In this article, we will take a detailed look at Top 10 Stocks Market Is Watching Today.
Chris Grisanti, MAI Capital Management chief market strategist, said in a latest program on CNBC that the market is going through a shift towards value stocks from growth stocks.
“A lot of investors miss is that you have to choose a great company, but you also have to choose a great entry price. And the valuation, especially over the last several years, has really gotten out of whack as growth has outperformed value by the most ever that we’ve ever seen. So now we’re just kind of getting back.”
The analyst warned that the latest selloff is not the “healthy correction” we used to see in the past.
“The economically sensitive stocks leading the way down. You’ve got banks that are tanking, you got airlines that are tanking, the worst groups are the financials, the industrial, and the consumer discretionary like retailers. So this is the market saying economic slowdown. Now is it right? You know the old saw about the market predicting eight of the last two recessions—maybe it’s wrong. The problem is one, it’s different this time so people should pay attention, and two, what generally happens is things can fall even on irrational fears, and then they become self-fulfilling.”
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For this article we picked 10 stocks Wall Street is currently focusing on. With each stock 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).
Stock market data. Photo by Jakub Zerdzicki on Pexels
10. SoundHound AI Inc (NASDAQ:SOUN)
Number of Hedge Funds Investors: 11
Senior markets reporter George Tsilis said in a latest program on Schwab Network that SoundHound AI Inc (NASDAQ:SOUN) AI shares have fallen considerably compared with their past highs. The analyst mentioned how the company’s business is growing.
“Overall sales are improving, and even the net losses on an annualized basis are improving as well. They reported a loss of 5 cents, while expectations were for a loss of 10 cents. They also reported more than a 100% increase in sales, around 34.5 million versus 33.7 million, compared to the same quarter last year. They did reiterate their relationships with Nvidia, and they are now in 10,000 restaurant locations. They also have strategic partners, such as AI voice recognition technologies for call centers, Mastercard, Snapchat, and a few others, including Netflix. These are customers of SoundHound AI Inc (NASDAQ:SOUN).
I think this is an interesting name. Not just because the price of the stock is very low, but if you consider right now, the stock has retraced about 50% of the gains from late last year at around $3 and 5 billion. If you look at the annualized sales estimates going forward, it’s still trading around 20 times sales, but it was trading at over 100 times sales not too long ago. They continue to expect improving topline sales growth, as well as improving EBITDA margins. If you look at the estimates for fiscal year 26, they were expected to lose around 25 cents for the full year, but that’s now been cut down to around 14 cents.”
9. Super Micro Computer Inc (NASDAQ:SMCI)
Number of Hedge Funds Investors: 33
Matt Tuttle from Tuttle Capital in a latest program on Schwab Network discussed Super Micro Computer Inc (NASDAQ:SMCI).
“Super Micro is, in my opinion, one of the top AI infrastructure names, but you know, everything is tenuous. I mean, number one, we’re now in an environment where, you know, stocks had run up on all that capex, and now investors are asking kind of the inconvenient question: When do we monetize and do we need all this spending? So, that’s crushing all of these stocks. I think long-term, Super Micro is a name I want to own. Right now, you’d just be catching a falling knife.”
Columbia Acorn Fund stated the following regarding Super Micro Computer, Inc. (NASDAQ:SMCI) in its Q3 2024 investor letter:
“Super Micro Computer, Inc. (NASDAQ:SMCI) had a tough quarter due to a confluence of negative events. It declined, but is still up significantly for the year. While demand for the company’s AI server racks remains strong, with revenue up over 100%, gross margins have fallen sharply for two straight quarters, implying a price war. In addition, Super Micro was the subject of a short-seller report and a delay in filing its annual report with the SEC. We have been taking profits in the stock all year and have only a small position, which we are maintaining given the strong performance and demand for Super Micro’s AI racks and a depressed stock valuation.”
