There is a growing concern in Silicon Valley that the progress around artificial intelligence is slowly “losing steam”. CNBC’s Deirdre Bosa explores whether AI progress is slowing, and what it means for the industry. Early signs of struggle are bubbling up in major tech names. As highlighted by Bosa, the first sign of things slowing down has been a lack of progression between models. OpenAI has led the pack in AI advancements, with each of the new models of ChatGPT exponentially better than the last.
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Unfortunately, the same can’t be said about today. OpenAI’s highly anticipated model Orion was expected to be a ground-breaking system bringing us closer to AGI. However, the initial vision is being scaled back.
“While Orion’s performance ended up exceeding that of prior models, the increase in quality was far smaller compared with the jump between GPT-3 and GPT-4, the last two flagship models the company released, according to some OpenAI employees who have used or tested Orion”.
-The Information
The same roadblocks have been happening to other AI models, such as that by Anthropic. Just like OpenAI, Anthropic is also witnessing a timetable slip for the release of its long-awaited Claude model called 3.5 Opus.
“The AGI bubble is bursting a little bit. It’s become clear that ‘different training approaches’ may be needed to make AI models work really well on a variety of tasks.”
-Margaret Mitchell, chief ethics scientist at AI startup Hugging Face, to Bloomberg.
Even some of the big tech giants aren’t enthusiastic about the progress AI has been making. Speaking during the New York Times annual DealBook summit at Jazz at Lincoln Center, Sundar Pichai stated how generative AI won’t be changing lives in 2025— at least, not more than it already has.
“I think the progress is going to get harder. When I look at [2025], the low-hanging fruit is gone. The hill is steeper … You’re definitely going to need deeper breakthroughs as we get to the next stage”.
– Sundar Pichai
However, if progress is plateauing, it has to do with scaling laws. Anthropic CEO Dario Amodei states that the scaling laws are a misnomer. He emphasizes that while these patterns have historically guided AI development—suggesting that increasing data and computational power leads to improved AI capabilities—they are not guaranteed to continue indefinitely.
As such, AI companies have been turning to synthetic AI, i.e. data generated artificially. The Information reports that Orion was produced based on synthetic data. However, the problem has been that low-quality data, in turn, leads to low-quality performance. As such, with leading tech companies poised to unveil new models over the next eighteen months, their pace of progress—or lack thereof—has the potential to dramatically redefine the dynamics of the competition.
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.
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).
12. Soluna Holdings, Inc. (NASDAQ:SLNH)
Number of Hedge Fund Holders: 3
Soluna Holdings, Inc. (NASDAQ:SLNH) is a developer of green data centers for intensive computing applications including Bitcoin mining and AI. On December 16, the company announced that its subsidiary, Soluna Cloud, has entered into a strategic partnership with Gynger, the leading embedded payments platform for technology. The partnership will allow renewable-powered high-performance computing to become more accessible. Customers would be able to adopt Soluna’s cutting-edge AI Cloud without paying huge upfront costs. Instead, these costs would be spread out using Gynger’s payment options.
“Our partnership with Gynger reflects our commitment to not only providing high-performance and environmentally sustainable computing solutions but also to ensuring our clients have flexible financial options to support their growth. Together, we’re removing financial barriers, allowing customers to access the technology they need to stay competitive”.
-John Belizaire, CEO of Soluna.
11. Cardio Diagnostics Holdings, Inc. (NASDAQ:CDIO)
Number of Hedge Fund Holders: 3
Cardio Diagnostics Holdings, Inc. (NASDAQ:CDIO) is an AI-driven precision cardiovascular medicine company that makes heart disease prevention more accessible, personalized, and precise. On December 16, the company announced that two of their tests had received final pricing determinations from the Centers for Medicare & Medicaid Services (CMS). Effective January 1, 2025, Medicare contractors will be able to determine pricing for PrecisionCHD and Epi+Gen CHD tests based on actual cost data from Cardio Diagnostics. The approval allows these tests to be accessible to the Medicare population.
“Receiving this final determination is a crucial step for our innovative solutions to help improve the risk assessment, diagnosis, management and monitoring of coronary heart disease (CHD) for Medicare patients. This milestone brings us closer to addressing the significant unmet needs in cardiovascular care for the Medicare population, enabling clinicians to better personalize treatment strategies and ultimately improve patient outcomes”.
-Meesha Dogan, Ph.D., CEO and Co-Founder of Cardio Diagnostics.
