In this article, we will take a detailed look at the Top 10 AI Stocks Buzzing on Latest News.
Investors are continuing to assess the impact of new LLMs in the AI industry. X. Eyeé, CEO of AI consulting firm Malo Santo and senior policy advisor at the Goldman School of Public Policy at UC Berkeley, said in a recent program on CNBC that the DeepSeek breakthrough in China has changed the dynamics of the AI race. She believes AI development is no longer limited to the companies with the “largest pockets.”
“I mean, the world has long looked to the United States to be the leader in artificial intelligence, but these recent model releases from China have demonstrated its ability to leapfrog and catch up with us tech giants and achieve groundbreaking results without the luxury of advanced hardware, which is ultimately challenging everything that we thought was necessary for innovation in the AI space. See, what DeepSeek represents is that AI innovation isn’t necessarily driven by the companies with the largest pockets or the fanciest hardware, but that collaborative development approaches can actually end up providing market-leading technologies.”
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For this article, we picked 10 AI stocks making the biggest moves these days. 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. Recursion Pharmaceuticals Inc (NASDAQ:RXRX)
Number of Hedge Fund Investors: 16
Cathie Wood in a latest program on CNBC talked about Recursion Pharmaceuticals Inc (NASDAQ:RXRX) and explained why she’s bullish on the stock because of AI catalysts:
“Recursion Pharmaceuticals Inc (NASDAQ:RXRX) has, just in one year thanks to AI and I think 1500 GPUs—so very few relative to what we’re seeing elsewhere—driven the average number of hypotheses per researcher for new drugs up tenfold in just one year, from 20 to 200 per researcher. We think that research and discovery is going to be impacted incredibly, and we also think that phase one and phase two drugs, which get very little love in the marketplace these days, especially phase one and anything preclinical, now that AI is speeding everything up, we’re going to see more value placed on those because the number of failures is going to drop and the time to market is going to accelerate.”
9. Palantir Technologies Inc (NASDAQ:PLTR)
Number of Hedge Fund Investors: 43
Kim Forrest, Bokeh Capital Partners CIO, cautioned investors about Palantir Technologies Inc (NASDAQ:PLTR) in a latest program on CNBC, saying the company’s stock-based compensation is concerning.
“If you are a retail person, it behooves you to sit down and look at financials. Don’t just go with the story, the vibe, or whatever you want to call it. This was a hallmark of companies that kind of, well, disappointed, we’ll just say, in the dot-com era. Because, again, they were reporting, “If you overlook our stock-based compensation, we’re a really great company.” And I don’t think anybody should do that.”
Forrest believes Palantir Technologies Inc (NASDAQ:PLTR) is more like a services company:
“Firstly, everybody’s saying, “Oh, look at this, this is a new enterprise software company.” But if you look at the financials, they don’t look anything like an enterprise software company—until you take out the cost of shares that they’re giving away to their employees. And then it looks like a software company. So what am I saying by this? There’s a ton of people that make this happen, and that is more of a services company.”
Palantir’s valuation is concerning for many. Its 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. Illumina Inc (NASDAQ:ILMN)
Number of Hedge Fund Investors: 54
In a latest interview with CNBC, Cathie Wood explained why she likes Illumina Inc (NASDAQ:ILMN) on the back of AI catalysts:
“Now that AI is speeding everything up, we’re going to see more value placed on those because the number of failures is going to drop and the time to market is going to accelerate. We think cures are going to increase the value of patents, and this is not what the traditional world thinks—by anywhere from two to twentyfold. If we’re curing disease, then we won’t be falling off patent cliffs. I do see Illumina getting hit today by the China announcement overnight. Illumina Inc (NASDAQ:ILMN) is the premier short-read sequencing company, and that’s going to be very important in the blood tests that help us discern whether we have cancer or whether it is recurring.”
