In this article, we will take a detailed look at the Top 10 Stocks Analysts are Watching as AI Selloff Deepens.
Major AI stocks are struggling to gain traction as investors rethink their strategies amid concerns of a slowdown in spending. Even top tech bulls are starting to use the word “bubble” for the AI trade. Gene Munster, Deepwater Asset Management managing partner, said in a latest program on CNBC that he believes we still have two years of the AI bull run before the bubble bursts.
“From a high-level perspective, I always return to the fundamentals as a tech investor. The fundamentals of these companies remain strong. I predict we have two good bullish years ahead before a spectacular bubble burst. When I see this, it shakes my confidence, but if I stay focused on the fundamentals, I still believe this trade will play out.”
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For this article, we picked 10 stocks analysts are currently talking about. 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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10. Cencora Inc (NYSE:COR)
Number of Hedge Funds Investors: 45
Josh Brown, CEO of Ritholtz Wealth Management, in a latest program on CNBC, talked about several top healthcare stocks. Cencora Inc (NYSE:COR) tops his list and here is how the analyst made the bull case for the drug wholesale company:
“Many of you know this stock—but you remember when its ticker was ABC—and we used to call it AmerisourceBergen. Very 20th-century name. Cencora is much sexier—much more modern. But basically, it’s a pharmaceutical distribution company. RSI of 63—not yet overbought. It’s within 3% of a 52-week high. Stock looks outstanding—up 2% during the volatility of this week. 15 times forward P—expecting 12% earnings growth. That’s a great setup for something contrarian.”
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding Cencora, Inc. (NYSE:COR) in its Q3 2024 investor letter:
“Our preferences among Health Care stocks are those companies providing novel therapies for unmet needs that deserve premium pricing, or specialized service providers. Cencora, Inc. (NYSE:COR), a pharmaceutical products distributor, had a flat return due to uneven fiscal third quarter results. US health care revenues grew for the quarter, however, international fell short. Gross margins deteriorated due to a higher mix of GLP-1s.”
9. PepsiCo Inc (NASDAQ:PEP)
Number of Hedge Funds Investors: 60
Michael K. Farr, CEO and founder of Farr, Miller & Washington LLC, said in a latest program on CNBC that he likes Pepsi (NASDAQ:PEP) because of its dividend and earnings growth:
“Pepsicola, 3.4% dividend, 7% earnings growth. You know, if I got a 3% dividend and 7% earnings growth and a 10% return out of these kind of stalwart companies, I’d be okay.”
8. Palo Alto Networks Inc (NASDAQ:PANW)
Number of Hedge Funds Investors: 64
Stephanie Link, CIO at Hightower, said in a latest program on CNBC that she’s buying Palo Alto Networks Inc (NASDAQ:PANW) shares.
“I like cybersecurity very much. I think it’s bigger than AI in terms of the total addressable market. I like their platform strategy—I think they’ve done a really good job there. Free cash flow is expanding, so this one too has kind of lagged. It’s hung around in this downdraft, but it hasn’t been a good stock over the last year or so. I think it’s a laggard that will win,” Link said about PANW.
Parnassus Growth Equity Fund stated the following regarding Palo Alto Networks, Inc. (NASDAQ:PANW) in its Q2 2024 investor letter:
“Palo Alto Networks, Inc. (NASDAQ:PANW) has been a profitable position for the portfolio. Given its elevated valuation, we decided to sell it to fund the purchase of Workday, where we see greater opportunity and a clearer story of margin expansion potential.”
7. Arista Networks Inc (NYSE:ANET)
Number of Hedge Funds Investors: 70
Rob Sechan, CEO of NewEdge Wealth, said in a latest program on CNBC that he’s buying Arista Networks Inc (NYSE:ANET) shares. Here is how he explained the reasons for his bullish outlook on the stock:
“They make essential networking hardware and software that connects GPUs and servers, allowing for more efficient compute. They’re highly regarded for their AI networking in particular. Their main customer base is the hyperscalers, for which we continue to get good news. There’s no indication that they’re reducing capex. It now trades at a 37 times forward PE, rich for us, but it’s down from 50 earlier this year.”
