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.
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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.
8. CyberArk Software Ltd. (NASDAQ:CYBR)
Number of Hedge Fund Holders: 51
CyberArk Software Ltd. (NASDAQ:CYBR) is a cybersecurity firm that offers AI-powered identity security solutions, enhancing privileged access management, endpoint protection, and multi-factor authentication across dynamic environments with real-time threat response and insights on the CORA AI platform. The AI tool ensures round-the-clock monitoring of potential enterprise risks to provide threat-response recommendations and even implement automated actions as required. CyberArk Software Ltd.’s (NASDAQ:CYBR) acquisition of Venafi also proved helpful in developing end-to-end identity security products for enhanced protection.
On January 28th, Truist hiked the company’s stock price target to $385 from $350 and maintained a “Buy” rating as part of a broader research note previewing Q4 earnings in the Infrastructure & Security Software segment. Analysts expect firms under coverage to report robust Q4 earnings and adopt a conservative stance for guidance, which could fuel a continued beat-and-raise cadence for 2025. The brokerage added that its conversations with clients and partners signal demand and minimal changes in the macro environment.
7. Reddit Inc. (NYSE:RDDT)
Number of Hedge Fund Holders: 52
Reddit Inc. (NYSE:RDDT) is a social media platform engaged in social news aggregation and content rating that has surged in popularity in the past years. The social media platform has a data-licensing agreement with OpenAI and Google, where companies pay Reddit Inc. (NYSE:RDDT) to access its data to enhance AI models. Currently, the social media platform is testing several AI-powered features on the app, including the latest AI Answers feature built on its search architecture to help users quickly find answers to queries from posts across subreds.
On January 28th, Piper Sandler analyst Thomas Champion highlighted a new app feature called Ads Manager, a beta option to import a campaign from the Meta Ads Manager. The brokerage views this as “an interesting strategy that can help onboard advertisers to Reddit from the 10MM+ that currently spend on Meta today,” and is confident it could be a topic of discussion on Reddit Inc.’s (NYSE:RDDT) earnings call on February 12th. Ahead of the call, Piper Sandler maintained an “Overweight” rating with a $197 target price per share.
6. Lockheed Martin Corp. (NYSE:LMT)
Number of Hedge Fund Holders: 58
Lockheed Martin Corp. (NYSE:LMT) is a leading aerospace and defense company that develops military aircraft, satellite platforms, ground control software, and launch vehicles for crewed spacecraft. The company has several AI and ML-based initiatives like the LMText Navigator, T-Tauri platform, and the Astris AI subsidiary to rapidly process large datasets from space, air, and ground sensors, monitor spacecraft telemetry, connect disperse teams via 5G communications, and integrate AI solutions in the US defense industrial base.
On January 29th, TD Cowen reduced the company’s stock price target to $520 from $540 but maintained a “Buy” rating. The brokerage said it views Q4 as a clean-up period that sets up an improved 2025 margin/FCF optics, but margin pressures will persist this year at Aero/MFC as zero margin programs ramp.
5. Intuitive Surgical Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders: 82
Intuitive Surgical Inc. (NASDAQ:ISRG) designs and builds cutting-edge robotic-assisted surgical systems. The company uses AI to refine its robotic systems, including the da Vinci Surgical System, to help surgeons carry out minimally invasive surgeries with higher precision for improved patient outcomes. Intuitive Surgical Inc. (NASDAQ:ISRG) also uses AI in real time to help clinicians predict patients’ risk of developing surgical complications with higher accuracy.
On January 29th, Wells Fargo analyst Larry Biegelsen noted Intuitive Surgical Inc.’s (NASDAQ:ISRG) lawsuit win yesterday versus emerging competitor Surgical Instrument Service, which might translate to a win for the company in the class action lawsuit, given that the cases are similar and are being heard by the same judge. Surgical Instrument Service accused Intuitive Surgical Inc. (NASDAQ:ISRG) of breaching antitrust law by illegally preventing its customers from purchasing the company’s “repaired” EndoWrists. The analysts believe the case is vital because it is a preview of the substance in the bigger class action case, considering that the case moves forward. Based on yesterday’s positive outcome, the brokerage retained its “Overweight” rating for Intuitive Surgical Inc. (NASDAQ:ISRG) with a $687 stock price target.
