In this article, we will take a detailed look at the Top 10 AI Stocks to Watch After Latest Earnings and Analyst Ratings.
Tom Lee, Fundstrat Global Advisors co-founder, said while talking to CNBC in a latest program that the next few weeks until the US election would be “confusing” for many since no one could say anything with conviction about who is going to be in the White House.
Lee said that the market is going to trade “well” into the upcoming Fed meeting where he expects “some” rate cuts amid the labor market needing support and positive inflation data. Asked whether he expects a 25bps rate cut or a 50bps cut, Lee said:
“ A 25 or 50 can have both hawkish or dovish implications so I think it’s ultimately whether Fed Chair Powell comes across as this is the start of a cycle they are confident that we are moving back towards neutral and whatever number they make is quite dovish and positive but if it seems like that it’s dragging along the FOMC members and then there is even concerns about hard landing then I think the market can view anything they do as negative,” Lee said.
However, Lee said he believes the outcome would be positive.
For this article, we chose the top 10 buzzing AI stocks on the back of the latest earnings and analyst ratings. With each company, 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).
10. Arista Networks Inc (NYSE:ANET)
Number of Hedge Fund Investors: 65
The Information recently reported that Meta Platforms is preparing a cluster of over 100,000 NVIDIA H-100 GPUs to train the latest version of its Llama language model. Evercore ISI believes Arista Networks is likely to be the networking partner for Meta Platforms’ cluster. Ethernet will handle the networking for the project, as InfiniBand isn’t capable of supporting a cluster of this scale, leading Evercore to believe Arista will supply some of the infrastructure.
“Assuming GPU’s represent 80% of total spend on this AI cluster, this would imply total cost of around $2.5B, of which 10% is likely spent on infrastructure,” said Evercore analyst Amit Daryanani, in a note. “This could represent a $250M revenue opportunity for Arista, if they won the business.”
Arista has previously worked with Meta, providing switches for a cluster with 24,000 GPUs. Daryanani noted that their strong relationship makes it likely Arista will supply the switches for this new cluster. If successful, this could boost Arista’s $750 million AI revenue target for 2025. Evercore maintains an Outperform rating on Arista with a $400 price target.
What makes Arista a promising AI stock?
Arista Networks Inc (NYSE:ANET) is set to gain amid the AI-driven shift to high-speed networks due to its open Ethernet design and unified Arista EOS. The company’s partnership with Broadcom also created an opportunity for Arista Networks Inc (NYSE:ANET) to expand its integrated software and hardware solutions.
Arista Networks Inc (NYSE:ANET) claims its Ethernet architecture based on merchant silicon allows fast deployment for major hyperscalers and Tier-2 cloud providers.
During Q1 earnings call, Arista Networks Inc (NYSE:ANET) management said it targets $750 million in AI revenue by 2025.
Ethernet at scale is becoming the de facto network and premier choice for scale-out AI training workloads. A good AI network needs a good data strategy delivered by a highly differentiated EOS and network data lake architecture. We are therefore becoming increasingly constructive about achieving our AI target of 750 million in 2025. In summary, as we continue to set the direction of Arista 2.0 networking, our visibility to new AI and cloud projects is improving, and our enterprise and provider activity continues to progress well.
Read the full earnings call transcript here.
Despite Nvidia’s integrated Ethernet approach with Spectrum-X, Arista Networks Inc (NYSE:ANET) is confident about its scalable AI solutions using Jericho-based platforms, which could drive broader market adoption. Arista Networks Inc (NYSE:ANET) EOS offers a unified interface for various network applications, making it a reliable choice for cloud providers.
Arista Networks Inc (NYSE:ANET) does not see Nvidia as a direct competitor in the Ethernet space yet. Playing on its strengths instead of competing against a giant gives it a strong position in the market.
Madison Mid Cap Fund stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its Q2 2024 investor letter:
“We trimmed our positions in Arista Networks, Inc. (NYSE:ANET) and Carlisle Companies. Both of these companies have witnessed strong multi-year growth in their stock prices, which have resulted in elevated valuations. While we remain confident in the long-term prospects of both of these businesses, we trimmed our holdings to more appropriate position sizes given the risk/reward offered.”
