In this article, we will take a detailed look at: Wall Street Analysts Can’t Stop Talking About These 10 AI Stocks.
Henry Ajder, Latent Space Advisory founder, said in a latest program on CNBC that lack of fresh data remains a key challenge for the performance of AI systems after a period of “huge” developments and fast learning.
“I think data is the real problem here. We have a finite amount of data available on the internet and a limited number of sources for live, fresh data. I believe this is becoming an increasingly significant challenge, especially as legal issues surrounding how companies obtain and use data are becoming more prominent,” the analyst said.
Ajder believes there won’t be a complete “halt” to the progress in AI systems but in 2025 we are expected to see a slowdown. Answering a question about the AI’s ability to make up data, called synthetic data” to train itself, the analyst said this domain has shown promise but there are risks of synthetic data potentially corrupting the training models.
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For this article we picked 10 AI stocks currently trending based on latest news. 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Photo by Pascal Bernardon on Unsplash
10. Palantir Technologies Inc (NASDAQ:PLTR)
Number of Hedge Fund Investors: 43
Lee Munson, president and CIO of Portfolio Wealth Advisors, explained in a latest program on Schwab Network why he would consider buying Palantir on a dip:
“I love the military AI stuff; we’re going to need so much more of it. I mean, they’re just a category killer. They also have almost a 400 PE, which has done a little too fast, too soon. I don’t own any Palantir Technologies Inc (NASDAQ:PLTR), and neither do my clients. But let me tell you, if that price came down, I would be a buyer.”
What makes Palantir Technologies Inc (NYSE:PLTR) one of the top AI stocks? Its technologies are actually solving the problems of businesses. Palantir’s data technology Ontology is solving the famous hallucination problem for AI systems, thanks to the company’s years of experience with military and defense systems. Earlier this year at an event with customers, Palantir Technologies Inc (NYSE:PLTR) shared some specifics on how its customers are being able to reduce costs and increase profits due to its artificial intelligence platform (AIP) that was launched about a year ago.
Airbus accelerated A350 production by 33%, BP reduced costs per barrel by 60%, and Jacobs Connect cut power usage by 30%. Panasonic decreased waste by 12%, ESI Group sped up ERP harmonization by 70%, and PG&E reduced transformer ignitions by 65%. Eaton boosted productivity by 25%, while Tyson Foods achieved $200 million in cost savings.
Fidelity Growth Strategies Fund stated the following regarding Palantir Technologies Inc. (NASDAQ:PLTR) in its Q3 2024 investor letter:
“Untimely ownership of Palantir Technologies Inc. (NASDAQ:PLTR) (+47%) also hurt the fund’s relative result. This software and services firm, which operates in both government and commercial segments, saw strong growth during the quarter, largely driven by its “AIP” – or Artificial Intelligence Platform – offering. In early August, the company reported Q2 financial results that mostly met somewhat lofty expectations. We established a sizable holding in Palantir Technologies during the quarter, and at quarter end it was the second-largest position and a slight overweight.”
9. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
Lee Munson, president and CIO of Portfolio Wealth Advisors, explained in a recent program on CNBC why he “hates” Tesla cars and why he recommends selling the stock:
“I hate the product, you know. My analyst, Jesus, and I went out to go see Iron Maiden in San Diego. We had to rent a Tesla Inc (NASDAQ:TSLA) to check it out. Everything about that car, I hate. Every general manager, some of them are clients that run auto dealerships, you can make a lot of money doing auto dealerships, let me tell you, they all say the same thing: People are coming in and saying, “Is it morally okay if I switch back to gas?” Because people don’t want electric cars, they want a Tesla. It’s an old design. It’s up 50% since the election. I’m sorry, Elon Musk is going to make bank hanging out being a bro with Trump on SpaceX. Tesla is a car company, it’s not a tech company. When I say valuations don’t matter, there’s a line in the sand, and Tesla just crossed it. So I’m not in it.”
