In this article, we will take a detailed look at the Top 10 Trending Stocks as AI Hype Fades.
The US stock market took a major hit recently due to tariff-related uncertainties and a broader concern about AI stock valuations. Jeff Sonnenfeld, Yale School of Management senior associate dean for leadership studies, recently talked about the latest data showing a decline in CEO sentiment amid President Donald Trump’s tariff policies.
“We’re seeing with the CEO community, it’s not just the report you had this morning on the plunge in retail sentiment, the plunge in consumer sentiment, and CEO confidence indices by other indices such as Chief Executive Magazine. But we had 100 CEOs across sectors, 60% Republican, about 30% Democrat, 10% independent, and they were overwhelmingly discouraged. There’s a lot of goodwill that had been accumulated after the election. Even though most large CEOs didn’t support President Trump, they did rally and were encouraged to go down to Mar-a-Lago to talk about company-specific issues. The same thing happened in 2017. That goodwill dissipates quickly, and it’s happening right now. 85% think these tariff moves are a disaster, even though they’re in favor of tariffs. They want selective tariffs.”
With tariff deadlines fast approaching, it would be interesting to see how the market reacts to potential changes in President Trump’s policies and stance.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In
For this article, we picked 10 stocks Wall Street analysts were discussing lately. 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. Conagra Brands Inc (NYSE:CAG)
Number of Hedge Funds Investors: 26
Dale Smothers from RDS Wealth named Conagra Brands Inc (NYSE:CAG) among the top defensive stocks to buy to offset the ongoing market volatility.
“We like this barbell approach because the overall market is still going to see some turbulence with things that are going on with the administration currently. I think, for the short term, you need to hold names that would be defensive—things like ConAgra Foods ..Two weeks ago, we were calling these names out on this program, and since then, it’s as if we’ve had a crystal ball. I think that we should continue to add to those positions because they pay strong dividends, they’ve got phenomenal track records in volatile times just like this, and again, they will see growth until it becomes out of favor. That’s where we have this barbell approach for names that are suffering major hits in the MAG 7 and again leading the stock market, the overall S&P 500, downward.”
9. Campbell’s Co (NASDAQ:CPB)
Number of Hedge Funds Investors: 33
Dale Smothers from RDS Wealth said in a latest program on Schwab Network that Campbell’s Co (NASDAQ:CPB) is one of the suitable defensive stocks to buy and hold during the current market volatility.
“We like this barbell approach because the overall market is still going to see some turbulence with things that are going on with the administration currently. I think, for the short term, you need to hold names that would be defensive—things like Campbell Soup… Two weeks ago, we were calling these names out on this program, and since then, it’s as if we’ve had a crystal ball. I think that we should continue to add to those positions because they pay strong dividends, they’ve got phenomenal track records in volatile times just like this, and again, they will see growth until it becomes out of favor. That’s where we have this barbell approach for names that are suffering major hits in the MAG 7 and again leading the stock market, the overall S&P 500, downward.”
8. Protagonist Therapeutics Inc (NASDAQ:PTGX)
Number of Hedge Funds Investors: 38
Senior markets correspondent George Tsilis in a latest program on Schwab Network talked about several growth catalysts of biopharma company Protagonist Therapeutics Inc (NASDAQ:PTGX).
“This is an interesting play on some of the aspects of inflammatory diseases and also hematology. So there’s actually quite a few catalysts for this biotech company. But there was a main catalyst today that they reported—some very positive two phase 2B data associated with an oral pill that they are actually developing in conjunction with Johnson and Johnson for ulcerative colitis, which is actually becoming sort of a chronic illness for many folks. There’s a lot of other treatments that are a little bit more evasive, but an oral application is something I think the market is really looking for. And so they generated some very positive results that led to a huge move to the upside in the stock. But even if you go back not too long ago, the company actually received some positive data in conjunction with Takata Pharmaceuticals for a hematology drug that deals with blood clotting, which is a byproduct of a certain type of blood cancer. They’re actually in phase three trial in that regard. The company’s becoming—if you look at its income statement, particularly in the last year—they’re generating more collaborative licensing revenues.”