9. Dell Technologies Inc (NYSE:DELL)
Number of Hedge Fund Investors: 88
UBS recently listed Dell Technologies Inc (NYSE:DELL) as one of the top tech stocks to own for the end of 2024.
UBS believes Dell Technologies Inc’s (NYSE:DELL) emerging strength in AI-focused servers and a refresh cycle for PCs are being supported by better pricing. Dell recently reported second-quarter results that topped estimates.
Bill Baruch, founder and president at Blue Line Capital, said in an interview with CNBC that there were margin concerns in the previous quarter report but in the latest results we saw “significant” margin improvement in the infrastructure solutions group which holds the AI server subsegment. This subsegment saw about 80% year-over-year growth.
“This was a great report. It’s everything we wanted to see.”
The analyst said that the stock could reach $134 by the end of this year.
Dell Technologies Inc (NYSE:DELL) got attention when Elon Musk said on Twitter that the company, along with Super Micro Computer, would make servers for his AI startup xAI. But Dell is expanding its partnerships with other companies, too. In just a few quarters, AI servers have surged to account for 12.4% of total revenue, up from 2.2% three quarters ago. Dell Technologies Inc (NYSE:DELL) closed the quarter with a record $3.8 billion backlog, which is impressive. In May 2024, Dell expanded their AI factory with Nvidia to include the new PowerEdge XE9680L server, as well as storage, edge, and workstation 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. Oracle Corp (NYSE:ORCL)
Number of Hedge Fund Investors: 93
Oracle Corp (NYSE:ORCL) is rising after the company’s latest quarterly results. Oracle’s Cloud services segment remains in strong growth mode. Revenue in the segment rose 21.3% year over year as Oracle Corp’s (NYSE:ORCL) Cloud is becoming a crucial player for firms developing AI, providing essential database systems for major players like OpenAI, AWS, and Google Cloud.
Oracle Corp’s (NYSE:ORCL) technology is critical for AI development, serving as a key foundation much like GPUs are for AI processes. Oracle says it has built large data centers with ultra-fast RDMA networks and massive 32,000-node NVIDIA GPU clusters, boosting its presence in AI training.
Oracle Corp (NYSE:ORCL) has increased its revenue outlook for fiscal 2026 to $66 billion from a prior target of $65 billion. It expects its revenue to reach a towering $104B by fiscal 2029. The Street expects Oracle’s EPS to grow at a compounded rate of 13.4% for fiscal 2025, rising to 14.41% in 2026, and continuing at a low double-digit pace in the following years. The company’s remaining performance obligations (RPO) jumped 53% year-over-year to $99 billion by the end of the first fiscal quarter, outpacing revenue growth.
Oracle Corp’s (NYSE:ORCL) forward P/E is about 25, slightly above the sector median of 23.17. Give the strong growth catalysts Oracle has, the stock is currently undervalued.
Carillon Eagle Growth & Income Fund stated the following regarding Oracle Corporation (NYSE:ORCL) in its Q2 2024 investor letter:
“Oracle Corporation (NYSE:ORCL) stock rose to all-time highs after the company announced better than expected cloud infrastructure revenue. Oracle signed dozens of new customers, including two leaders in generative artificial intelligence. The backlog remains, and strong growth appears poised to accelerate.”
7. Adobe Inc (NASDAQ:ADBE)
Number of Hedge Fund Investors: 107
Adobe Inc (NASDAQ:ADBE) is falling after the company issued soft Q4 guidance. However, fiscal Q3 results came in better than expected, with revenue up 11% year over year.
Adobe Inc (NASDAQ:ADBE) expects fourth-quarter revenue between $5.5 billion and $5.55 billion, with a midpoint of $5.525 billion, falling short of the $5.6 billion consensus estimate. Adobe Inc (NASDAQ:ADBE) also forecasts earnings per share (EPS) ranging from $4.63 to $4.68, with the midpoint slightly below the $4.67 estimate.
