The artificial intelligence revolution is fueling a fierce clash for increasingly scarce resources. That appears to be the case, given that a single query on ChatGPT requires nearly 10 times as much electricity as a traditional search query on Google. You will be mistaken to think that only power grids are being strained amid the AI boom.
Water, land, metals, and minerals are some of the natural resources being strained as the AI race heats up. In addition to natural resources, millions of humans are always on dial engineering, correcting and training models at the heart of AI.
AI mostly lives and works in data centers, which are humming with motherboards, chips, and storage devices. The demand for electricity from these centers is currently higher than the supply in many parts of the world. Likewise, Goldman Sachs reports that data centers in the US are likely to use 8% of all electricity by 2030, which is almost three times the percentage in 2022 when the AI craze first started.
“The data centers have to partner with utilities, the system operators, the communities, to really establish that these things are assets to the grid and not liabilities to the grid. Nobody’s going to keep approving,” said Ali Fenn, president of Lancium, a company that secures land and power for data centers in Texas.
Similarly, it’s no longer a secret that resource-intensive AI will create winners and losers. Tech giants willing to spend billions of dollars appear to be having an edge. That might explain why the US tech giants are on course to spend $320 billion in 2025, primarily to enhance their AI infrastructure.
Likewise, it is a battle for supremacy between nations as they look to outdo each other on a technology that’s emerged as a matter of national security. The US has already passed legislation prohibiting the sale of advanced chips and equipment to China. Beijing has also hit back with similar restrictions.
“We will safeguard American AI and chip technologies from theft and misuse, work with our allies and partners to strengthen and extend these protections and close pathways to adversaries attaining AI capabilities that threaten all of our people,” said US Vice President JD Vance
The fact that AI is causing conflicts over increasingly limited resources, including chips, is no longer a secret. It is encouraging tech companies to look for more effective ways to develop artificial intelligence. They are investing billions of dollars in alternative energy sources like nuclear fusion, which have been stuttering along for years or even decades without significant investment or technological advancements. Even though the world is on track to surpass important emissions targets in the fight against climate change, the demands of AI are increasing the pressure to continue burning fossil fuels to power the grid.
There is danger even though the AI rollout offers investors, companies, and societies many opportunities. Numerous people have brought up the possibility of such systems being biased and harmful. Meanwhile, Wall Street is growing weary of waiting for the technology to produce significant financial gains. Even emphasizing efficiency could become a liability for those who make excessive infrastructure investments.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds in Q4 2024.
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. Agora Inc (NASDAQ:API)
Number of Hedge Fund Holders: 11
Agora Inc (NASDAQ:API) is a software application company that provides real-time video, voice and messaging engagement services. It operates a real-time engagement platform-as-a-service (RTE-PaaS) to provide the software and infrastructure required to enable real-time engagements. The company delivered solid fourth quarter and full-year 2024 results on February 26, as it bounced back to profitability.
While revenue in the fourth quarter was down 4.4% to $34.5 million, Agora Inc (NASDAQ:API) achieved a net income of $0.2 million, up from a net loss of $2.6 million for the same quarter the previous year. The company also reiterated that generative AI represents a transformative opportunity to enable real-time, voice-based interactions between humans and AI models. Likewise, it confirmed the launch of Conversational AI Engine, a solution allowing interactive voice experiences with any large language model.
“Our solution is designed to deliver natural conversation dynamics, including intelligent pause and interruption handling, advanced voice processing features such as selective attention and noise suppression, as well as ultra-low latency. We believe this innovation will accelerate the adoption of conversational AI across diverse industries and serve as a key driver of our future growth,” said Tony Zhao, Founder, Chairman, and CEO of Agora.
9. SES AI Corporation (NYSE:SES)
Number of Hedge Fund Holders: 14
SES AI Corporation (NYSE:SES) is an auto parts company that develops and produces high-performance lithium-metal rechargeable batteries for electric vehicles and other applications. The company leverages AI to accelerate the development and manufacture of batteries in addition to detecting manufacturing defects. It delivered solid fourth quarter and full year 2024 results on February 25, which marked a critical inflection point.
