In this article, we will take a detailed look Top 10 AI Stocks on Investors’ Radar These Days.
The debate around AI systems hitting a “data wall” or plateau is heating up in the tech industry with many arguing that the performance of AI models is not showing signs of further improvement amid a lack of quality inputs, causing scaling issues in the industry.
CNBC’s Deirdre Bosa recently discussed this debate in a program and said:
“All it feels like anyone is talking about right now in tech is this debate over scaling laws and a data wall, which continues to rage in Silicon Valley. This is the idea that more data and bigger models will always lead to better AI, with some arguing that progress has peaked or is starting to plateau. Put another way, it’s a debate over a core assumption in AI that could have massive implications for the industry, from valuations to the GPUs powering it, and of course, the Nvidia story. I was at the Newcomer AI conference yesterday here in San Francisco. It was the theme of the day, with everyone from Scale AI’s Alexander Wang to Anthropic’s Dario Amodei to Databricks’ Ali Ghodsi weighing in.”
Jensen Huang was also asked about the issue of AI systems hitting a data wall and possible scaling issues in a latest earnings call. Here is what he said:
“A foundation model pre-training scaling is intact and it’s continuing. As you know, this is an empirical law, not a fundamental physical law, but the evidence is that it continues to scale. What we’re learning, however, is that it’s not enough that we’ve now discovered two other ways to scale. One is post-training scaling. Of course, the first generation of post-training was reinforcement learning human feedback, but now we have reinforcement learning AI feedback and all forms of synthetic data generated data that assists in post-training scaling.”
Read Huang’s comments in detail here.
Bosa mentioned some other tech leaders pushing back against the idea of AI hitting a data wall and said:
“…..also acknowledge that this alone isn’t enough to push AI further, and progress will come from post-training scaling, which is the development of AI applications on top of existing models. He and others say this will still require massive amounts of compute power.
An open question remains: will it be as much? A helpful way to frame that next phase of AI development is digestion or innovation. Maybe both are possible, but digestion might suggest a pullback on the huge amounts of spending and capital expenditures we’ve seen over the last few years. Innovation, on the other hand, could mean doubling down, with just another phase of development beginning. It’s still very much an open question.”
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For this article we picked 10 AI stocks currently trending on the back of latest analyst ratings and 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).
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10. HP Inc (NYSE:HPQ)
Number of Hedge Fund Investors: 42
HP Inc (NYSE:HPQ) recently posted quarterly results and the stock fell amid downbeat Q1 guidance.
Citi maintained its Neutral rating on HP Inc (NYSE:HPQ) but reduced the price target to $36.50 from $37.
Analysts, led by Asiya Merchant, noted HP’s stock fell due to weaker-than-expected guidance, driven by subdued PC recovery and inflated commodity costs impacting margins in the short term.
While they expect the PC recovery to gain momentum in upcoming quarters with margin improvement, the Print segment exceeded expectations. However, HP Inc (NYSE:HPQ) anticipates a low single-digit decline in the overall market through fiscal 2025.
Margins are expected to remain at the top of HP Inc (NYSE:HPQ)’s target range, thanks to a shift towards more profitable units and cost actions. The analysts noted that EPS for the year will likely fall a penny below consensus expectations at $3.60 (midpoint), but still below Citi’s forecast.
On the other hand, Evercore kept an Outperform rating and a $40 price target.
Amit Daryanani and his team highlighted HP Inc (NYSE:HPQ)’s solid results despite weak PC market conditions. While there are concerns about below-seasonal EPS guidance for Q1, the analysts believe the second-half guidance is reasonable given industry dynamics.
TD Cowen maintained its Hold rating but raised the price target to $39 from $32, citing soft end markets that hinder the company’s progress with cost restructuring.
The analysts noted that HP’s Q4 EPS met Street estimates, but the outlook missed expectations due to continued softness in the PC market and higher variable compensation costs for fiscal Q1 2025.
Importantly, the analysts said HP’s fiscal 2025 EPS outlook is in line, as PC growth in the second half of the year and strong Print profitability should drive mid-single-digit EPS growth.
While premium PC mix and the repricing of PC parts support Free Cash Flow, weak consumer PC demand and challenges in Print may limit HP’s ability to achieve significant EPS growth.
J.P. Morgan maintained its Overweight rating but lowered the price target to $40 from $41.