Adobe Inc (NASDAQ:ADBE) has become a complex case for analysts who are still gauging whether Adobe would be a net beneficiary of the AI boom or a loser. On the one hand Adobe Inc (NASDAQ:ADBE) is under threat with tons of AI tools good enough to make beginner-level designs, posts and videos for individuals or companies with low or no marketing budget. But on the other hand the company is launching several AI-powered tools and integrating generative AI tools in its products that could boost its revenue in the future.
Daniel Newman, CEO of Futurum Group, said in a program on CNBC that the latest earnings show the effects of a macro slowdown but Adobe Inc (NASDAQ:ADBE) could benefit if companies decide to use the company’s AI tools to cut its reliance on human workers.
Polen Global Growth Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q2 2024 investor letter:
“With Adobe Inc. (NASDAQ:ADBE), in some ways, we see it as a microcosm of the market’s “shoot first, ask questions later” approach to categorizing AI winners and losers. In the early part of last year, Adobe came under pressure with a perception that generative AI (GenAI) would represent a material headwind to their suite of creative offerings. In short order, the company introduced its GenAI offering, Firefly, which shifted the narrative to Adobe as a beneficiary with a real opportunity to monetize GenAI in the near term. Earlier this year, that narrative was again challenged as the company reported a slight slowdown in revenue growth. Results in the most recent quarter were robust as the company raised its full-year forecast across a number of key metrics and showcased better-than-expected results.”
6. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Investors: 108
UBS recently listed Advanced Micro Devices, Inc. (NASDAQ:AMD) as one of the top tech stocks to own for the end of 2024.
UBS believes in Advanced Micro Devices, Inc.’s (NASDAQ:AMD) GPU roadmap. Its GPU offerings are seen as “competitive” with Nvidia’s (NVDA), due to superior memory bandwidth and a push towards full-system solutions, UBS said.
“We see data center becoming [roughly] 70% of [operating profit] next year and AMD is seeing strong momentum on both GPU and CPU aspects.”
Advanced Micro Devices, Inc (NASDAQ:AMD) impressed Wall Street with solid second-quarter results amid strong data center revenue. Data center revenue in the period grew 49% year over year.
But can Advanced Micro Devices, Inc (NASDAQ:AMD) continue gaining in the coming months? Analysts are hopeful amid the launch of its Instinct™ MI300 Series accelerators that are designed for AI and HPC workloads. The new chip competes with Nvidia’s H100 AI chip. Advanced Micro Devices, Inc (NASDAQ:AMD) now plans to release new AI chips annually, including the MI325X in Q4 this year, the MI350 in 2025, and the MI400 in 2026. Advanced Micro Devices, Inc (NASDAQ:AMD) said MI350 would be a competitor to Nvidia’s Blackwell.
Advanced Micro Devices, Inc (NASDAQ:AMD) data center business doubled its revenue but this growth was not at the cost of profits. The segment’s operating income increased by 405% compared to the year-earlier period. However, Advanced Micro Devices, Inc (NASDAQ:AMD) data center business is still very small compared with NVDA. It generated about $2.8 billion in revenue vs. $22.6 billion in quarterly revenue for NVDA. However, Advanced Micro Devices, Inc (NASDAQ:AMD) CPU and GPU businesses are also thriving. Ryzen CPU sales increased 49% over year and slightly quarter over quarter. Although gaming revenue declined 59% due to decreased PlayStation and Xbox sales, Advanced Micro Devices, Inc (NASDAQ:AMD) Radeon 6000 GPUs saw a year-over-year sales increase.
Advanced Micro Devices, Inc (NASDAQ:AMD) is trading 17% below its 3-year average P/E ratio. The company is estimated to grow its EPS by 43% in the long term, compared to 33% for Nvidia. During the third quarter, its revenue growth is expected to come in at 15% on a QoQ basis. Amid growth forecasts based on new chips and an expected increase in AI spending by other companies, Advanced Micro Devices, Inc (NASDAQ:AMD) forward P/E of 38 makes the stock undervalued at the current levels.