SES AI Corporation (NYSE:SES) delivered its first revenue-generating quarter with $2 million and projected revenue of between $15 million and $25 million in 2025. Additionally, SES AI Corporation achieved a significant milestone in the discovery of an AI-enhanced molecule that enabled the unveiling of a new 2170 cylindrical cell. The cell is for humanoid robotics applications and new and existing Li-Metal and Li-ion applications in EVs and drones.
“Commercialization of AI for Safety has also opened a market for Battery Energy Storage Systems that we believe is 10 times larger than automotive. The contracts and MOU we signed in all of these markets provide the basis for our 2025 projection of revenue in the range of $15 million to $25 million,” stated Dr. Qichao Hu, Founder and CEO.
8. DigitalOcean Holdings, Inc. (NYSE:DOCN)
Number of Hedge Fund Holders: 18
DigitalOcean Holdings, Inc. (NYSE:DOCN) is a cloud computing company that provides infrastructure and platform tools to developers and businesses. It also provides cloud infrastructure and services specifically designed to simplify AI development for developers. On February 25, the company confirmed that continued traction on AI and focus on higher spend customers drove fourth quarter and fiscal year 2024 revenue growth for its top 500+ customers.
Consequently, DigitalOcean Holdings, Inc. (NYSE:DOCN) logged a 13% year-over-year revenue increase to $205 million as net income attributable to shareholders increased 15% to $18 million. The solid financial results came on the company releasing 49 new products and features in the year. It also unveiled a GenAI platform that makes creating, deploying, and integrating agents for real applications easy. During the year, the company also announced the public preview of Cloudways Copilot, which is a suite of AI solutions.
7. Infosys Limited (NYSE:INFY)
Number of Hedge Fund Holders: 27
Infosys Limited (NYSE:INFY) is an information technology services company that provides clients with expertise for navigating digital transformation through cloud and AI technologies. It offers digital marketing, data analytics, generative AI, and blockchain solutions. On February 25, the company moved to strengthen its prospects in the rapidly evolving AI governance landscape by unveiling an open-source Responsible AI Toolkit.
Built on top of the AI3S framework (Scan, Shield, and Steer), the Responsible AI Toolkit seeks to enhance ethical AI adoption. It also comes with technical guardrails that can detect and mitigate various AI-related risks, including privacy breaches and deepfakes. The toolkit is designed to be customizable and compatible with various models and agentic AI streams. The AI tool should position Infosys as a leader in the responsible AI space and drive higher-margin consulting engagements.
6. Pegasystems Inc. (NASDAQ:PEGA)
Number of Hedge Fund Holders: 30
Pegasystems Inc. (NASDAQ:PEGA) is a software company that develops and sells applications for business processes, including marketing, sales service, and operations. It also offers workflow automation and AI-powered decision-making platforms that help businesses automate various processes.
On February 25, Pegasystems Inc. (NASDAQ:PEGA) unveiled Pega Customer Engagement Blueprint, a generative AI tool for marketing, customer experience, and AI practitioners. Powered by Pega GenAI Blueprint™, it offers scalable and advanced AI capabilities to design precise and efficient customer engagement programs, helping users enhance AI-powered engagement across their organizations. The AI-powered tool should strengthen the company’s position against established enterprise players specializing in mapping customers’ journeys. Additionally, it should help Pegasystems Inc. (NASDAQ:PEGA) strengthen its business ties by offering a tool that improves customer retention.
“This tool will empower marketing and AI practitioners to design and execute customer engagement strategies with unparalleled precision and scalability. Pega Customer Engagement Blueprint enhances organizations’ ability to deliver personalized experiences at scale and helps ensure our clients can stay ahead in an increasingly competitive market. We anticipate this having a transformative impact on our customers’ marketing programs,” said Ryan Jessop, SVP and CXForward business unit head.
