Deep Seek is open source—so all the innovations they have there, Facebook, you’re going to see it in the Llama models, which, by the way, before Deep Seek came out, was the best open-source model out there.”
Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q4 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META): Investment Initiated: April 2018: Internal Rate of Return (IRR*): 22% *IRR represents the annualized rate of return on an investment, accounting for the timing and magnitude of cash flows over the holding period.
For META, our 22% IRR aligns closely with the company’s compounded growth in earnings per share (EPS) and free cash flow per share during the 6 years holding period.
Looking ahead, Meta is expected to grow its revenues, earnings, and free cash flow per share at mid-teens rates over the next two years. There’s a good possibility that it could exceed these estimates, considering the breadth of growth initiatives currently in place, such as advancements in Al, monetization of Reels, expansion into business messaging, and the ongoing development of the metaverse…” (Click here to read the full text)
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Investors: 286
Arun Sundaram from CFRA said in a latest program on Schwab Network that he increased his price target on Amazon.com Inc (NASDAQ:AMZN) after the latest report.
“We upgraded our target price; we went from 251 to 276 now. You know, yeah, the shares are down a little bit, but I think this is a good buying opportunity for Amazon.com Inc (NASDAQ:AMZN). Really, the report yesterday, I thought, was there was a lot of positives in there. You know, the only, I think, the two negatives in the report were one, the certainly the Q1 outlook was a little softer than expected. Amazon.com Inc (NASDAQ:AMZN) typically pretty conservative with their outlook, but this one is a little more conservative than normal. There are tariff headwinds, FX headwinds going on right now. And then the other part is that the capex spend, capex is likely to be above 100 billion in 2025. The street was expecting about 85 to 90 billion, so well above expectations there. But then again, you know, all the big tech players have announced pretty big capex increases, so that shouldn’t be overly surprising. But yeah, overall, I thought it was an overall strong report and yeah, we did raise our estimates and our target price.”
Despite weak guidance, Amazon could easily surpass $100 billion in operating income within the next two years because of its AWS growth engine. In the latest quarter, Amazon Web Services sales jumped 19% and operating profit for the segment jumped 62% in 2024 on an annual basis.
The market is currently forecasting $6.27 per share in profits this year (a 13% YoY growth) and $7.59 per share next year (a 21% YoY growth). Amazon’s stock is priced at a profit multiple of 30.2x. This valuation might look rich, but when we incorporate AWS growth, the stock seems to have more upside potential.
Alger Spectra Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a renowned online retailer and leader in cloud computing. The company’s Amazon Web Services (AWS) division offers utility-scale cloud solutions that support corporate America’s digital transition. During the quarter, Amazon’s shares contributed to performance as the company reported better-than-expected fiscal third-quarter results, with revenues and earnings beating analyst estimates. Operating margins expanded to 11%, driven by efficiency gains in logistics and robust AWS performance. Notably, AWS revenue growth accelerated during the quarter, along with recording its highest-ever operating margin of 38.1%, driven by easing cloud cost optimizations, renewed workload migrations, and an increasing contribution from AI workloads. On their earnings call, management highlighted plans to increase capital expenditures to enhance their technology infrastructure, catering to the surging demand for AI-driven computing.”
While we acknowledge the potential of Amazon.com Inc (NASDAQ:AMZN), our conviction lies in the belief that under the radar 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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