In this article, we will take a detailed look at the Top 10 Trending AI Stocks on Latest Analyst Ratings and News.
AI stocks have pulled back considerably over the past few weeks and analysts believe this is exactly the healthy correction long-term investors were looking for. According to Bloomberg, Rob Sluymer, technical strategist at RBC Wealth Management, said that AI stocks have stabilized at levels they can sustain for the rest of the year. The analyst said technical indicators now show AI stocks have gone from overbought to oversold territory.
“Now that positions have been unwound, there’s an opportunity for traders to take positions,” Sluymer reportedly said.
Many others agree with Sluymer. Dan Ives of Wedbush reiterated his view that we are still in the early stages of the AI bull market in a latest program on CNBC.
“If you look at what we’ve seen from AI revolution to broader tech, it’s been strong from an earnings perspective. And the growth scare that we saw, it’s just a bump in the road to what I believe is the fourth industrial revolution playing out,” Ives said.
For this article, we picked up 10 AI stocks that are making waves on the back of latest earnings, analyst ratings or important industry news. 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).
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10. Tempus AI Inc (NASDAQ:TEM)
Number of Hedge Fund Investors: 18
Tempus AI Inc (NASDAQ:TEM) is a small-cap AI healthcare tech stock making waves these days. The stock is up about 26% so far this year. Piper Sandler recently started covering the stock with a Neutral rating, citing valuation concerns. The firm acknowledged the company’s strong position in tech and pharma services but said it’s reluctant to assign a higher industry multiple until it sees more robust revenue growth.
Tempus AI Inc (NASDAQ:TEM) is working in the diagnostics and testing industry, including next-gen sequencing and molecular profiling, for healthcare providers and researchers. The company also offers a data library and tools for pharmaceutical companies to analyze clinical and molecular data.
Tempus AI Inc (NASDAQ:TEM) platform has 200 petabytes of data, serving over 95% of top pharmaceutical companies and more than 7,000 doctors. All of this data is used in AI-based sequencing and diagnostics.
In 2023, Tempus AI Inc (NASDAQ:TEM) saw revenue growth of 66% but the growth slowed to 47% in the last quarter of 2023, and in the first quarter of 2024, sales only grew by 26% to $146 million, with operating losses holding steady at $53 million. This slowdown in growth and ongoing losses are concerning amid a high P/S ratio and high cash burn rate. Tempus AI Inc (NASDAQ:TEM) ability to stay competitive could be at risk, especially since their tests, which cost about $1,500 each, need to be highly accurate to avoid serious consequences.
Baron Health Care Fund stated the following regarding Tempus AI, Inc (NASDAQ:TEM) in its Q2 2024 investor letter:
“We initiated a small position in Tempus AI, Inc (NASDAQ:TEM), an intelligent diagnostics and health care data company. Tempus has two synergistic business units: Genomics and Data & Other. Within the Genomics business, Tempus provides diagnostic tests, particularly for cancer treatment selection. Tempus’ labs sequence the tumor’s genome and transcriptome (gene expression) and can help oncologists select the best treatment for their patient. We think the cancer treatment selection sequencing market is underpenetrated and poised to continue to grow rapidly, and Tempus is well positioned as one of the leaders in this field. The genomics testing data also feeds into Tempus’ value as a data company. Tempus has amassed a huge (over 200 petabytes) proprietary multimodal dataset that combines clinical patient data (which includes clinical records, imaging data, etc., mostly from two-way collaborations with health systems) with genomic testing data from the Genomics business. In total, the company’s dataset includes approximately 7.7 million clinical records, over 1 million imaging records, over 910,000 matched clinical and molecular dataset profiles, and over 970,000 samples sequenced. In addition to using this data to empower more intelligent diagnostics, Tempus also licenses this data to biopharmaceutical companies who use it to design smarter clinical trials and identify potential new drug targets. Tempus works with 19 of the top 20 pharmaceutical companies in this capacity and has disclosed 9-figure deals with 3 biopharmaceutical companies. We think this proprietary dataset is unique with meaningful barriers to entry, and brings meaningful value to biopharmaceutical R&D.”
9. Coherent Corp (NYSE:COHR)
Number of Hedge Fund Investors: 47
Coherent Corp (NYSE:COHR) is trending as investors pay attention to this relatively new entrant in the list of popular AI semiconductor stocks. The company recently posted strong quarterly results and gave an upbeat guidance. Earlier this month, BofA upgraded the stock to Buy from Neutral citing potential for improved execution and AI optical market growth. BofA also increased its price target for the stock to $75 from $65.