10. Tempus AI, Inc (NASDAQ:TEM)
Number of Hedge Fund Holders: 7
Tempus AI, Inc (NASDAQ:TEM) is a healthcare technology company that provides AI-enabled precision medicine solutions. On December 16, the company announced that it has expanded its relationship with Personalis, Inc. (NASDAQ:PSNL), a provider of advanced genomic sequencing and analytics solutions. The companies had initially collaborated in November 2023 to bring ultra-sensitive MRD testing to market, a testing procedure used to check if a cancer treatment is working.
They launched their efforts at the 2024 American Society of Clinical Oncology (ASCO) Annual Meeting. Tempus serves as the exclusive commercial diagnostic partner for Personalis’ ultra-sensitive tumor-informed MRD product, NeXT Personal® Dx. This product focuses on breast and lung cancers as well as immunotherapy for solid tumors. Strong market interest has led the companies to expand their relationship, where Tempus will offer Personalis’ MRD product to pharmaceutical and biotech companies.
While we already offer NeXT Personal through our own biopharma channel, we are pleased to leverage Tempus’ integrated platform as well for these biopharma customers who desire to combine NeXT Personal with other Tempus products. We believe the expansion of the relationship with Tempus will accelerate market penetration of our leading ultra-sensitive MRD platform and allow us to better capitalize on the opportunity”.
-Chris Hall, CEO of Personalis.
9. SoundHound AI (NASDAQ:SOUN)
Number of Hedge Fund Holders: 11
SoundHound AI (NASDAQ:SOUN) is a voice artificial intelligence company offering voice AI solutions to businesses. On December 16, Dan Ives increased his price target on SoundHound to $22 from $10 and maintained an “Outperform” rating. The Wedbush analyst is confident in the artificial intelligence voice technology stock, predicting that it will see a higher rally in 2025. The analyst said that the company is “in the early stages of capitalizing on its growth initiatives with enterprise AI demand just starting”. He also noted that Soundhound is an underappreciated pure-play AI company that is “taking significant strides in taking share across the landscape”.
8. Fastly, Inc. (NYSE:FSLY)
Number of Hedge Fund Holders: 14
Fastly, Inc. (NYSE:FSLY) is an edge cloud platform provider that offers cloud computing, image optimization, security, edge computer technology, and streaming solutions. On December 16, the company announced the general availability of Fastly AI Accelerator, a semantic caching solution that allows developers to optimize their LLM generative AI applications. Delivering an average of 9x faster response times, the AI accelerator was initially released in beta with support for OpenAI’s ChatGPT and is now available with Microsoft Azure AI Foundry as well. Developers would often need only a single line of code to update their application to a new API endpoint. This reduces the need to repeatedly call the AI provider as Fastly’s Edge Cloud Platform caches and responds to repeated queries. As a result, developers enjoy more efficient AI performance, lower costs, and an overall better experience.
“AI is helping developers create so many new experiences, but too often at the expense of performance for end-users. Too often, today’s AI platforms make users wait. With Fastly AI Accelerator we’re already averaging 9x faster response times and we’re just getting started.1 We want everyone to join us in the quest to make AI faster and more efficient”.
-Kip Compton, Chief Product Officer at Fastly.
7. Cohu, Inc. (NASDAQ:COHU)
Number of Hedge Fund Holders: 16
Cohu, Inc. (NASDAQ:COHU) is a global technology leader that provides semiconductor test equipment and services to the semiconductor industry. On December 16, the company announced that it has entered into a definitive agreement to acquire Tignis, Inc., a provider of AI-powered process control solutions and analytics-based monitoring software. Cohu’s strategic acquisition aims to target the estimated $2.6 billion semiconductor process control market through Tignis’ PAICe Monitor and PAICe Maker solutions. Leveraging AI, machine learning, and data science, the PAICe Monitor and PAICe Maker solutions provide advanced predictive and prescriptive automation solutions for semiconductor manufacturing. Cohu also expects the acquisition to deepen its expertise in data science and add advanced analytics to its DI-Core software.
“We look forward to the very talented Tignis team joining the Cohu family. This acquisition represents a significant opportunity to accelerate our growth in semiconductor manufacturing, broaden our product portfolio, and deepen our customer presence. Together, our combined expertise and complementary capabilities will drive artificial intelligence process predictability, empowering semiconductor manufacturers to achieve higher yield, improved quality, and greater productivity.”
-Cohu President and CEO Luis Müller.