9. Dell Tech Inc (NYSE:DELL)
Number of Hedge Fund Investors: 60
Dell Tech Inc (NYSE:DELL) posted mixed quarterly results recently where revenue missed Wall Street expectations despite growing 9.3% year over year.
What stands out is Dell’s Infrastructure Solutions Group (ISG), which posted an impressive 34% year-over-year growth, reaching $11.4 billion in revenue. The server business rose a whopping 58% increase YoY to $7.4 billion.
Dell Tech Inc (NYSE:DELL) experienced a shift in AI server demand toward the next-generation Blackwell architecture. Dell Tech Inc (NYSE:DELL)’s management highlighted that there was a dramatic shift in orders toward Nvidia’s (NVDA) Blackwell-based systems during Q3, which impacted short-term shipments as these products ramp up production. This shift shows Dell Tech Inc (NYSE:DELL)’s competitive position, as customers are willing to wait for the latest tech solutions. Dell secured $3.6 billion in AI server orders this quarter, an 11% increase from the previous quarter. Dell Tech Inc (NYSE:DELL) also signed over 2,000 enterprise customers for their AI solutions.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its Q2 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) was a top contributor despite reporting disappointing first-quarter earnings results, because investors looked through the near-term disappointment and expected strong growth from AI-related servers and personal computers. We expect Dell to participate in the growth of artificial intelligence hardware, especially as enterprises invest more aggressively. We like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
8. Snowflake Inc (NYSE:SNOW)
Number of Hedge Fund Investors: 71
Snowflake Inc (NYSE:SNOW) shares recently gained after Wedbush Securities upgraded Snowflake, saying the AI revolution is “hitting the next phase.”
“The stalwart cloud/hyper scale players have been another instrumental part of this first phase of the AI Revolution, being led by Microsoft and now also seeing Google and Amazon finding major cloud and AI momentum in the field,” analyst Dan Ives wrote in a note to clients. “Now [it’s] time for the broader software space to get in on the AI Party as we believe the use cases are exploding, enterprise consumption phase is ahead of us beginning in 2025, launch of LLM models across the board, and the true adoption of generative AI will be a major catalyst for the software sector and key players to benefit from this once in a generation 4th Industrial Revolution set to benefit the tech space. The AI Software era is now here in our view.”
The firm upgraded Snowflake Inc (NYSE:SNOW) to Outperform from Neutral and increased its price target to $190 and $135, respectively.
Snowflake Inc (NYSE:SNOW) is a Cloud-based data warehouse offering data storage and analytics services. Snowflake Inc (NYSE:SNOW)’s moat lies in its data technologies that let companies analyze and make sense of unstructured data. Amid the generative AI boom, companies are ready to spend a fortune to use huge datasets to their advantage. This would bode well for Snowflake Inc (NYSE:SNOW). The company’s usage-based pricing model also gives it an edge in the market. Snowflake Inc (NYSE:SNOW) expects the total addressable market for its Cloud data platform to rise to $342 billion by 2028, which is double the market size of 2023.
Baron Global Advantage Fund stated the following regarding Snowflake Inc. (NYSE:SNOW) in its Q3 2024 investor letter:
“Snowflake Inc. (NYSE:SNOW) is a leading cloud data platform predominantly used for data analytics. Shares fell 15.2% in the third quarter due to a cybersecurity incident, a shifting competitive landscape, a change in leadership, and general macro complexities which are pressuring customer IT budgets. With generative AI (Gen AI) front and center, both investors and customers are closely evaluating Snowflake’s positioning in the future data ecosystem. Databricks and other competitors whose core users are data scientists who are also key buyers of Gen AI technologies, are benefiting. In addition, while Snowflake’s product innovation push should fuel future growth, it may also lead to short-term headwinds to profitability. Management reported healthy demand for its core data analytics, evidenced by solid growth rates among current customers alongside new go-to-market initiatives that could support growth. We are optimistic the new CEO, Sridhar Ramaswamy, can lead the company towards an AI-centric strategy, and therefore remain shareholders.”
7. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Investors: 107
The Advanced Micro Devices, Inc. (NASDAQ:AMD)-powered El Capitan claimed the top spot in the 64th edition of the TOP500 list of the world’s most powerful supercomputers.