Looking beyond the recent spike in Tesla shares amid Donald Trump’s victory, Tesla’s fundamentals are challenged. How? Tesla Inc’s (NASDAQ:TSLA) key robotaxi event was short on details. Notably absent was the discussion of a “more affordable” model that Musk had previously mentioned to boost confidence in Tesla’s vehicle sales growth outlook.
What about the $30,000 price tag claim?
Musk has indicated that the Cybercab will have a production cost of approximately $30,000. Operating within the robotaxi fleet is projected to cost around $0.20 per mile. With a production cost of $30,000, the retail price of the Cybercab is likely to exceed this figure. For instance, if the Cybercab is priced at $30,000 per unit, that translates to $15,000 per seat. In contrast, the average price per passenger seat in Tesla Inc (NASDAQ:TSLA)’s most affordable long-range RWD Model 3—factoring in full self-driving (FSD) licensing—is under $10,000 ($29,990 post-incentive vehicle price plus $8,000 for the FSD license, divided by four passenger seats). Regarding operational costs, while the Cybercab is expected to cost $0.20 per mile, charging the Model 3 is estimated at under $0.10 per mile, leaving a significant margin to cover maintenance and downtime.
There is a lot of hype around Tesla Inc (NASDAQ:TSLA) robo taxis but many believe they will not be enough to fix the company’s long-term challenges.
What are these challenges?
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. Even Rivian’s CEO suggested Tesla Inc (NASDAQ:TSLA) could be nearing market saturation for these 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 Q3 2024 investor letter:
“The largest relative detractors during the quarter were Apple, Airbnb, and Tesla (not owned). We’ve spoken at length about our rationale for not owning Tesla, Inc. (NASDAQ:TSLA). In short, the market seems to be pricing in a lot of positive optionality for this company in the near-to-intermediate term (and particularly a fully autonomous fleet of electric vehicles in the medium term). What exists today is an automobile manufacturer limited to the higher-income segment that is increasingly challenged to sell vehicles when interest rates are not zero. We continue to question the company’s long-term growth profile and governance.”
8. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 116
Salesforce Inc (NYSE:CRM) has been upgraded to “Overweight” from “Sector Weight” by KeyBanc. They believe Salesforce’s new AI tool, Agentforce, is a big deal for business software.
KeyBanc analysts are enthusiastic about Agentforce’s potential. They stated, “The energy around Agentforce is pervading our conversations with Salesforce customers, partners, and investors. We are fans of this agentic wave in artificial intelligence compared to its copilot predecessor and believe there is real potential for Agentforce to pull activity across Salesforce Inc (NYSE:CRM) Clouds into its demand orbit.”
KeyBanc has set a $440 price target for Salesforce stock.
Polen Focus Growth Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q3 2024 investor letter:
“In the third quarter, we purchased new positions in Apple and Oracle and eliminated our small positions in Nike and Salesforce, Inc. (NYSE:CRM). We exited our position in Salesforce to fund better opportunities in Shopify and MSCI. Salesforce is seeing slower revenue growth than we would have expected, given the weakening macroeconomic environment. Furthermore, since its core end markets in customer relationship management (“CRM”) and Service are fairly mature, a lower growth level versus our expectations could persist for some time.”
7. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 128
Stacy Rasgon, Bernstein senior analyst, explained in a latest program on CNBC exactly why Broadcom Inc (NASDAQ:AVGO) shares shot up after its latest quarterly results:
“It looks like the performance was driven by AI. They reported $12.2 billion for the year, which translates to roughly $37 billion for the quarter. The guidance was around $35 billion, so the AI performance for the quarter exceeded expectations. Even though the revenue outlook for fiscal Q1 is roughly in line with expectations, investors were worried about things like wireless seasonality into Q1 and some potential lumpiness in AI. We’ll get more details on the segments during the call, but as of right now, the inline revenue seems to be in line with where investors expected it to be going into the quarter, which is likely why the stock is up.”
Broadcom Inc (NASDAQ:AVGO) continues to be a leader in the AI ASCI and networking chips market. Broadcom Inc (NASDAQ:AVGO) has 3nm AI ASIC chip deals with Alphabet and Meta in addition to many other tech giants aiming massive spending for AI hyperscaling.
