Hugh Gimber, global market strategist at J.P. Morgan Asset Management, joined CNBC’s Squawk Box Europe to discuss the sectors poised to benefit from the artificial intelligence boom as the dominance of the “Magnificent 7” fades.
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Gimber anticipates a broadening across sectors in 2025, stating that the current gap between Mag7 and the rest doesn’t make sense. This is because it is unrealistic to have a handful of stocks priced as if they are going to unlock new productivity across the economy alone, while other sectors don’t witness any major earnings upgrades.
He further stated that he believes the story for next year is to see some of those earnings benefits coming through in sectors such as financials, manufacturing, and healthcare, particularly, as these sectors start to reap the rewards of the capital expenditures already initiated by tech giants.
As the gap between mega caps and the rest starts to close, it is going to set the stage for a healthy market and more opportunity under the surface. As such, attention turns to how quickly certain stocks respond and what unfolds as the market acknowledges the increasing number of AI-related opportunities heading into the year.
For instance, some utility names could emerge as critical players, and healthcare stands out as a particularly strong candidate for growth. There are going to be plenty of examples that are showing up over the next few quarters, and some of the biggest gains might come from names that aren’t yet on the radar.
As of today, artificial intelligence stocks are still the hottest in the market, even though the Magnificent Seven has delivered mixed results lately due to concerns over escalating expenditures and valuation pressures.
In a notable shift, Barron’s reports that investor sentiment may be shifting from AI infrastructure providers, such as those focusing on hardware and cloud-based resources, toward software-centric players. These software companies are now being recognized for their potential to deliver higher margins, scalability, and faster adoption cycles as AI applications permeate industries ranging from healthcare to finance and beyond.
Moreover, the upcoming inflation report, seen as a key to future interest rates, is also causing investor skepticism. While AI stocks are poised for long-term growth as the technology continues to revolutionize multiple sectors, short-term fluctuations remain tied to macroeconomic concerns.
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.
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).
An overhead view of the stock floor, the traders keeping an eye on the performance.
10. C3.ai, Inc. (NYSE:AI)
Number of Hedge Fund Holders: 17
C3.ai, Inc. (NYSE:AI) is an enterprise artificial intelligence (AI) software company that builds and operates enterprise-scale AI applications. On December 10, the company announced that it would accomplish a task order from the U.S. Army’s Program Manager for Intelligence Systems & Analytics (PM IS&A) in partnership with ECS, an IT systems integrator focused on data and AI, cybersecurity, and enterprise transformation solutions. The task involves modernizing information collection management processes for Army Intelligence using the AI-powered C3 AI Decision Advantage application. Both companies will leverage their expertise to streamline workflows, offer expeditionary toolsets, and reduce the workload on soldiers.
“Delivering timely, actionable intelligence to decision makers in the field is critical for strategic operations, and C3 AI Decision Advantage is designed to do precisely that. By integrating and optimizing information collection assets across the U.S. Army, we’re enabling a new era of efficiency and readiness. This solution, built on years of innovation with the Department of Defense and Intelligence Community, will significantly enhance the Army’s ability to support Combined Joint All-Domain Command and Control, ultimately advancing mission success on the modern battlefield.”
-Thomas M. Siebel, CEO, C3 AI.
9. Five9, Inc. (NASDAQ:FIVN)
Number of Hedge Fund Holders: 29
Five9, Inc. (NASDAQ:FIVN) is a cloud contact center solutions provider for contact centers. It offers the Five9 Intelligent CX Platform, an AI-driven cloud-based contact center platform, which offers a suite of solutions to power AI-elevated customer experiences. On December 10, the company announced the latest release of the Microsoft Teams UC Integration featuring bidirectional presence. The new feature will enable both Five9 agents and Microsoft Teams users to view each other’s real-time presence, empowering them to click-to-call, conference, or transfer calls with confidence. Viewing each other’s real-time presence will enable better timing for calls and support, enhance employee connections, and boost contact center efficiency. Moreover, it will enable agent-expert communication as well as speed up resolutions for complex customer requests.
“Five9’s partnership with Microsoft revolves around offering customers best-in-class solutions that integrate seamlessly. With this enhancement, organizations can transform the way they deliver customer experience. We’re proud to be the first in the market to deliver a pre-built bi-directional presence feature with Microsoft Teams. Our joint customers can now enjoy a complete connection between the contact center and back-office subject matter experts.”
-Jim Hickey, Senior Vice President of Products, Five9.