4. GE Vernova Inc. (NYSE:GEV)
Number of Hedge Fund Holders: 89
GE Vernova Inc. (NYSE:GEV) manufactures energy equipment and offers solutions integral to generating, transmitting, and storing electricity to global clients. The company is integrating AI to automate manual inspection, ensure optimal oversight of industry assets, and offer predictive analysis for engineers to identify potential equipment failures. The US government also recently entrusted the firm to develop an AI assistant for safe handling, permitting, and training for hydrogen deployment.
On January 28th, TD Cowen increased the company’s stock price target to $405 from $400 while reiterating a ”Buy” rating. The brokerage highlighted that GE Vernova Inc.’s (NYSE:GEV) commentary at the Q4 report was incrementally positive, adding that DeepSeek’s AI model and potentially reduced electricity intensity led the stock and other power peers materially lower as investors are aware of the efficiency threat that may remain a valuation overhang.
3. Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Holders: 91
Vertiv Holdings Co (NYSE:VRT) is a leading designer and developer of hardware, software, and analytics solutions that revolve around power management, thermal systems, and lifecycle services for data centers, communication networks, and industrial environments. Its AI-ready power, cooling, and IT infrastructure offerings are designed to run AI workloads even during outages, thus reducing dependency on utility providers. The company also collaborates with Nvidia (NASDAQ:NVDA) and Intel Corp. (NASDAQ:INTC) to develop AI cooling solutions to keep AI systems operational regardless of the cluster size.
On January 28th, JPMorgan noted the recent pullback in the company’s share prices due to the DeepSeek disruptions looks overdone and that it sees a lucrative risk/reward for the company. The brokerage noted that its model had always assumed growth in high-end AI server shipments would simmer beyond 2026, and the mix of training versus inference spending would shift from close to 70/30 in 2023 to the inverse of that by 2029, with inference needing reduced power per rack. However, JPMorgan believes Vertiv Holdings Co (NYSE:VRT) will benefit from a longer-term infrastructure cycle, with catalysts such as “myriad tech earnings reports,” likely reinforcing the growth trajectory.
2. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 115
Alibaba Group Holding Limited (NYSE:BABA) is a leading e-commerce giant that is heavily tapping into AI, NLP, and machine learning to enhance customer support, text analysis, and translation. Alibaba Cloud’s full-stack offerings allow developers to leverage AI-ready infrastructure to build and optimize foundation models and GenAI applications, customize them based on business preferences, and deploy them at scale cost-efficiently. On the first day of the Lunar New Year, the company launched its Qwen 2.5 AI model, rivaling the recently launched DeepSeek-V3. The Qwen 2.5 is pre-training on large-scale multilingual and multimodal data to support natural language processing, text generation, AI tool use, and chatbot role-play.
On January 28th, Goldman Sachs reiterated a “Buy” rating on Alibaba Group Holding Limited (NYSE:BABA) and maintained a $117 target price per share. The brokerage highlighted the launch of the Qwen2.5-VL open-source AI model and how agile Chinese models and improvements in computing cost efficiencies offer more room for the adoption/exploration of AI applications and enhance the global growth potential for Chinese players. Analysts added that Alibaba Group Holding Limited (NYSE:BABA) stock’s current market capitalization has already priced in the unfavorable e-commerce competition.
1. Uber Technologies Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 136
Uber Technologies Inc. (NYSE:UBER) is a mobility Software-as-a-Service company that connects riders with drivers, offers food delivery and grocery shopping services, and integrates public transport in over 70 countries. The company has continually invested in AI over the past decade, and the tech is now a critical part of company operations. It uses AI and ML to improve ETA predictions, pricing, risk assessments, customer service, the company’s internal productivity, and overall business operations.
On January 28th, BofA analyst Justin Post marginally trimmed Uber Technologies Inc.’s (NYSE:UBER) stock price target to $93 from $96 but retained a “Buy” rating. The brokerage believes the company’s current valuation “seems to reflect a big AV overhang.” However, analysts see opportunities for multiple expansions based on steady growth and margin improvement this year, combined with a “stable-to-improving” autonomous vehicle narrative.
While we acknowledge the potential of Uber Technologies Inc. (NYSE:UBER) as an investment, our conviction lies in the belief that 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 UBER but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stock To Buy Now and Complete List of All AI Companies Under $2 Billion Market Cap.
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