6. Ciena Corporation (NYSE:CIEN)
Number of Hedge Fund Holders: 40
Ciena Corporation (NYSE:CIEN) is a leading provider of networking systems and software specializing in optical and routing systems, services, and automation software. On December 16, Citi analyst Atif Malik singled out two AI infrastructure framework stocks, one of which is Ciena Corporation. Deeming it a “top pick”, the firm is bullish on the stock and anticipates that the company will make the most out of the AI trend and the rebounding market heading into 2025. He stated that even though the overall market has been weak in 2024 due to economic concerns, inventory issues, and slowdowns in China, growth will rebound in 2025. The firm also anticipates the company to benefit from AI-related Data Center Interconnect (DCI) solutions. Data Center Interconnect (DCI) technology enables connecting two or more data centers over short, medium, or long distances by means of high-speed packet-optical connectivity.
“We believe Ciena will benefit from a growing AI-related DCI opportunity with ZR/ZR+ optical products that are not included in optical transport market data. Our recently raised FY26 estimates reflect the stronger adoption of pluggables in and around the data center, an opportunity not captured in the company’s 6-8% growth target.”
5. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Fund Holders: 64
Palo Alto Networks, Inc. (NASDAQ:PANW) is a leader in AI-powered cybersecurity. On December 16, Wolfe Research analyst Joshua Tilton raised the firm’s price target on Palo Alto Networks to $440 from $400 and kept an “Outperform” rating on the shares. The firm has expressed its strongest enthusiasm for the software sector in years. It cited stronger business fundamentals, a more favorable regulatory environment, and improving capital markets that have created an exciting moment for the industry. This is an opportune time to invest in software stocks. Other analysts seem to agree. The same day, Morgan Stanley analyst Hamza Fodderwala maintained a “Buy” rating and set a price target of $223.00.
4. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 99
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives. On December 16, the company was revisited by Wedbush Securities analyst Daniel Ives who maintained a “Buy” rating on the stock and a $515.00 price target. Ives has rated Tesla as a Buy owing to the company’s potential growth and strategic positioning in the autonomous and AI sectors. The regulatory environment under the Trump administration is anticipated to be positive for the company, helping to accelerate the company’s initiatives in autonomous driving and AI.
According to Ives, the electric vehicle maker has the potential to pass the $1 trillion market cap threshold under Trump. The strong demand in the Chinese market will further help it reach $2 trillion by the end of 2025, he noted. Ives also highlighted the financial potential of increased Full Self-Driving (FSD) adoption and new products like the Cybercab, which could transform Tesla’s margins and business model. According to him, Tesla isn’t just a car company, but a disruptive tech leader. Furthermore, it is an attractive investment opportunity given that its current valuation doesn’t fully capture the potential of artificial intelligence.
3. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 107
Micron Technology, Inc. (NASDAQ:MU) is an innovative memory and storage solutions provider. On December 16, Citi analyst Christopher Danely reiterated a “Buy” rating on Micron with a $150 price target. The rating, which comes ahead of Micron’s fiscal Q1 results on December 18, is driven by anticipations that the firm will report results and guidance slightly below the consensus. The legacy Dynamic Random Access Memory (DRAM) weakness is largely responsible for the anticipated low guidance. The analyst further told investors in a research note that the excess DRAM inventory should go away this spring, with data center demand providing support. All in all, the analyst is bullish on DRAM recovery, citing favorable supply/demand dynamics for 2025.
2. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 116
Salesforce Inc (NYSE:CRM) is a cloud-based CRM company that has gained traction after the launch of its AI-powered platform called Agentforce. With the successful launch of Agentforce, the company is now planning to launch Agentforce 2.0. This is an improved version of its flagship AI product for enterprises, offering Slack integration, enhanced CRM and analytics capabilities, and greater accuracy with an upgraded Atlas Reasoning Engine. Agentforce 2.0 will help users build smarter and more complex agents. The Agentforce 2.0 event will be live tomorrow on December 18, from 12:00 AM – 1:30 AM GMT+5.
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a technology company that makes personal computers, mobile devices, and software. Its recent innovation is Apple Intelligence, the company’s AI-driven personal system. One of the biggest analyst calls issued on Monday, December 16, was for Apple Inc. JPMorgan reiterated its “Overweight” rating on the stock with a price target of $265.00. The stock surged in the second half of the year, with the integration of AI with the iPhone and other devices driving it upward. Some analysts, however, may not agree considering the little boost to sales. According to the JP Morgan analyst, the boost is anticipated to come through with the expected launch of the iPhone 17 next year. In his view, it would drive iPhone sales from 230 million units in Apple’s fiscal 2025 year to 251 million in fiscal 2026.
While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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