8. Target Corp (NYSE:TGT)
Number of Hedge Funds Investors: 49
Oliver Chen, TD Cowen senior retail analyst, said in a latest program on CNBC that he prefers Walmart and Costco over Target Corp (NYSE:TGT) and explained the challenges the discount department store is facing:
“We’re cautious on the consumer—cautiously optimistic. The consumer continues to be very choiceful and looking for bargains. We’re recommending Walmart and Costco, which offer a stronger value proposition and simply a lot more food. Target’s been under a lot more pressure because so much of the portfolio is discretionary. And what they really need to do to improve the comp store sales is increase pricing. They’re having problems in the home category and electronics. And as you think about Walmart versus Target—Walmart’s over 50% food; at Target, it’s about 20%.”
Diamond Hill Large Cap Strategy stated the following regarding Target Corporation (NYSE:TGT) in its Q2 2024 investor letter:
“Other bottom contributors in Q2 included CarMax, Target Corporation (NYSE:TGT) and ConocoPhillips. US-based mass retailer Target faces concerns about a slowing consumer discretionary spending environment, which weighed on shares in the quarter.”
7. General Motors Co (NYSE:GM)
Number of Hedge Funds Investors: 64
Jon McNeill, former Tesla president and General Motors Co (NYSE:GM) board member, said in a latest program on CNBC that General Motors Co (NYSE:GM) has built its business on “resilience” and the company can survive through the tariff-related shocks.
“I think in GM’s case, GM has built its business on resilience and hasn’t been waiting to react—it has been proactive around this. They’ve invested in a really resilient supply chain and an agile approach to manufacturing. And so GM is in a strong position to mitigate the short-term impacts and ensure customers get the GM cars that they want and love. As Mary Barra said recently, “We think that we can mitigate 30 to 50% of the tariffs without deploying capital.” So there’s a lot of reaction in the moment, and I understand that. GM has built a business model that can adapt, and there’s a lot of noise, but GM and the team are really focused on execution and can absorb these kinds of shocks.”
Hotchkis & Wiley Large Cap Value Fund stated the following regarding General Motors Company (NYSE:GM) in its Q3 2024 investor letter:
“General Motors Company (NYSE:GM) is one of the world’s largest manufacturers of passenger vehicles. GM reported a strong Q2; however, management provided a cautious outlook for the second half of 2024. Comments from GM mirrored those of other OEMs and auto suppliers, leading investors to believe the automotive cycle has peaked. We believe this is an overreaction, and we continue to view GM as an attractive investment. We like GM for many reasons. First, we believe GM has leading market positions in its main business segments. Second, the valuation is extremely attractive. Finally, it is a strong free cash flow generator, and the management team is committed to repurchasing their undervalued shares.”
6. Dell Technologies Inc (NYSE:DELL)
Number of Hedge Funds Investors: 60
Kim Forrest, chief investment officer at Bokeh Capital Partners, talked in a latest program on Schwab Network about the latest earnings of Dell and the impact of DeepSeek on the company. She is in a wait-and-see mode on Dell and said further “clarity” is needed on the company’s forward path in the changing environment.
“I’m a fundamental analyst, so I’m looking at things like demand drivers and, you know, the world in which Dell and the rest of the tech world works, and it’s a confusing one. Sure, there are issues with tariffs. We don’t know, like, are there going to be tariffs on stuff shipping out of Taiwan? We don’t know. Is that really China? Isn’t it? Who knows? So, there’s issue number one. But the bigger issue is demand, and I think this all goes back to AI. This is what has been driving demand, not necessarily demand for its PCs— even its AI PCs—it’s pretty small potatoes compared to the whole server market that drove Dell in this last year or so. So, looking at that, it’s a real conundrum of whether or not the companies are going to continue to demand these particular chips that Dell can provide. So, that’s a big question, and in what numbers. Deep Seek gives us an idea that there are different ways to build these models and do inference on asking the questions of the models, right? And will we really need this infinite amount of chips that people have been banking on, that investors really bought into names like Dell and Nvidia? And the answer is up in the air at this point.”
5. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Funds Investors: 99
Matt Tuttle from Tuttle Capital said in a latest program on Schwab Network that Tesla Inc (NASDAQ:TSLA) could “end up” being an undervalued stock if it executives well on its capabilities in AI and self driving.
“I really look at Tesla as an AI vertical where they’ve got their hands in everything. They’ve got to execute on it, you know, the full self-driving, the robotics. They’ve got a lot of work to do, but if they can do it, this company could end up being really undervalued here. But again, if it’s just an EV company, it’s a totally different story. You know, it’s obviously run up a lot based on Elon’s relationship with Trump, and then I think people are realizing, with all of Elon’s companies, this one isn’t really going to benefit from a Trump relationship. So, it’s kicking around the 200-day moving average. It’s got to hold here, and then they’ve got to execute on the entire AI vertical vision to really justify it moving higher.”
Analysts are looking beyond Elon Musk’s big claims and digesting the harsh reality facing the company. Tesla’s sales are falling all over the world despite the broader industry growth. For example, in California, the largest U.S. market for electric vehicle adoption and sales, Tesla sales fell about 12% year over year in 2024, causing its market share to drop from 60.1% in 2023 to 52.5% in 2024. Was it because Californians are buying fewer EVs? No. Californians purchased more than 2 million electric cars during the year, almost doubled when compared to the past two years.
Things aren’t looking good for Tesla in Europe, too. For example, in Germany, Tesla delivered just 1,429 new cars in February, down 76% from the same month last year. In contrast, battery-electric vehicle (BEV) registrations surged 30.8% during the month.
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.”
4. Netflix Inc (NASDAQ:NFLX)
Number of Hedge Funds Investors: 121
LikeFolio’s Megan Brantley said in a latest program on Schwab Network that Netflix Inc (NASDAQ:NFLX) ad tier and sports streaming is helping the company gain more subscribers. The analyst said she’s watching the sustainability of subscription additions gained based on sports streaming.
“Our data have been the introduction of its ad tier and also its foray into live sports, and you can see that whenever we look specifically at web traffic for Netflix Inc (NASDAQ:NFLX), we saw a massive increase in the month of November and then also a nice little bump in December whenever Netflix Inc (NASDAQ:NFLX) hosted the Jake Paul Mike Tyson fight and also the NFL Christmas Day matchup. And so I think that this has proven that live sports not only grabs these consumer eyeballs but it’s also very compelling for advertisers. Netflix announced that it also secured rights for the FIFA Women’s World Cup coming up, so I think that this is a smart move and this is what’s been driving a lot of the growth that we’ve seen in Netflix, at least in terms of consumer interest.
But we want to watch for retention long term because we have some signs in our data that a lot of those consumers that Netflix Inc (NASDAQ:NFLX) gained may have jumped on to watch those sports events and they popped off. And so I think that this is something that investors will be watching pretty closely just because Netflix Inc (NASDAQ:NFLX) was able to report such nice user growth last quarter.”
Sensing major threats amid rising competition in the market from Disney Plus, Peacock (CMCSA), Max, Amazon and YouTube, Netflix Inc (NASDAQ:NFLX) has fired all engines and is using a multi-pronged approach to thrive. Netflix Inc (NASDAQ:NFLX) is expanding into emerging markets, aggressively focusing on user engagement and tapping into advertisement and gaming. Netflix Inc (NASDAQ:NFLX) is also expanding into NFL games and WWE.
3. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Funds Investors: 128
Broadcom (NASDAQ:AVGO) is one of the stocks that could boost interest in the artificial intelligence sector in the short term, according to Bank of America.
“We expect strong results from AVGO, MRVL, and CRDO to reignite interest in AI semiconductors, as spending by US cloud customers and AI investments from governments remain the few reliable demand drivers in the global economy,” analyst Vivek Arya said in a client note.
For Broadcom Inc (NASDAQ:AVGO), Arya expects the company to emphasize the long-term addressable market of $60B to $90B for custom accelerator chips and networking.
