In this article, we will take a detailed look at the Top 10 Stocks to Watch as AI Trade Dynamics Change.
Aswath Damodaran from NYU Stern School of Business said in a recent program on CNBC that AI “buzzwords” are not boosting the market anymore as investors grow more concerned about capital spending.
“I’ve said about data centers we’ve gotten way ahead of the game. I mean, the AI product and service business, which ultimately is what has to pay for all of this, has not taken off in any substantial way. I’m hard-pressed to think about any company making significant money from the AI product and service business.”
Damodaran said that the “sobering” of the AI trade started in September last year and the DeepSeek breakthrough in China also had an impact on the industry.
“It’s part of, I think, what you see almost every buzzword in history in the last four decades. I call these the ‘bar mitzvah moment,’ where people wake up and say, ‘Okay, there’s a lot of promise here, but show me something that I can hang my hat on.'”
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For this article, we picked 10 stocks Wall Street analysts have been talking about lately. 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).
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10. Ralph Lauren Corp (NYSE:RL)
Number of Hedge Fund Investors: 30
Jim Cramer in a latest program on CNBC commented on a new bullish note on Ralph Lauren Corp (NYSE:RL) and said the company is “key” to this market.
“Goldman Sachs is trying to stop the rain in the apparel group, which has just been shelled endlessly, by saying that it’s time to buy Ralph Lauren. Now I’ve done a lot of work in this company. Patrice Louvet is doing a remarkable job. I was shocked at the stock declined so much. David, this stock is, believe it or not, the key to this market because if it can reverse itself and the rain can stop, then we have something to, let’s say, put our hat on. That’s a key. Ralph Lauren is the key to this market, and Goldman’s piece is cogent. I think it’s articulate.”
Goldman Sachs upgraded Ralph Lauren (NYSE:RL) to a Buy rating, citing the brand’s successful strategy and minimal exposure to near-term macro risks like tariffs, shifts in consumer spending, and challenges in department stores.
Goldman analyst Brooke Roach points to Ralph Lauren Corp’s (NYSE:RL) ability to drive market share and expand margins, noting continued growth in comparable sales and average unit retail (AUR).
“Although we’ve been optimistic about Ralph Lauren’s brand momentum in recent quarters, its elevated valuation had kept us cautious,” Roach says. However, she sees the pullback in apparel valuations, due to macro uncertainty and market volatility, as an opportunity to buy into companies like Ralph Lauren, which show resilience even amid a volatile environment.
9. Palantir Technologies Inc (NASDAQ:PLTR)
Number of Hedge Fund Investors: 41
Aquiles Larrea from Larrea Wealth Management said in a recent program on Schwab Network that he’s bullish on Palantir Technologies Inc (NASDAQ:PLTR) and thinks the stock can reach $100.
“The first thing being, okay, we had the government cuts, that’s affected the stock somewhat. It came down from about 115 or so, and that’s flirting right now with right below 90, basically. But more importantly, is that they are uniquely positioned in their particular area of AI, that we could see that stock be more than 115. As a matter of fact, I’ve come on, I’ve been following this stock, I first recommended it last January here on this network at 7, did very well yet last year, 17 bucks it was at. So I foresee that we still have a lot more, you know, think about this sector, it’s in its infancy, so there’s a lot more potential opportunity here, but it’s not going to be as fast, because right now, everything is starting to slow down in the sector. We’re starting to see productivity come down, we’re starting to see the economy pull. So we could see the next target for this particular stock at about 100, 101 right now.”
Baron Asset Fund stated the following regarding Palantir Technologies Inc. (NASDAQ:PLTR) in its Q4 2024 investor letter:
“Two software stocks that the Fund did not own, Palantir Technologies Inc. (NASDAQ:PLTR) and AppLovin Corporation, each gained more than 100% and accounted for 52% of the Benchmark’s gain during the quarter. At year end 2024, Palantir was valued at approximately 200 times its expected 2024 earnings, while AppLovin was valued at 80 times. The market cap of each exceeded $100 billion, and the two stocks represented nearly 8% of the Index. Neither company met our criteria for investment. The total impact on relative performance from Palantir and AppLovin was about 7 times higher than we have seen historically for two securities that are unique to the Benchmark, showing just how unparalleled the event was and something that we believe is unlikely to be repeated.”