Madison Mid Cap Fund stated the following regarding Arista Networks Inc (NYSE:ANET) in its Q4 2024 investor letter:
“The top five contributors for the quarter were Liberty Formula One, Arista Networks Inc (NYSE:ANET), Copart, Brookfield Asset Management, and Lithia Motors. Arista Networks posted another quarter of better-than-expected revenue and earnings growth. More importantly, the outlook remains robust, with promising results from its AI trials with customers on top of anticipated solid growth in the core business.”
6. Crowdstrike Holdings Inc (NASDAQ:CRWD)
Number of Hedge Funds Investors: 74
Jamie Meyers, Senior Securities Analyst at Laffer Tengler, said in a latest program on Schwab Network that Crowdstrike Holdings Inc (NASDAQ:CRWD) could face volatility in the near term but he’s bullish on the stock in the long term:
“Visibility is rather limited right now—that incident was all over the news. It delayed their outbound sales activities, extended sales cycles, and the company is having to offer customer commitment packages—which is essentially a discount or forgoing upfront payment from their customers. But we remain positive on the stock—we think that new ARR is going to be in focus this quarter. We think there’s still a path to 10 billion in ARR (Annual Recurring Revenue) by 2031—and we believe that the company will continue putting up free cash flow margins to 30% plus. But it’s going to be a little rocky in the near term.”
Aristotle Atlantic Core Equity Strategy stated the following regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its Q4 2024 investor letter:
“CrowdStrike Holdings, Inc. (NASDAQ:CRWD) provides cybersecurity products and services that offer endpoint protection and threat intelligence solutions, enabling customers to prevent damage from targeted attacks, detect advanced malware and search all endpoints. The company’s open cloud architecture enables it and third-party partners to rapidly innovate, build and deploy new cloud modules that can provide customers with enhanced functionality across a myriad of use cases.
We see the cloud cybersecurity market as positioned to experience strong growth over the next few years, driven by continued migration from on-premises to cloud-based architecture. We believe CrowdStrike can benefit from this trend due to its early-mover advantage, multiple product offerings and native integrations with leading cloud platforms. The increasing threats from state-sanctioned cybercriminals using high-performance computing and AI necessitate higher spending on advanced cybersecurity products. The total addressable market (TAM) is projected to grow significantly over the next four calendar years. Additionally, CrowdStrike’s cloud-native architecture and unified platform approach provide competitive advantages, resulting in high customer retention and widespread adoption of multiple modules.”
5. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Funds Investors: 99
Steve Sosnick, Interactive Brokers chief strategist, said in a latest program on CNBC that retail traders have been net buyers of major Mag. 7 stocks including Tesla Inc (NASDAQ:TSLA). He believes retail traders do not want to miss any new buying opportunities amid selloffs.
“Nvidia remains the most actively traded and the most actively bought stock on our platform, Tesla being number two. These stocks brought them to the dance, and they’re not abandoning them.”
Analysts are still trying to look beyond Elon Musk’s claims and find out the specifics on the company’s EV and robo-taxi plans.
Tesla Inc’s (NASDAQ:TSLA) product lineup is showing signs of stagnation, with over 95% of sales still coming from the Model 3 and Model Y. Meanwhile, competitors are rolling out more advanced models. According to Reuters, Tesla’s market share in Europe is slipping as legacy automakers like BMW post stronger sales. Chinese competitor BYD is also gaining ground in Europe, despite talk of tariffs.
Baron Partners Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q4 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) designs, manufactures, and sells electric vehicles, related software and components, and solar and energy storage products. Shares rose on growth in the energy segment, the promise of new model launches in 2025, and increasing investor confidence in Tesla’s AI initiatives. Despite macroeconomic challenges, delivery data in major markets like China have shown considerable improvement. The energy and automotive segments demonstrated stronger-than-expected profitability. Tesla also expanded its advanced computing center in Texas, released improved version of its software-enhanced driving solution, and is set to launch new mass market vehicles years after the initial rollouts of Models 3 and Y. Expectations of deregulation under the incoming administration point to the potential acceleration of new technology rollouts, which could enhance Tesla’s leadership position in real world AI and bolster investor confidence that Tesla will benefit from these large and attractive growth opportunities.”