7. PepsiCo Inc (NASDAQ:PEP)
Number of Hedge Funds Investors: 58
Dale Smothers from RDS Wealth named PepsiCo Inc (NASDAQ:PEP) among the top defensive stocks to buy to offset the ongoing market volatility.
“We like this barbell approach because the overall market is still going to see some turbulence with things that are going on with the administration currently. I think, for the short term, you need to hold names that would be defensive— things like Pepsico. Two weeks ago, we were calling these names out on this program, and since then, it’s as if we’ve had a crystal ball. I think that we should continue to add to those positions because they pay strong dividends, they’ve got phenomenal track records in volatile times just like this, and again, they will see growth until it becomes out of favor. That’s where we have this barbell approach for names that are suffering major hits in the MAG 7 and again leading the stock market, the overall S&P 500, downward.”
6. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Funds Investors: 99
Gene Munster, Deepwater Asset Management managing partner, said in a latest program on CNBC that Tesla, Inc. (NASDAQ:TSLA) fundamentals are “deteriorating” and he would be a seller of the stock in the very short-term investment horizon. However, the analyst believes the stock is set for gains in 2026 amid electrification and robotics.
“I’m a believer in where this company is going. I want to start there but just focus on the fundamentals because investing in Tesla over the last seven years has had two phases to it. One is the momentum that is either all investors’ focus, or second, fundamentals. And to answer your question, the investors are focused on fundamentals right now, and the fundamentals are deteriorating. To put it in perspective, I think that this year is going to be down from last year, both in terms of deliveries and earnings. The street back on January 31st was looking for 308 in earnings for calendar 25; that’s drifted down to 285. I think the real number is 220. At 220, it’s still 100 times earnings, and so that’s the fundamental. I think that’s the vortex that the stock is going to focus on until they report their deliveries. I think that is going to be a disappointing number relative to expectations.”
Wall Street is finally realizing that President Trump cannot solve Tesla’s core problems. 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.
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.”
5. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Funds Investors: 136
Mark Mahaney from Evercore ISI recently made some bullish comments about Uber during a program on CNBC:
“We didn’t have any at the beginning of this year, except for Uber. Uber was our top pick. I thought at 60 was the thing—it was way dislocated. Look, we had a two-and-a-half-year rally—super rally in the S&P 500, more so in NASDAQ, even more so in the internet large-cap names. That left very few compelling valuation startups at the end of the year. But, you know, you continue with a correction like this, you’re going to find really interesting aggressive price points. So I’m sticking with my two most interesting price points right here—Uber and Amazon.”
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Uber Technologies, Inc. (NYSE:UBER) in its Q4 2024 investor letter:
“A rapidly evolving competitive environment for the nascent autonomous vehicle market caused investor angst for Uber Technologies, Inc. (NYSE:UBER) and the stock underperformed the market. On one hand, legacy auto provider General Motors announced plans to exit its robotaxi effort, Cruise, due to capital constraints and difficulty scaling the business. On the other end of the market, Alphabet, through its self-driving unit Waymo, announced plans to expand to different cities in the U.S. Waymo also announced entrance to the Japanese market through a partnership with local ride-hailing players, despite already having an established partnership with Uber. Tesla remains committed to building out its own autonomous fleet as well. The competitive environment may be shifting, but Uber still remains in the pole position due to its scale, at over 100 million customers, along with dominant market share in many markets and significant cash flow generation that can be used to reinvest in growth opportunities.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Funds Investors: 158
Counterpoint Research’s latest data shows that global smartwatch shipments fell for the first time ever during 2024, seeing a 7% drop. Apple Inc. (NASDAQ:AAPL), which introduced the Apple Watch in 2015 and helped drive the demand for wearables, saw a 19% year-over-year decline in shipments last year.
“Apple Watch saw a drop in momentum during its 10th anniversary, despite the release of the S10 series,” said Counterpoint senior research analyst Anshika Jain. “The main factor behind the decline was North America, where the absence of the Ultra 3 and minimal updates to the S10 series caused consumers to delay their purchases. Additionally, patent disputes limited shipments in the first half of the year. The slowdown of the existing Apple Watch SE lineup and the lack of new SE models also contributed to the drop.”