8. Docusign Inc (NASDAQ:DOCU)
Number of Hedge Fund Investors: 42
Wall Street is focusing on Docusign Inc (NASDAQ:DOCU) after the company’s latest results.
“While bears push back on the Q4 outperformance given half of the upside was driven by early renewals, bulls point to improving gross retention and higher-than-expected IAM billings as well as the above-consensus billings guide for FY26,” said Morgan Stanley analysts, led by Josh Baer, in a recent investor note. “With FY26 billings guidance already starting at 8% cc, the path to double-digit growth has become more realistic.”
The company’s Intelligent Agreement Management, or IAM, is expected to see a double-digit percentage share of total subscription recurring revenue in fiscal 2026.
“This implies a ~5X increase in the IAM business to a ~$320M ARR run rate, which is especially impressive given most of the FY26 contribution will be from the SMB/mid-market segment despite IAM providing more value to enterprise customers given the higher level of complexity within enterprise agreement workflows,” Baer added.
Polen Focus Growth Strategy made the following comment about DocuSign, Inc. (NASDAQ:DOCU) in its Q3 2023 investor letter:
“We eliminated our remaining 1% position in DocuSign, Inc. (NASDAQ:DOCU). While the company remains the leader by a wide margin at the higher end of the digital signature market, it has become clearer to us that its addressable e-signature market is likely significantly smaller than we had believed or will take much longer to develop than we had anticipated. The lower end of the market is highly competitive. We were patient with our very small position. Impressive new management joined from Google and The Trade Desk in hopes of them being able to reinvigorate growth in core e-signature. Still, it does not appear that this is likely anytime soon with new management articulating that the company will need to develop new products to achieve higher levels of e-signature growth despite what we considered to be low penetration rates within existing e-signature products. As such, we used the proceeds of our sale as part of the funding for our Novo position.”
7. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
Keith Fitz-Gerald, Fitz-Gerald Group CIO, said in a latest program on CNBC that while he’s frustrated with the latest selloff around Tesla Inc (NASDAQ:TSLA), he continues to believe in the company for the long term.
“You know, I think if we look at FSD, we look at autonomy, we look at all the things that Tesla is involved in, if you take Musk himself out of the equation for a few minutes, you can’t deny that that company continues to change the planet. So, this is one of those moments where I’m going to hold my nose, I’m going to continue to wait anyway, and I hope that I have enough shares at the end of the day.”
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 double 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.
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.
Polen Focus Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q4 2024 investor letter:
“The largest relative detractors in the quarter were Tesla, Inc. (NASDAQ:TSLA) (not owned), Thermo Fisher Scientific, and Broadcom (not owned). We’ve spoken at length about our rationale for not owning Tesla. The stock enjoyed a 54% return during the quarter, with effectively all of the share price performance strength coming in the post-election period, as the market expressed a positive view on Elon Musk’s prominent role in the incoming Trump administration and its potential implications for Tesla. While we agree this development should be a net positive for Tesla and recognize the company’s interesting future prospects for autonomous driving and humanoid robots, its current valuation demands that shareholders pay primarily for potential innovations that have yet to materialize, with uncertain risks and timelines, presenting a different type of risk profile than we are comfortable with. Today, Tesla is an automobile manufacturer limited to the higher-income segment and is increasingly challenged to sell vehicles when interest rates are not zero. As such, we continue to question the company’s long-term growth profile, its ability to scale a large robotaxi service (which seems to be the source of euphoria in Tesla shares), and its corporate governance.”
6. Netflix Inc (NASDAQ:NFLX)
Number of Hedge Fund Investors: 121
David Nelson from Belpointe Asset Management said in a latest program on CNBC that Netflix Inc (NASDAQ:NFLX) has won the streaming wars and is growing faster than peers.