However, the stock could face the impact of what Nvidia is facing today: too high expectations.
In the latest quarterly results, Broadcom Inc (NASDAQ:AVGO) revenue was largely in line with estimates. The company has narrowly exceeded revenue expectations by less than 5% in most cases. Some analysts suggest Broadcom’s growth rates will moderate to below 20% CAGR starting the first quarter of 2025. In fiscal Q4, it was +50% topline growth. The market won’t be kind to the stock when the revenue growth rate slows. Broadcom has about $58 billion in net debt, which is relatively high.
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q3 2024 investor letter:
“Similar to the earnings results for Nvidia, shares of Broadcom Inc. (NASDAQ:AVGO) initially sold off after the company reported solid earnings that fell light of elevated market expectations, but the stock did recover from its drawdown in the matter of a few weeks. With an enticing combination of custom chip offerings as well as networking assets, Broadcom remains one of the best positioned companies as part of the AI revolution. Broadcom outlined a path to derive a majority of its revenue from the AI end market within a couple of years, and the non-AI part of the business has stabilized after a deep correction. The company’s dominant market position in its end markets, along with durable growth, strong margins and best-in-class capital allocation, presents an opportunity to compound capital over time.”
6. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Dan Niles, Niles Investment Management founder and portfolio manager, said while talking to CNBC earlier this month that Apple Inc (NASDAQ:AAPL) is one of the stocks that should worry investors. He explained his case:
“The company has grown revenues cumulatively, if you include this year’s calendar year, at 5% over the last 3 years. And every product, you know, people go, ‘Oh my God, Vision Pro is going to be terrific,’ and then you figure out, no, nobody’s going to wear ski goggles on their head. Then you look at what’s going on with the iPhone and the features they’ve rolled out, which surprised me because they weren’t particularly good to start with. They’re going to get upgraded in December in the US, but then you have to wait for next year for it to be upgraded in the rest of the world. And you’ve got a company that’s also trading at a 33 P/E for 5% revenue growth over the past three years combined. So that’s the other one where if people finally go, ‘You know what? The problem isn’t this. It’s market share losses to people like Huawei that have resurged in China.’”
Parnassus Growth Equity Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q3 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) shares rose during the quarter, making our underweight position a relative detractor. Investors reacted positively to the new iPhone 16 lineup and its advanced features, including generative artificial intelligence, greater durability and increased processing power.”
5. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Howard Chan from Kurv Investment Management said while talking to Schwab Network in a recent program that Wall Street’s high expectations with NVIDIA Corp (NASDAQ:NVDA) are a concern for him despite the company being a “very strong” player in the AI infrastructure market.
“We think they are a very strong player and maybe a dominant player in the infrastructure space. But, you know, I have to mention that they had a pretty good earnings report this past quarter. However, the market was disappointed, and that’s what we’re worried about because we think the expectations may be too high.”
Chan is right. Simply beating earnings estimates is not enough for NVIDIA Corporation (NASDAQ:NVDA) anymore, and the impact of high expectations will continue to weigh on the stock as growth cools.
Nvidia’s forward P/E ratio for the fiscal year ending January 2026 is around 31. An EPS surprise of 8.5% was not able to help the stock. A similar trend occurred following the second-quarter earnings after a 5.6% EPS surprise. It’s difficult to see Nvidia maintaining a mid-70s gross margin by the end of 2026. Over the last two quarters, Nvidia has already reported a drop in its gross margin from 78% to 74.5%.
Then there’s competition. Amazon (AMZN) recently disclosed its Trainium 3 chip, which is set to be released by the end of 2025. The chip is expected to be twice as fast with 40% more power efficiency than the previous generation, manufactured on TSMC’s (TSM) cutting-edge N3 technology. Reportedly, technology giant Apple (AAPL) will be a consumer of Amazon’s new silicon.
Parnassus Growth Equity Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) shares finished the quarter with a negative return, so our underweight (yet still large) position was a relative contributor. Although the semiconductor company released robust quarterly sales figures and issued encouraging guidance for the current quarter, its stock declined amid investor skepticism that its rapid pace of growth can continue.”