Baron Global Advantage Fund stated the following regarding Illumina, Inc. (NASDAQ:ILMN) in its Q3 2024 investor letter:
“We added to our investment in Illumina, Inc. (NASDAQ:ILMN). The company supplies instruments and consumables for next generation sequencing (NGS), a technique that enables massive amounts of genetic analysis in both research and clinical diagnosis. It is the dominant player today with 80% of the market. We believe Illumina is on a path to return to double-digit growth in the intermediate to long term while benefiting from a long runway for growth with genomes sequenced for less than 1% of humans and 0.1% of species. We believe that Illumina would be able to grow its TAM by continuing to reduce the cost of sequencing as it has in the past (its recent Novaseq X) has reduced the cost from $600 to $200. We also believe that Illumina is more than a sequencing company. It’s an entire workflow and ecosystem, from sample prep to sequencing and bioinformatic analytics. While it used to be that the sequencing portion was a big chunk of the whole workflow’s costs, nowadays it’s in line with the other parts of the workflow. If researchers are used to Illumina protocols and their solution is spec’ed in on the workflows (particularly on the clinical side), it doesn’t make sense to save a bit more money on that few hundred dollars, if Illumina makes them more efficient on the other parts of the workflow like sample prep and bioinformatics.”
7. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
Ed Mills, Washington policy analyst at Raymond James, said in a program on CNBC that Elon Musk might go “too far” with his powers and end up getting a “no” from President Donald Trump.
“Elon Musk is going after individual senators, going after individual members, but there’s just not a lot of play there. So to me, if there is one pressure point that I am truly looking at, it’s if he goes too far—if he takes something and makes it very difficult for a member of Congress to win reelection. They just might be a “no,” and then Trump’s agenda is a “no.””
The analyst talked about Elon Musk’s attitude about business interests and what that might bring for Tesla Inc (NASDAQ:TSLA) shareholders:
“I do think when you look at this, it’s exceptionally unusual that you have the President of the United States and Elon Musk, both having publicly traded companies that can be specifically targeted. As it relates to Elon Musk, you had the story about Starlink in Ottawa, but also, if there are direct tariffs, I don’t think that matters as much to Elon as it would to a shareholder. Elon has certainly kind of shrugged off the response to the SpaceX contract being canceled—that’s just kind of how he does business. His wealth is so vast that what would be painful to a Tesla Inc (NASDAQ:TSLA) shareholder is not the same level of pain for Elon.”
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.”
6. Advanced Micro Devices Inc (NASDAQ:AMD)
Number of Hedge Fund Investors: 107
Christopher Rolland, Susquehanna Senior Analyst, explained during a latest program on CNBC that data center business numbers were the reason why Advanced Micro Devices Inc (NASDAQ:AMD) shares fell after its latest quarterly results. He believes data center is one of the most important parts of the AMD story. However, he said there’s an upside to Advanced Micro Devices Inc (NASDAQ:AMD) stock:
“We think Advanced Micro Devices Inc (NASDAQ:AMD), just on the server side and a few other things like embedded, which is FPGA, and then we’re not counting this MI300 AI opportunity out entirely. We do think that these all give the stock quite a bit of optionality, so we do like it from here. We think there is upside.”
The analyst was asked why Advanced Micro Devices Inc (NASDAQ:AMD) shares have been under pressure over the past few months. Here is what he said in response:
“I think it’s all summed up in expectations, particularly for MI300. There are numbers like $11 or $12 billion in 2025 MI300 revenue, and I think the buy side now is about half of that—$6 to $7 billion for the upcoming year. That, I think, is almost 100% of the drop we’ve seen in the stock price since last March.”
Advanced Micro Devices (NASDAQ:AMD) bulls believe the market should stop comparing the company’s chips with Nvidia and focus on its data-center growth and its competitive edge over other players like Intel. Advanced Micro Devices (NASDAQ:AMD)’s strong growth in the data center segment is indeed impressive, driven by Instinct GPU shipments and strong sales of EPYC CPUs. Advanced Micro Devices (NASDAQ:AMD) will continue to benefit from organic growth catalysts in this segment despite the competition from Nvidia. According to Goldman Sachs Research, global data center demand could surge by 160% by 2030. In the U.S., data centers are projected to use 8% of total power by 2030, up from 3% in 2022. McKinsey estimates that adding the required U.S. capacity will need over $500 billion in infrastructure investment by the decade’s end.