“Everybody’s looked at the streaming stocks, and you can either own a company that is trying to become the next Netflix or you can buy Netflix. The war is over, Netflix won. They added 19 million subscribers in their last quarter. That puts them over 300 million worldwide and counting. The added caveat is that they’ve now added advertising, and those margins on the bottom line are going to start to expand. It’s almost like a flywheel right now. They’re growing faster than their peers, so they can spend more on content. That, of course, increases engagement, and the cycle repeats itself. This is a no-brainer. This is one you have to own.”
Guinness Global Innovators stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its Q4 2024 investor letter:
“Netflix, Inc. (NASDAQ:NFLX). The streaming giant is a high-quality, fast-growing business with a solid growth runway that is being leveraged by a competent management team. Netflix transitioned to streaming well before competitors and is now the dominant streaming player. Its first-mover advantage allowed it to accrue a vast content library (when capital was cheap and investors were patient) and it has built on this moat with continued investment into original content. This includes a growing non-English catalogue, which has opened up international markets and allowed continued subscriber base growth, which now stands at 270m. Monetising its ad-tier subscribers, expanding penetration in developing markets, and incremental revenue-per-user increases will drive the growth outlook, while Gaming / Sports remains a potential growth avenue for the future. Although the valuation is not overly cheap in the absolute (priced at c.34x 1yr forward earnings), the stock has historically traded in a wide range (40x+ in the pre-COVID growth era and troughing at c.12x in late 2021 over growth fears), we feel the current quality-growth attributes of the firm justify this premium to the market. At present, the business and the narrative around it have turned a corner following concerns over profitability. Management actions have driven both subscriber numbers and profits up meaningfully in recent years, and investors look forward to the encouraging runway for growth – and most importantly profitable growth – that lies ahead. Even as management shift investor focus away from pure subscriber growth to user engagement, there is still a double-digit top-line forecast, while c.25% or more on the bottom line and a strong improvement in margins and free cash flow all make for an encouraging outlook.”
5. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Jim Cramer in a latest program on CNBC commented on a recent bullish note on Apple Inc (NASDAQ:AAPL) from Evercore, agreeing with the firm. Cramer thinks the selloff after Apple Inc’s (NASDAQ:AAPL) delay of the Siri update was overblown.
“Evercore comes out and says, “All right, you ready? They’re taking the price target from 260 to 275.” In other words, a different direction from what the stock has been selling. A lot of shorts in the name. Why are they short? Because Apple doesn’t have a strategy, but also because it’s still got the high multiple. People feel that the quarter is going to be weak. I’m going to go with the Evercore view because it’s about free cash flow, it’s about return to shareholders, and David, I think this is another one of these pieces that just says enough with the Siri gate. There was nothing strange about AI. It’s going to be a slower rollout. When you talk to the people who work at Apple, particularly someone by the name of Tim Cook, they don’t like to release things unless they’re good. And are they happy that they don’t have the best AI yet? Well, of course. Look, they’re a company that prides themselves in professionalism.So, I actually like this piece.”
Evercore ISI believes Apple Inc (NASDAQ:AAPL) is “well positioned” to have double-digit earnings growth through 2029.
“While investors over index on iPhone growth, we think there is less of a focus on AAPL’s ability to keep growing EPS & FCF growth consistently via gross margin (mix and pricing), operating leverage and buybacks,” analyst Amit Daryanani wrote in a note to clients. “Furthermore, AAPL is positioned to benefit from AI monetization without having to invest their FCF into GPUs, we see monetization occurring on multiple fronts over time.”
Columbia Seligman Global Technology Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:
“The fund maintained a position in Apple Inc. (NASDAQ:AAPL) throughout the quarter through the release of the company’s new iPhone 16 in September. Company leaders were excited about the release of the new model, as this is the first model that will feature enhanced AI capabilities through the Apple Intelligence features. Sales for the first few weeks in October and November trailed behind year over year sales from the iPhone 15, as availability of Apple Intelligence was not compatible with all iPhone models. Apple announced a partnership with OpenAI that has allowed the integration of ChatGPT into the Apple ecosystem, separate from the core Apple Intelligence features. This partnership highlights continued progress from Apple to introduce AI capabilities into its products and we expect the iPhone 17 to have even more expansive AI capabilities, increasing potential demand for the new model that is on track to be released in 2025.”