Baron Technology Fund stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2024 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global fabless semiconductor company focusing on high performance computing technology, software, and products including CPUs,9 GPUs, FPGAs,10 and others. Shares of AMD remain volatile, and after a strong run earlier in the year, the stock fell during the quarter as investors continue to wrestle with AMD’s competitive positioning in the AI compute market relative to NVIDIA, who continues to strengthen its full-system solution offerings at a rapid pace. AMD also updated its MI300 GPU chip revenue expectations for the full year to “greater than $4 billion” vs. prior $3.5 billion, which disappointed the market a bit relative to high expectations. Over the long-term, we believe AMD, with its unique chiplet-based architecture and open-source software ecosystem, will play a meaningful role in the rapidly growing AI compute market, where customers don’t want to be locked into a single vendor and AMD offers a compelling total-cost-of-ownership proposition, especially in inferencing workloads. Simultaneously, we believe AMD will continue to take share from Intel within traditional data center CPUs, which, while now a slower growth market, is likely to see a near-term refresh as data centers look for ways to improve energy efficiency and optimize existing footprints.”
5. Micron Technology Inc (NASDAQ:MU)
Number of Hedge Fund Investors: 120
Micron Technology Inc (NASDAQ:MU) shares fell after the company received multiple downgrades from Wall Street analysts.
Raymond James cut its price target on Micron Technology Inc (NASDAQ:MU) from $160 to $125 but kept an Outperform rating. The reduction reflects slower short-term growth in non-high bandwidth memory DRAM and NAND markets. However, the firm sees this as a temporary issue and expects the DRAM market to recover by the second half of 2025.
“Data center demand remains strong due to HBM, while AI is boosting smartphone content growth,” said Raymond James analyst Srini Pajjuri in a note. “PC and smartphone makers appear to have stocked up in advance of price hikes, leading to a softer second half of 2024.”
Micron Technology Inc (NASDAQ:MU) is still on track to meet its HBM goals, and Raymond James expects yield improvements to boost margins.
BNP Paribas Exane downgraded Micron Technology Inc (NASDAQ:MU) to Underperform from Outperform and slashed its price target from $140 to $67. Analyst Karl Ackerman predicts the company’s weak performance will continue. Micron Technology Inc (NASDAQ:MU) peaked at $153 in mid-June but has declined since.
Despite this, some analysts remain optimistic. Citi Research still considers Micron Technology Inc (NASDAQ:MU) a top pick, citing strong DRAM prices expected to rise 66% in 2024 and 14% in 2025.
Micron Technology Inc (NASDAQ:MU) posted quarterly results recently which came in better than expected but the market didn’t welcome the in-line guidance and rising expenses. However, this short-term view misses the fact that Micron Technology Inc (NASDAQ:MU) is investing heavily in high bandwidth memory (HBM) production that is expected to generate billions in sales by fiscal 2025 compared with just hundreds of millions in 2024.
After the earnings, Arya reiterated a Buy rating and gave a $170 price target on Micron Technology Inc (NASDAQ:MU).
“Mgmt emphasized both CY24 and CY25 volumes are now fully sold out with pricing generally secured, providing visibility to its healthy sales and margin expansions (HBM is GM accretive),” Arya said.
Here is what Micron Technology Inc (NASDAQ:MU) said about HBM during fiscal Q3 earnings call:
“Our HBM shipment ramp began in fiscal Q3, and we generated over $100 million in HBM3E revenue in the quarter, at margins accretive to DRAM and overall Company margins. We expect to generate several hundred million dollars of revenue from HBM in fiscal 2024 and multiple billions of dollars in revenue from HBM in fiscal 2025. We expect to achieve HBM market share commensurate with our overall DRAM market share sometime in calendar 2025. Our HBM is sold out for calendar 2024 and 2025, with pricing already contracted for the overwhelming majority of our 2025 supply. We are making significant strides toward expanding our HBM customer base in calendar 2025, as we design-in our industry-leading HBM technology with major HBM customers. We have sampled our 12-high HBM3E product and expect to ramp it into high-volume production in calendar 2025 and increase in mix throughout 2025.”
ClearBridge Value Equity Strategy stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Stock selection in the IT sector proved to be the largest contributor to performance, particularly driven by the strong performance of Micron Technology, Inc. (NASDAQ:MU) The company, which designs, develops, manufactures and sells memory and storage products, continued its strong performance alongside other AI beneficiaries as the anticipated demand for new and additional storage essential for housing and training large language AI models continues to grow.”