White Falcon Capital Management stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q4 2024 investor letter:
“During the year, we sold half of our stakes in Advanced Micro Devices, Inc. (NASDAQ:AMD) and Nu Holdings as they reached their intrinsic values. However, the decline in these stocks toward the end of the year provided us with an opportunity to add to our positions. In AMD’s case, the market has been disappointed by the company’s potential shortfall in AI chip revenues, which were previously forecasted to reach $10 billion in 2025. However, the factors required to justify the investment when the stock is priced at $220 per share are vastly different from those needed when the stock is at $120 per share. Yes, AMD’s AI chips and associated software are not competitive with Nvidia but this is now known and in the valuation. We believe this hyperfocus on AI ignores AMD’s other businesses where they continue to take advantage of Intel’s missteps. Importantly, AMD retains the potential to capture a small share of the AI chip market, which, given the market’s massive size, could be highly impactful for the company.”
5. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Kim Forrest, Bokeh Capital Partners CIO, said while talking to Schwab Network before Apple’s earnings that she was expecting a weakness in iPhone numbers because people are not seeing a reason to upgrade. Apple Inc (NASDAQ:AAPL) report later proved that iPhone sales were in fact downbeat in the quarter. But let’s first see what the analyst said:
“I’m looking for weakness, actually, and it’s for the reasons that you’ve said. First of all, it’s a great product. I got converted, I don’t know, in 2019 to the iPhone, and it is a great product, but it’s really lasting. I have not upgraded since 2019, nor am I always kind of like a laggard on personal use technology, even though I was a technologist. Let’s just not delve into that too early in the morning. Regardless, I am not alone. There’s not a whole lot of reasons for me to want to upgrade, and as you point out, yeah, the promise of AI is there, but the delivery isn’t there yet. I think the more the great body of people are going to want to know why they need to upgrade and go through that cycle. So I agree that this is going to be a flattish quarter, and expectations will be met, but it’s not going to be exciting. Here’s the thing, though: if you are a holder of Apple Inc (NASDAQ:AAPL), this isn’t really an excuse to sell it necessarily, because, as I said, there’s not a whole lot of competition. It’s not like people are buying other phones instead of Apple Inc (NASDAQ:AAPL). It’s just that the cycle, the renewal cycle, the upgrade cycle, has been extended.”
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.
Greenlight Capital stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:
“We continue to be concerned about the overall valuation of the market and have maintained a lower-than-average net market exposure. In fact, our daily correlation to the S&P 500 last year was 0.01. Cyclically and interest rate adjusted valuations are as high as we can remember.
A look at a prior favorite company of ours, Apple Inc. (NASDAQ:AAPL), shows that the stock at times sported a single digit P/E ratio and achieved 19.2% compounded revenue growth during the eight years we owned it. The last couple of years AAPL has had no revenue growth, but the P/E multiple has expanded from 22x to 37x. In this environment, we can’t say the multiple won’t expand to 45x a year from now. It might. But we don’t see why it should or what the investment appeal is at this valuation.”
4. Alphabet Inc Class C (NASDAQ:GOOG)
Number of Hedge Fund Investors: 160
Commenting on Alphabet’s latest quarterly results, Tim Seymour, the founder and Chief Investment Officer of Seymour Asset Management, said that he’s worried about the company’s Cloud business which he called the “bread and butter” of the search engine giant.
“I think this was all about Cloud. I think this is weak, this is bread and butter. Because, you know, I think about adtech, I think where they are in digital ad, and I think they’re dominant, and I think they’re going to continue to grow, take market share, and improve margin. So I guess I’m less worried about that than I am the bread and butter, and it gets down to some commoditization and a very, very crowded Cloud space.
I do like the operating margin at 32%. I think overall margins for this company are getting better—that’s good news. And I think everyone just hit it. I mean, the stock moved 40 points, or about 35%, from Thanksgiving into the print. It was priced to perfection, even though it wasn’t expensive. I mean, what’s interesting about Google, and this might be a negative, is that in the run we’ve had with mega-cap tech stocks, this stock is absolutely in line with its 10-year PE.”
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 Gemini instead of moving to a completely new app like ChatGPT or Perplexity. So far AI competition hasn’t dented the company’s search revenue.
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 Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Jeffrey Small from Arbor Financial said in a latest program on Schwab Network that the latest dip of NVIDIA Corp (NASDAQ:NVDA) shares was a buying opportunity. He believes Nvidia’s revenues will see an increase in the second half of the year.
