According to investment firm Morgan Stanley, electricity demand is going to prove to be resilient regardless of any recession that may come into play from Trump’s tariff policies. This is because data centers need a lot of power, and demand will not go down despite a downturn or because of efficiency gains from Ant Group, DeepSeek, and others. While it is true that industrial demand may dip in the short term, bringing manufacturing back to the US will help solve this problem.
“We believe power demand trends are more durable than in prior cycles, in part due to the inelasticity of data center demand. Industrial demand could decline in the near term, but reshoring of manufacturing is a long-term tailwind.”
-Analysts led by Andrew Percoco.
READ ALSO: 10 AI Stocks Surging on News Today and 10 AI Stocks You Shouldn’t Overlook Right Now.
A similar analysis by a Bloomberg report forecast that US power demand coming from data centers could swell 20-40% in 2025, with strong double-digit growth likely to persist in 2026-30.
While Morgan Stanley does acknowledge that rapid policy changes may have deep implications for large capital investments, it also forecasts electricity consumption from artificial intelligence growing tenfold by 2028.
“With this in mind, we do not want to minimize the risk of a near-term ‘shock’ in demand. This could translate into slowing order growth for some companies.”
History has shown energy stocks to remain resilient despite economic downturns. The firm noted how, since 1960, demand has fallen by just 0.2% on average during such periods.
“Utilities screen favorable in a recession given their defensive nature,”
That said, it is optimistic about strong spending on AI infrastructure from tech giants such as Meta, Amazon, and Alphabet. This is because hyperscalers want to have a lead in artificial intelligence and also because they have large product pipelines that need GPUs.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds. The hedge fund data is as of Q4 2024.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 42
Bloom Energy Corporation (NYSE:BE) develops solid-oxide fuel cell systems for on-site power generation, helping meet the growing energy demands of AI data centers. On April 18, Truist analyst Jordan Levy lowered the firm’s price target on the stock to $19 from $22 and kept a “Hold” rating on the shares. While there are concerns of a pullback in artificial intelligence spending and worries surrounding tariffs, the firm is optimistic that Bloom Energy will maintain its momentum in the data center space. At the same time, macroeconomic uncertainty and AI models’ efficiency may make it difficult for Bloom’s time-to-power story to warrant a further premium multiple amongst hyperscaler/datacenter customers.
9. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 63
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. On April 15, William Blair analysts told investors in a research note how Palantir’s deal with NATO has broader geopolitical significance. Instead of just another win, the deal matters globally as some investors are concerned that Europe is looking to decrease reliance on U.S. defense contractors. The firm contends that the win has favorable read-throughs across the U.S. defense sector and that Europe will likely remain a large buyer of U.S. systems. The firm has a “Market Perform” rating on the shares.
8. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 105
Marvell Technology, Inc. (NASDAQ:MRVL) engages in the development and production of semiconductors. On April 17, Stifel lowered the firm’s price target on the stock to $80 from $115 and kept a “Buy” rating on the shares. The firm anticipates the Analog, Connectivity, and Processors group to have generally in-line March quarter results due to tariff impacts. It also stated that June quarter outlooks appear even softer. Despite how long the tariffs last or how big they are, it believes that the chances of semiconductor stocks entering a downturn have “increased materially.”
7. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 126
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives. On April 18, Barclays lowered the firm’s price target on the stock to $275 from $325 and kept an “Equal Weight” rating on the shares. Even though Tesla’s stock situation is a bit unclear, the firm believes it still has the potential to outperform. Barclays also sees potential for CEO Elon Musk to reengage with the company, with the planned launch of unsupervised and driverless full self-driving in Austin in June driving additional excitement.
“The good narrative could outweigh weak fundamentals.”
6. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 162
Salesforce Inc (NYSE:CRM) is a cloud-based CRM company that has gained popularity after it unveiled its AI-powered platform called Agentforce.
On April 17, BNP Paribas Exane lowered the firm’s price target on the stock to $305 from $360 and kept an “Outperform” rating on the shares.
Two days prior, Morgan Stanley also lowered the firm’s price target on the stock to $393 from $405 and kept an “Overweight” rating on the shares. The rating comes amid firms adjusting risk/rewards amid tariff uncertainty and what may have already been reflected in shares.
5. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures and sells advanced chips used in artificial intelligence applications. On April 17, Bank of America has lowered its price target for the stock but maintained a “Buy” rating. The price target revision has been issued, citing demand uncertainties linked to tariffs.
The firm said it reduced its 2026 and 2027 earnings estimates by 4.8% and 5.2%, respectively, based on “increased demand uncertainties caused by tariffs.” Nevertheless, it believes the stock’s recent correction has already incorporated much of the downside. The company continues to forecast robust growth backed by robust demand for artificial intelligence.
“TSMC continues to guide for mid-20% revenue growth in USD terms in 2025, on strong AI momentum,” BofA noted.
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 223
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services. On April 17, Argus lowered the firm’s price target on the stock to $150 from $175 and kept a “Buy” rating on the shares. According to the firm, fresh US licensing requirements for AI chip exports, including Nvidia’s H20 models, tend to impact quarterly earnings by as much as $5.5 billion.
3. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 234
Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses. On April 16, Monness analyst Brian White maintained a Hold rating on the stock. Monness sees a cautious outlook on Alphabet Inc. due to the challenging macroeconomic environment, antitrust issues, and the significant capital expenditures that the company is planning. Nevertheless, the company is poised to benefit from trends in digital advertising, cloud services, and AI innovation, the firm noted. White also forecasts a slowdown in Alphabet’s growth.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On April 17, Truist lowered the firm’s price target on the stock to $700 from $770 but kept a “Buy” rating on the shares. The rating, issued ahead of its Q1 results, reflects the firm lowering its growth estimates on the impact of tariffs. Regardless, the analyst told investors in a research note how Meta’s AI investments continue to drive better ranking and recommendation results for its users/advertisers.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 317
Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements. On April 17, Phillip Securities analyst Paul Chew maintained a “Buy” rating on the stock with a price target of $480.00. Chew’s buy rating stems from Microsoft’s strong position in the cloud and AI sectors. Its Intelligent Cloud segment, particularly Azure, is growing significantly. It is also likely that the segment may expand even further with new data center capacities backed by the rising demand for AI models. Microsoft is also witnessing continued robust demand for the Office 365 suite due to higher average revenue per user and adoption of E5 upgrades and Copilot tools. It is also well-positioned to capitalize on the AI boom due to its strategic investments in AI and data centers, as well as the ability to embed AI capabilities across its products.
While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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