As the global tech sector was catching up to the disruption caused by DeepSeek’s r1 AI model, Chinese e-commerce giant Alibaba announced its brand new Qwen 2.5 AI model on the first day of the Lunar New Year. The Qwen 2.5 is pre-trained on large-scale multilingual and multimodal data and rivals DeepSeek’s AI model.
“Qwen 2.5-Max outperforms … almost across the board GPT-4o, DeepSeek-V3 and Llama-3.1-405B,” the group’s cloud unit on its official WeChat account.
The latest Chinese AI model release also sent US firms scrambling to innovate and stay ahead of the competition. OpenAI CEO Sam Altman recently teased several “exciting new features” coming to ChatGPT and a new ChatGPT Gov tool to bolster ties with the US government.
The rise of advanced, cost-effective Chinese AI models has introduced volatility in US stocks as analysts rampantly rerate companies and shift outlooks based on the rapidly evolving tech landscape.
We selected AI stocks by reviewing news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 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).
A Wall Street trading floor, chaotic with activity as traders and financial analysts analyze the company’s impact on the markets.
10. DigitalOcean Holdings Inc. (NYSE:DOCN)
Number of Hedge Fund Holders: 22
DigitalOcean Holdings Inc. (NYSE:DOCN) is a cloud service provider with data centers globally. The company offers an infrastructure as a service (IaaS) platform for developers to access powerful virtual machines for their AI/ML workloads, seamlessly create and deploy AI agents, and deliver context-aware responses for diverse use cases. DigitalOcean Holdings Inc.’s (NYSE:DOCN) GenAI Platform streamlines the custom AI agent creation, integration, and deployment process, supported by its fully managed services.
On January 28th, Goldman Sachs analyst Gabriela Borges raised DigitalOcean Holdings Inc.’s (NYSE:DOCN) stock target price to $44 from $40 while maintaining a “Buy” rating. The analyst highlighted the firm’s recent keynote event, which demonstrated its offering across the infrastructure, platform, and application layers for core cloud computing and GenAI and revealed multiple product innovations, like its GenAI Platform for developing use-case specific agents supported by their own data and foundational LLMs. The event led Goldman Sachs to have a “better appreciation” of the degree to which the company’s AI offerings can provide a structural tailwind to growth as demand for cost-effective AI for businesses grows.
9. Klaviyo Inc. (NYSE:KVYO)
Number of Hedge Fund Holders: 24
Klaviyo Inc. (NYSE:KVYO) offers customer data and marketing automation solutions. Its cloud-native platform helps businesses deliver personalized email, SMS, and push notifications for customer engagement. The company leverages AI-powered features like RFM (recency, frequency, and monetary value) analysis, product analysis, and content creation tools to identify emerging trends, predict upcoming order dates, and create personalized product feeds.
On January 29th, Scotiabank hiked Klaviyo Inc.’s (NYSE:KVYO) target price to $45 from $35 and maintained a “Sector Perform” stock rating. The brokerage consulted with a Klaviyo Inc. (NYSE:KVYO) partner to understand the implications of the recently announced pricing changes. It found that clients looking to reduce the impact will clean up their lists while the remainder of the client base is expected to witness minimal pricing uplift. Overall, Scotiabank sees the pricing changes creating an easier glide path for the company to achieve consensus 25% growth estimates in 2025.