Broadcom threw it out of the park with its latest quarterly results. The most important part of the report? The company expects strong AI semiconductor sales growth to continue. It sees AI semiconductor revenue of about $4.4 billion in fiscal Q2, which would be a 42% year-over-year growth. Broadcom reported $6 billion in free cash flow for the quarter. Its software business gross margin came in at about 90%. But what’s Broadcom’s moat? It makes ASIC, chips designed for specific applications and tasks. As major companies look for custom chips to break Nvidia’s monopoly and lower costs, Broadcom is positioned well to thrive. Many top AI spenders are teaming up with Broadcom to develop these chips, which are expected to be high-margin, high-volume products, potentially driving substantial growth in both revenue and profits.
Broadcom Inc (NASDAQ:AVGO) continues to be a leader in the AI ASCI and networking chips market. Broadcom Inc (NASDAQ:AVGO) has 3nm AI ASIC chip deals with Alphabet and Meta in addition to many other tech giants aiming massive spending for AI hyperscaling.
Bell Global Equities Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q4 2024 investor letter:
“During December we introduced two new holdings to the portfolio and exited two names. The first addition was Broadcom Inc. (NASDAQ:AVGO), a leading global player in the semiconductor and software industry. We established the position early in December as we saw good potential for earnings upgrades going into 2025. Broadcom’s fundamentals continue to improve and there are many opportunities for them to continue growing double-digit revenue growth and faster profit acceleration. Broadcom has built their industry leading positions through both organic investment and strategic acquisitions. They are also a key player in the booming AI market where they develop custom chips used in data centres which are tailored to specific customer needs and networking infrastructure. Their recent acquisition of VMWare is another good example of how Broadcom can expand their opportunity set into enterprise software and garner strong pricing power from their existing customer base. This adds to their software footprint in mainframe, through CA Technologies, and in cybersecurity following their Symantec acquisition. The strength of their franchise is reflected in the high margins that they earn, which helps them generate a free cashflow margin near 40%. The strong results in mid-December reinforced the strength of the business and we see continued upside for this holding.”
2. Apple Inc (NASDAQ:AAPL)
Number of Hedge Funds Investors: 158
Jefferies said in a latest report that China’s smartphone market is slowing, and Apple’s (NASDAQ:AAPL) new iPhone 16e is likely underwhelming.
A team of analysts led by Edison Lee said their findings show smartphone sales in China have weakened further, marking four straight weeks of declines following the Lunar New Year. The year-over-year drop is deepening, prompting steeper discounts last week on both iPhones, particularly the 16 series, and high-end Android models.
Lee believes consumers generally care less about AI than camera features. He does not see strong demand for iPhone e and said Apple Inc (NASDAQ:AAPL) may have to cut orders in the June quarter.
Apple’s latest quarterly results were helped by Services revenue in the latest quarter, but the key challenges haunting the company remain as they were. Many analysts believe just a few AI apps would not be enough to trigger a broader upgrade cycle for iPhone. Apple is dealing with currency headwinds as the stronger US dollar is expected to reduce top-line growth by 2.5% next quarter. For Q2 FY2025, management expects overall revenue to grow in the low to mid-single digits. Apple’s stock is trading at a premium valuation, with a price-to-earnings ratio of 39-40x, a price-to-free-cash-flow ratio of 33-34x, and a PEG ratio exceeding 3x. Upcoming quarters would be difficult for Apple and its current valuation is not justified.
Tsai Capital stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:
“We initiated our investment in Apple Inc. (NASDAQ:AAPL) in 2016 and elevated it to a core holding in 2018, the same year the company introduced its redesigned 13-inch and 15-inch MacBook Pro models. Under Tim Cook’s visionary leadership, Apple has consistently redefined innovation in hardware and software.
The September 2024 launch of the iPhone 16, with its groundbreaking AI capabilities, including enhanced image generation tools, marks another inflection point. We believe this transformative device is the foundation for an AI-driven supercycle and could entice approximately 100 million consumers to upgrade, reinforcing Apple’s leadership in the industry.