Coherent Corp (NYSE:COHR) makes optical materials and semiconductors. Its laser tech is used for laser welding for EV batteries and for UV lasers in mobile and high-end TV display industries. However, the spotlight is currently on its Communications segment, which is set to benefit from the expansion of cloud computing, AI, and machine learning. This segment, driven by the demand for datacom transceivers that handle higher data throughput, accounted for 52% of Coherent Corp (NYSE:COHR) recent market and grew by double digits year-over-year, particularly in North America and China.
Giverny Capital Asset Management stated the following regarding Coherent Corp. (NYSE:COHR) in its Q2 2024 investor letter:
“Because I like the portfolio, we had very few transactions during the quarter. I exited Coherent Corp. (NYSE:COHR) as I came to believe the company has an exceptional collection of assets but a much less impressive management culture. The CEO and CFO of Coherent both left their jobs recently, and perhaps I should have given their replacements time to set a new course. I used the proceeds from the sale to add to Five Below and Kinsale Capital. In the short run, Coherent is up and Five Below is down, so the early returns on this swap are not encouraging.”
8. Cisco Systems Inc (NASDAQ:CSCO)
Number of Hedge Fund Investors: 61
Cisco Systems Inc (NASDAQ:CSCO) is trending after posting strong quarterly results. Piper Sandler analysts James Fish and Quinton Gabrielli said in a note that Cisco’s management has indicated that the demand is getting strong again. Analysts believe AI and Cloud are future growth catalysts for Cisco Systems Inc (NASDAQ:CSCO).
Cisco Systems Inc (NASDAQ:CSCO) beat Wall Street estimates on EPS and revenue despite a 10% decline in the latter. So what was special about the results that made Wall Street analysts shower positive ratings?
Cisco Systems Inc (NASDAQ:CSCO) announced a major restructuring plan that includes a 7% reduction in workforce and an estimated $1 billion in pre-tax cost savings. The company’s legacy hardware businesses have been stagnating, with average revenue growth lingering at just 1.6%. Job cuts and cost savings will allow the company to allocate capital to high-growth areas like AI and Cloud networking.
The expected cost savings, which will cut about 2.4% of total operating expenses, could boost Cisco Systems Inc (NASDAQ:CSCO) operating margins by more than 220 basis points in FY25. Although the company is ramping up its AI efforts, it only expects AI to bring in around $1 billion in revenue next year, less than 2% of the total. So, while AI isn’t likely to be a game-changer for Cisco just yet, the focus on growth markets might accelerate overall revenue in the future.
Cisco Systems Inc (NASDAQ:CSCO) could rake in about $55 billion and $56.2 billion in revenue in fiscal 2025, which would be a 4.1% year-over-year growth. Cisco’s services business, which accounts for 27% of total revenue, is expected to grow by 5%. Analysts think possible declines in legacy on-premise networking business would be offset by growth in AI-driven networking.
7. Marvell Technology Inc (NASDAQ:MRVL)
Number of Hedge Fund Investors: 74
Tom O’Malley from Barclays said in a latest note that potential Blackwell delays won’t affect the broader semiconductor supply chain and said Marvell is well-positioned to benefit from the launch of Blackwell and the increased demand for high-speed networking. He highlighted that Marvell’s custom ASIC business is expected to see growth, as key customers remain committed to accelerating orders. O’Malley also pointed to Credo’s (CRDO) recent earnings update, which he sees as confirmation that at least one major customer is moving forward with significant orders.
JPMorgan believes MRVL could “dominate” the custom application-specific integrated circuit, or ASIC, market. Analysts at JPMorgan estimate that Marvell Technology Inc (NASDAQ:MRVL) could generate between $1.6 billion and $1.8 billion in AI revenue from ASICs and networking this year and between $2.8 billion and $3 billion next year.
Analysts believe that Marvell Technology Inc. (NASDAQ:MRVL) could be the next major AI play as Marvell Technology Inc. (NASDAQ:MRVL) begins to roll out AI-specific products like Spica™ 800G PAM4 DSP platform for optical interconnects. Marvell Technology Inc. (NASDAQ:MRVL) also sells Application-specific integrated circuits (ASICs) for data centers, which are seeing a huge boost amid the AI revolution.
Artisan Mid Cap Fund stated the following regarding Marvell Technology, Inc. (NASDAQ:MRVL) in its Q2 2024 investor letter:
“During the quarter, we initiated new GardenSM positions in CCC Intelligent Solutions, Marvell Technology, Inc. (NASDAQ:MRVL) and Insmed. Marvell Technology is a semiconductor company offering networking, secure data processing and storage solutions to customers worldwide. We believe Marvell has among the broadest range of intellectual property in technological areas (e.g., high-bandwidth data switching and storage applications) that position it well for the growing requirements of data centers, wireless networks and autos. Several of the company’s product lines (e.g., custom silicon, optical connectivity and switching) are benefiting from the growth of AI data centers. And we believe a significant opportunity exists for the company to help design and manufacture cost-effective custom data center chips that would help cloud providers reduce their reliance on expensive graphics processing units (GPUs). Furthermore, like many other semiconductor companies, a portion of its business may be poised for a cyclical recovery after the industry’s recent inventory correction.”
6. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Investors: 108
Dan Ives of Wedbush in a fresh note said the latest results from Advanced Micro Devices, Inc. (NASDAQ:AMD) and some other top tech companies should soothe market concerns about AI monetization.
“On the semi front, Advanced Micro Devices, Inc. (NASDAQ:AMD) is now on the cusp of getting a piece of the growing AI $1 trillion of Cap Ex we expect to see over the next few years with the Godfather of AI Jensen and Nvidia leading the charge,” Ives said.
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.
Meridian Contrarian Fund stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth quarter 2023 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global semiconductor chip maker specializing in central processing units (CPUs), which are considered the core component of most computing devices, and graphics processing units (GPUs), which accelerate operations running on CPUs. We invested in 2018 when it was a mid-cap value stock plagued by many years of underperformance due to lagging technology and lost market hi share versus competitors Intel and Nvidia. Our research identified that changes and investments made by current management under CEO Lisa Su had, over several years, finally resulted in compelling technology that positioned AMD as a stronger competitor to Nvidia and that its latest products were superior to Intel’s. We invested on the the belief that AMD’s valuation at that that time did not reflect the potential for its technology leadership to generate significant market share gains and improved profits. This thesis has been playing out for several years. During the quarter, AMD unveiled more details about its upcoming GPU products for the AI market. The stock reacted positively to expectations that AMD’s GPU servers will be a viable alternative to Nvidia. Although we pared back our exposure to AMD into strength as part of our risk-management practice, we maintained a position in the stock. We believe AMD will continue to gain share in large and growing markets and is reasonably valued relative to the potential for significantly higher earnings.”
5. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 130
Stacy Rasgon, Bernstein U.S. semiconductor senior analyst, recently said while talking to CNBC that he’s “always” liked Broadcom and it’s his favorite semiconductor stock pick.
“Broadcom I think has the second best AI story in the (semiconductors) space after Nvidia.”
Rasgon said the company sells networking and computing power to hyperscalers. This, according to the analyst, has helped the company “cover up some nastiness” in its core business. The analyst said Broadcom’s AI guidance is conservative.
“Highest margin, highest free cash flow in the space and I think the valuation is still really attractive relative to the sector.”
TD Cowen in a fresh note named Broadcom Inc (NASDAQ:AVGO) as one of the stocks that can benefit from the rise in AI spending. Analysts at the firm said there are “no signs” of generative AI demand abating and highlighted that Broadcom Inc (NASDAQ:AVGO) recently raised its full-year AI outlook. Broadcom Inc (NASDAQ:AVGO) expects AI-related revenue for 2024 at $11 billion.
Broadcom Inc (NASDAQ:AVGO) recently reported second-quarter results. Revenue in the quarter rose about 43% year over year. AI revenue in the period rose a whopping 280% year over year. Broadcom’s revenue stream is diverse and does not rely on a single source. It includes enterprise, networking, storage, data center/hyperscaler, industrial, and consumer space. For 2024 AVGO has increased its annual revenue guidance to over $51 billion, anticipating growth of over 40%. A significant portion of this growth is expected to come from software, which would also help margins.
The company’s Ethernet business is also strong amid partnerships with Arista Networks (ANET), while the company is also collaborating with Dell (DELL), Juniper (JNPR), and Super Micro (SMCI) in the networking business and other segments. Broadcom has also developed ASIC AI chips in partnership with Google and Meta Platforms.
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. The company strategically focuses its research and development resources to address niche opportunities in target markets and leverage its extensive portfolio of U.S. and other patents and other intellectual property to integrate multiple technologies and create system-on-chip component and software solutions that target growth opportunities. Broadcom designs products and software that deliver high performance and provide mission-critical functionality. The company has a history of innovation in the semiconductor industry and offers thousands of products that are used in end products such as enterprise and data center networking, home connectivity, “set-top boxes broadband access”, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom differentiates itself through its high-performance design and integration capabilities and focuses on developing products for target markets where it believes it can earn attractive margins.
We view Broadcom’s semiconductor business as being very well positioned to benefit from secular growth in data center networking, which is being driven by AI and cloud computing. The company continues to invest in research and development, and we see this as a competitive advantage for the company. Broadcom’s infrastructure software business is a recurring revenue business model that provides mission-critical mainframe support software to its customer base. The recent VMware acquisition will enhance this business strategy and accelerate the growth rate of this business unit, as VMware’s product suite includes key tools for AI server upgrades. Our long-term investment thesis is supported by Broadcom’s success in its strategy of maintaining technology and market share leadership in mission-critical markets with high switching costs and deep profit pools.”