“I mean, you know, it hit 115 today. That’s a great opportunity for folks to get in. I think if you’re trading NVIDIA Corp (NASDAQ:NVDA) stock, you’re looking at the upside potential over an 18- to 24-month period because we kind of know what’s going to happen this year. And we know the second six months of the year, things are going to start ramping up as they can meet production for their chip demand. Right now, there’s too much demand and not enough supply. So in the second half of the year, they plan on making that up, and we start to see revenues really take off next year more so than this year. But they could surprise. And so this is one you want to bank on for the next 24 months.”
Infuse Asset Management stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“We do still own some NVIDIA Corporation (NASDAQ:NVDA) as the forward multiple isn’t egregious and it powers over 90% of AI workloads. This company is only becoming increasingly important though the hyperscalers are actively trying to save money through their own ASIC programs. The moat CUDA provides has been underestimated time and time again. While I don’t think Nvidia has quite the upside as some of the other companies in the portfolio, it has a product that the best companies in the world literally can’t get enough of.”
2. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 235
Smead Capital CEO Cole Smead explained in a latest program on CNBC why he believes Meta Platforms Inc (NASDAQ:META) is not an attractive stock when it comes to valuation.
“Let’s just use your discussion a second ago of Meta Platforms Inc (NASDAQ:META). If I back out the stock-based compensation out of what the street expects Meta to make this year, they’re not going to make $43 billion in free cash. They’re going to make $26 billion in free cash flow, a 40% reduction because that’s how much stock-based compensation cost them last year. Now, that’s still a lot of money, admittedly, Kelly—$43 billion—but when you compare it to the book value of the business at $180 billion, it means it’s producing about a 15% return on capital when you look at cash returns. Now, that’s fine, but when you trade at eight or nine times book, that’s impossible to compound money.”
Meta crushed expectations with the latest quarterly results but yet again pointed to higher expenses in the future. In 2025, it sees total operating expenses in a range of $114-$119 billion, with 19-25% y/y growth. Capex is expected to rise 61-74% y/y to $60-$65 billion, compared to just $37.3 billion in FY24. Advertising rose strongly but analysts believe it should be seen in the context of higher political ad spend and holiday quarter perspective. In 2025, the company might not be able to keep reporting double-digit growth in ad pricing amid weaker consumer spending and a cautious macroeconomic backdrop.
In the long term, Meta shares are expected to grow because of AI. How?
Meta Platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. Meta Platforms (NASDAQ:META)’s advancements in Reels and WhatsApp are helping manage CapEx growth as the company strives to stay competitive in AI. Meta Platforms (NASDAQ:META)’s substantial user base of 3.3 billion provides a data and distribution edge that could capture a significant share of the GenAI market.
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
Robert Schein, Chief Investment Officer at Blanke Schein Wealth Management, said in a latest program on CNBC that Amazon.com Inc (NASDAQ:AMZN) will lead the Mag. 7 group this year amid several growth catalysts:
“Amazon.com Inc (NASDAQ:AMZN) really going to take the baton this year, and there are several reasons for that. We see continued operating margin expansion—last quarter was up 11%, recovering from a low of 2% at the end of 2022. They’re also leaning into faster-growing, higher-margin segments like AWS and advertising. Then, when we factor in and layer on another segment, which is the AI business, that could grow potentially three times faster than what we would see in just the AWS side alone. So, we expect 20% earnings growth from Amazon.com Inc (NASDAQ:AMZN) over the next five years for that reason.”
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.
Ariel Appreciation Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2024 investor letter:
During the quarter, we initiated three new investments, each in companies we have followed closely for a considerable time. At various points, we viewed them as missed opportunities; however, our experience with Mr. Market has taught us that patience often creates inevitable entry points. This quarter, some exciting opportunities presented themselves. The three investments are Amazon.com, Inc. (NASDAQ:AMZN), Diageo (NYSE:DEO), and Uber (NASDAQ:UBER). We will discuss each in detail below.
Amazon is one of the most widely followed companies in the world. While the “Magnificent 7” (of which Amazon is a key member) is often seen as a runaway freight train, we were able to purchase Amazon shares at prices last seen in 2021—three years ago. How is this possible if the “Mag7” has been so dominant? We believe it largely reflects the increasing prevalence of narratives driving market sentiment…” (Click here to read the full text)
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 timeframe. 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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