5. Kyndryl Holdings, Inc. (NYSE:KD)
Number of Hedge Fund Holders: 41
Kyndryl Holdings, Inc. (NYSE:KD) is an IT infrastructure services company that designs, builds, manages, and modernizes information systems. It also provides enterprise-level Artificial Intelligence (AI) services, including consulting, implementing, and managing AI solutions. On February 26, the company confirmed plans to establish a tech hub in Liverpool focused on creating 1,000 AI-related and software engineering jobs.
While supporting the UK’s digital transformation, the hub will also help businesses implement AI and other emerging technologies. The company has also expanded its strategic partnership with The Very Group to enhance the retailer’s digital capabilities. Kyndryl Consult’s advisory services will benefit businesses as they embrace and apply AI, software, platform engineering, and other cutting-edge technologies. The partnership should strengthen the company’s prospects in the AI services market.
4. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 74
Verizon Communications Inc. (NYSE:VZ) is a communication services company that provides communications, technology, and entertainment services to consumers, businesses, and government agencies. The company is increasingly integrating AI into its operations to simplify employee’s tasks and help customers. It has also teamed up with Google Cloud to develop advanced AI solutions to enhance network maintenance and anomaly detection.
On February 25, Verizon Communications Inc. (NYSE:VZ) confirmed a strategic partnership with Samsung and Qualcomm. The pact paves the way for the company to implement a multi-vendor RAN Intelligent Controller (RIC) in its commercial network. The integration marks an important milestone in Open Radio Access Network technology and AI integration. Additionally, the integration of AI-powered Energy Saving Manager with Qualcomm’s RAN Automation should strengthen Verizon’s prospects in the software-defined networks.
3. Snowflake Inc (NYSE:SNOW)
Number of Hedge Fund Holders: 85
Snowflake Inc (NYSE:SNOW) is a software application company that provides a cloud-based data platform. It offers Data Cloud, which enables customers to consolidate data. The company also provides AI solutions that allow teams to run analytical workflows on unstructured data. On February 25, Rosenblatt reiterated a Buy rating on the stock and increased the price target to $205 from $186.
According to Rosenblatt, Snowflake Inc (NYSE:SNOW) is well-positioned to benefit from heightened cloud migrations amid the artificial intelligence boom. Enterprise AI initiatives and the launch of new products are other key factors expected to bolster the company’s product revenue growth. For the fourth quarter, Rosenblatt expects the company to either meet or slightly exceed its estimated organic growth rate of roughly 23% year over year.
2. Workday, Inc. (NASDAQ:WDAY)
Number of Hedge Fund Holders: 89
Workday, Inc. (NASDAQ:WDAY) is a cloud-based software company that provides applications for human resources and finance departments. The company integrates AI into its solutions to enhance skills matching, talent acquisition, intelligent process automation, and advanced data analytics. On February 25, the company delivered solid financial results for fiscal 2025 and guidance that underlined the impact of its AI-powered solutions.
Revenue in the fourth quarter was up 15% year-over-year to $2.21 billion as subscription revenues increased 15.9%. Full-year revenue was up 16.4% to $8.44 billion as subscription revenue increased 16.9%. The solid revenue growth numbers were impacted by solid performance across key growth areas, including growing demand for Workday’s AI SKUs.
“Workday’s unified platform gives customers the ultimate advantage—helping them unlock value faster, reduce total cost of ownership, and harness the power of AI across our best-in-class HR and finance solutions,” said Carl Eschenbach, CEO of Workday.
1. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 117
Adobe Inc. (NASDAQ:ADBE) is a software company that creates graphic design, photo editing, and video editing solutions. It also utilizes AI technology across its creative and document management tools, focusing on features like automatic content generation and image manipulation. On February 25, 2025, Adobe (NASDAQ:ADBE) announced the launch of Photoshop on mobile, with availability on iPhone today and Android later this year, expanding the web experience.
With its user-friendly mobile interface, the new Photoshop mobile app was created from the ground up to introduce a new generation of image features. With Firefly-powered generative AI tools, the mobile app will increase access to commercially safe AI while providing mobile and web creators with even more sophisticated image editing and design capabilities.
While we acknowledge the potential of Adobe Inc. (NASDAQ:ADBE) as an investment, our conviction lies in the belief that 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 ADBE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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