Apple investors are waiting for some positive news, but things aren’t looking great for the stock amid falling demand for iPhone. 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.”
3. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Funds Investors: 158
Jim Lebenthal, Chief Equity Strategist at Cerity Partners, said in a latest program on CNBC that he’s buying Microsoft Corporation (NASDAQ:MSFT) and said the stock is currently trading for a “really good” price.
“I do think—and I think we’re all saying this—that this is a buying opportunity. It doesn’t matter whether it’s right or wrong—excuse me, institutional selling—doesn’t matter whether it’s right or wrong to a fundamental person like we all are. It’s a great opportunity. Now, I will look at the chart of Microsoft and say it looks pretty terrible, but it looked pretty terrible for a long period of time. Folks, I’m not saying that this is the bottom. What I’m saying is Microsoft is a great company—NVIDIA is a great company—you’re getting these stocks now at really good prices. If you just look back from a year from now, you’re going to probably feel these were very good buys.”
Mairs & Power Growth Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q4 2024 investor letter:
“Unlike the dot-com companies that operated at the turn-of-the-century, many of today’s technology companies are established businesses with significant cash flows. We have argued, and continue to argue, that many of these investments are perfectly aligned with our investments process in that they embody durable competitive advantages, above-average growth prospects, and excellent management teams.
A perfect example is Microsoft Corporation (NASDAQ:MSFT), which has grown to become the largest holding in the Growth Fund. Microsoft has a near monopoly on the office software productivity market with its Microsoft Office Suite. The company’s Azure platform is a leader in cloud computing and has been steadily gaining share. Thanks to its Office and Azure products, the company is deeply embedded within many enterprise IT ecosystems. Therefore, it should be well-positioned to expand its presence within its customer base, as it rolls out premium-price AI solutions. The company is not resting on its laurels and plans on spending an astounding $80 billion in 2025 to build out AI data centers.”
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Funds Investors: 193
Jim Lebenthal, Chief Equity Strategist at Cerity Partners, said in a latest program on CNBC that he bought NVIDIA Corporation (NASDAQ:NVDA) shares recently.
“What I’m saying is Microsoft is a great company—NVIDIA is a great company—you’re getting these stocks now at really good prices. If you just look back from a year from now, you’re going to probably feel these were very good buys. I bought Nvidia two weeks ago—right now it looks stupid—I get it. I’m willing to hang on for a month and see how it looks after that.”
NVDA 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, offer 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.
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) continued to outperform the market during the fourth quarter. The technology giant and top position in the fund delivered on sky-high expectations during the quarter and reported quarterly expectations that exceeded expectations. The red-hot company provided forward-looking expectations which were regarded as slightly lackluster as compared to prior quarters that smashed expectations. While the stock did churn a bit in the quarter, the AI giant remains top of mind for investors, especially as the company is on pace to satisfy the ‘staggering’ demand for its new product, Blackwell, which is poised to enter the market over the next year. The company’s position of owning all the major pieces of the evolving AI data center enables it to strengthen its competitive position and to define the technology roadmap for generations to come.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Funds Investors: 286
Mark Mahaney from Evercore ISI said in a latest program on CNBC that Amazon.com, Inc. (NASDAQ:AMZN) is one of his top picks as he believes the stock is “dislocated” after the latest selloff.
“If Amazon trades below 25, then that’s the market telling you that they think there are material negative revisions coming up. If you have belief that that’s going to happen, then you stay away from the stocks. Right now, I don’t believe that we’re going to have negative revisions, so I’d be waiting in here, buying some of these names. But I’d be very selective about it, starting off with the ones that are most dislocated in my book—that’s Amazon, then Uber.”
Parnassus Core Equity Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) posted better-than-expected quarterly earnings, lifting investor confidence in the e-commerce giant’s ability to generate margin while continuing to invest into its large AI and retail end markets.
Amazon’s shares experienced volatility throughout the year as IT spending and the company’s margin structure came under scrutiny. Despite this, the stock outperformed as sentiment and results improved across both the overall environment for Amazon Web Services and the company’s ability to show margin.”
While we acknowledge the potential of Amazon.com, Inc. (NASDAQ:AMZN), 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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