“The new El Capitan system at the Lawrence Livermore National Laboratory in California, U.S.A., has debuted as the most powerful system on the list with an HPL score of 1.742 EFlop/s,” according to TOP500. “It has 11,039,616 combined CPU and GPU cores and is based on AMD 4th generation EPYC processors with 24 cores at 1.8GHz and AMD Instinct MI300A accelerators.”
The system uses HPE’s (NYSE:HPE) Cray Slingshot 11 network for data transfer and achieves an energy efficiency of 58.89 Gigaflops/watt.
“AMD GPU cores overtook NVIDIA (NASDAQ:NVDA) for the first time, boosted by El Capitan which accounted for ~37% of AMD’s total accelerator cores on the list,” said Wells Fargo analysts, led by Aaron Rakers, in a note on the rankings. “AMD’s share of CPU cores hit an all-time high at 29% and systems, while NVIDIA GPUs grew to 184 (ex-China) versus 166 a year ago.”
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.
Advanced Micro Devices (NASDAQ:AMD)’s forward adjusted PEG ratio is about 40% lower than the median for the tech sector (XLK).
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2024 investor letter:
“Shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) lagged the market after the company reported earnings results that, while generally strong, left the market wanting more. The company reported AI revenue of ~$600 million and increased its forward-looking outlook for AI revenue growth, but shares took a breather, as results missed elevated expectations after the stock’s strong performance. Despite the stock’s underperformance during the quarter, the company’s AI story remains very much intact. The growth outlook for the company is supported by better cloud demand, enterprise recovery and continued share gains ahead of the company’s new AI product launch.”
6. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 116
Deutsche Bank recently increased its price target for Salesforce Inc (NYSE:CRM) after conducting research around the company’s Agentforce product.
“Partners we spoke with noted strong momentum in Data Cloud, particularly with multi-cloud customers, along with high interest in Einstein 1 for Sales and Service clouds. Finance and Healthcare sectors were also mentioned as positives within industry clouds,” analyst Brad Zelnick wrote in a note.
“Agentforce was a key topic in post-Dreamforce conversations with customers. Though it’s early with limited deal activity, we did identify a mid-7-figure Agentforce deal,” Zelnick added.
He raised his price target for Salesforce Inc (NYSE:CRM) to $365 from $325 and maintained his Buy rating.
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.”
5. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Apple Inc (NASDAQ:AAPL) shares fell recently after data from China showed a decline in foreign-branded smartphone sales for October, Reuters reported. The China Academy of Information and Communications Technology reported that sales of foreign-branded smartphones fell 44.25% year-over-year in October to 6.22 million units. According to media reports, a Chinese official recently indicated that foreign companies may face extended approval times unless they collaborate with local firms for artificial intelligence. Reports suggest Apple Inc (NASDAQ:AAPL) has explored partnerships with Chinese companies like Baidu (BIDU) and ByteDance (BDNCE).
Morgan Stanley recently called Apple’s current position “challenging,” with KeyBanc and TF International Securities expressing concerns over iPhone sales volume. KeyBanc downgraded Apple to “underweight” with a $200 price target. Almost every bullish case on Apple Inc (NASDAQ:AAPL) was built around this assumption: millions of people would rush to upgrade their iPhone because of AI features. But the latest numbers for iPhone 16 do not show much enthusiasm for the new device.
Apple Inc (NASDAQ:AAPL) has been seeing a long-term decline in mobile carrier upgrade rates, especially postpaid, for several years. This suggests that people are holding onto their devices longer, likely due to economic factors, satisfaction with current technology, or a lack of exciting new features in recent models
In the latest earnings call, Apple Inc (NASDAQ:AAPL) CEO Tim Cook highlighted new features for the iPhone, such as a more comfortable watch band and sleep apnea detection, but none appeared to be major demand drivers for new customers.
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q3 2024 investor letter:
“Shares of Apple Inc. (NASDAQ:AAPL) increased during the quarter after reporting quarterly results in August that met or exceeded expectations. The company also benefited from holding an investor event in September to introduce the newest iteration of products and accessories. Apple introduced the latest iteration of its flagship model, the iPhone 16, which features updated hardware and a refreshed operating system that integrates AI but will be exclusive to newer iPhone models, which could compel a refresh cycle. The gradual introduction of AI into the Apple product ecosystem is consistent with the company’s historical fast follower approach and represents a new tenant of the investment thesis as the market awaits further information related to the company’s AI strategy.”