Today, Apple’s ecosystem spans over two billion active devices, supported by a rapidly-growing base of subscription services. This strategy has helped to turbocharge customer engagement and spending. In the most recent fiscal year, which ended in September 2024, Apple’s high-margin services division accounted for 39.3% of total gross profits, up from 32.8% just two years ago.
Apple’s financial footing remains exceptional, with approximately $50 billion in net cash and marketable securities. Looking ahead, we expect earnings-per-share growth to outpace revenue growth, driven by margin expansion and continued share buybacks.”
1. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Funds Investors: 193
Eric Diton from The Wealth Alliance said in a latest program on Schwab Network that NVIDIA Corp (NASDAQ:NVDA) shares fell after earnings because customers want to hear the names of specific customers spending “boatloads” of money on AI.
“Earnings came out great; they beat all expectations. NVIDIA Corp (NASDAQ:NVDA) got crushed, and it’s telling you that when stocks have made those kinds of profound moves, even a beat may not be enough. And that’s what happened—they beat, but by less, and people are kind of tired of hearing NVIDIA Corp (NASDAQ:NVDA) say everything is great. They want to hear customers. They want to hear Amazon, Google, and Microsoft say they’re going to spend loads of money. Deep seek, no matter what anyone says, it definitely put just a dent in the armor. When stocks have made those kinds of moves and all of a sudden, you have a question mark about whether the growth will continue as planned, that’s a lookout below.
So, we’re having this pullback. Look, you’ve got to own big tech, but you don’t have to have 35% of your money in stocks like the S&P. You know, you shouldn’t. You’ve got to be more widely diversified, so we’re not jumping into tech.”
The market will keep punishing Nvidia for not coming up to its gigantic (and sometimes unrealistic) growth expectations. About 50% of the company’s revenue comes from large cloud providers, which are rethinking their plans amid the DeepSeek launch and looking for low-cost chips. Nvidia’s Q1 guidance shows a 9.4% QoQ revenue growth, down from the previous 12% QoQ growth. Its adjusted margin is expected to be down substantially as well to 71%. The market does not like when Nvidia fails to post a strong quarterly beat. The stock will remain under pressure in the coming quarters when the company will report unimpressive growth.
Nvidia is facing challenges at several levels. Competition is one of them. Major competitors like Apple, Qualcomm, and AMD are vying for TSMC’s 3nm capacity, which could limit Nvidia’s access to these chips. Why? Because Nvidia also uses TSMC’s 3nm process nodes. Nvidia is also facing direct competition from other giants that are deciding to make their own chips. Amazon, with its Trainium2 AI chips, offers alternatives. Trainium2 chips could provide cost savings and superior computational power, which could shift AI workloads away from Nvidia’s offerings. Apple is reportedly working with Broadcom to develop an AI server processor. Intel is also trying hard to get back into the game with Jaguar Shores GPU process, set to be produced on its 18A or 14A node.
Brown Advisors Global Leaders Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“The main driver of our 2024 relative underperformance was not being invested in NVIDIA Corporation (NASDAQ:NVDA). Since ChatGPT introduced the power of generative artificial intelligence to the world on 30 November 2022, the Global Leaders Strategy has outperformed its benchmark despite being underweight the USA and specifically underweight the “Magnificent Seven”.7 2024 underperformance of -2.81% versus our benchmark was almost precisely matched by the individual outperformance of NVIDIA, which we did not own. On balance the rest of the portfolio is doing just fine albeit with areas of strength (AI) and weakness (EM financials) discussed below.
We wrote about the concentration within global indexes last year and this continued with only 29% of companies within the ACWI Index at the start of 2024 outperforming this benchmark over the year. Our capital allocation added value in 2024 as five of our top ten largest weights over the year were also in our top ten percentage winners. Conversely, within our ten worst performers, seven were also amongst our smallest ten weights. Capital allocation is critical when index hit rates are below 50%…” (Click here to read the full text)
While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA) as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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