In this article, we will take a detailed look at the Wall Street is Talking About These 10 AI Stocks Now.
Edward Yardeni, president of Yardeni Research, said while talking to CNBC in a latest program that the Fed’s 50-basis-point rate cut would cause a melt-up in the market. He believes that the move would boost productivity and earnings growth, resulting in further increases in earnings multiples.
“I would have preferred to see the market kind of go sideways for a while but the market never listens to me and it just keeps going up,” Yardeni added.
Yardeni’s base case projects the S&P 500 to reach 5,800, which the analyst said could happen very soon. In a ‘melt-up’ scenario, he believes the index could cross 6,000. However, he expects a correction early next year.
“I don’t think it will be a bear market, because I don’t think we are gonna have a recession.”
For this article, we chose 10 trending AI stocks on latest news and analyst ratings. 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).
New York Wall Street sign.
10. Palantir Technologies Inc (NYSE:PLTR)
Number of Hedge Fund Investors: 44
Earlier this month, Wedbush Dan Ives said in a note that several AI stocks were headed for gains on the back of a Fed rate cut.
“In a nutshell we believe the stage is set for tech stocks to move higher into year-end and 2025 in our opinion as the Fed and Powell kick off its rate cutting cycle this week, macro soft landing remains the path, and tech spending on AI remains a generational spending cycle just starting to hit the shores of the tech sector,” said Wedbush analysts, led by Daniel Ives.
Palantir Technologies Inc (NYSE:PLTR) was one of the stocks Ives said would benefit from rate cuts.
“As more tech vendors show the monetization piece of AI this will ultimately drive the next leg of the tech bull market in a very stable overall IT spending environment that is a bullish backdrop for tech stocks in our opinion,” Ives added.
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.
Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its first quarter 2024 investor letter:
“The top contributor to return for the quarter was Palantir Technologies Inc. (NYSE:PLTR). Sentiment improved on Palantir after it reported stronger than expected commercial customer revenue and free cash flow. U.S. commercial growth was especially encouraging, as U.S. commercial revenue was up by a large percentage year over year for the fourth quarter and U.S. commercial customer count grew nearly as much. We expect Palantir to become one of the premier artificial intelligence (AI) software providers, built on its Foundry and AIP platforms.”
9. BlackRock Inc (NYSE:BLK)
Number of Hedge Fund Investors: 47
Investment management and financial services company BlackRock Inc (NYSE:BLK) recently made headlines after the company partnered with Microsoft to launch a $30 billion artificial intelligence investment fund aimed at building data centers and energy projects to meet the growing demand for AI infrastructure. The new fund, called the Global AI Infrastructure Investment Partnership, is one of the largest investment vehicles ever created on Wall Street.
Microsoft and Abu Dhabi-backed investment company MGX will serve as general partners, while Nvidia (NASDAQ) will provide technical expertise. The partnership aims to raise $30B in private equity and mobilize up to $100B in total investment when factoring in debt financing. This initiative follows Microsoft’s $10B commitment earlier in 2024 to renewable electricity projects developed by Brookfield Asset Management.
The deal marks a major push by BlackRock Inc (NYSE:BLK) into AI infrastructure, coinciding with its acquisition of Global Infrastructure Partners, set to close in October.
Baron FinTech Fund stated the following regarding BlackRock, Inc. (NYSE:BLK) in its Q2 2024 investor letter:
“Despite share price performance in the fintech sector lagging broad market indices, fintech sector fundamentals remain strong with mid-teens earnings growth across the Fund. We continue to invest behind secular themes where the intersection of financial services and technology should drive innovation and growth for years to come.
One of these themes is the growth of private markets, which are the fastest growing segment of asset management with alternative assets expected to reach nearly $40 trillion by 2030. BlackRock, Inc. (NYSE:BLK) is acquiring Global Infrastructure Partners, a leading independent infrastructure fund manager with over $100 billion in AUM, to capitalize on the growing need to modernize digital infrastructure, upgrade supply chains and logistics infrastructure, and invest in renewable energy. BlackRock also announced the acquisition of Preqin, a leading private markets data vendor, to provide standardized information, benchmarks, and analytics in an $8 billion data market expected to grow 12% annually through the end of the which allows the proceeds to be invested in highly rated private credit with higher yields but less liquidity than publicly traded fixed income securities with the same credit risk. This illiquidity premium is highly valuable in an industry with narrow spreads, providing a competitive edge to well-managed annuity providers that invest in private credit. In addition, higher interest rates combined with a growing population of retirees are spurring greater demand for guaranteed income products. Fixed annuity sales grew 37% in 2023 and have more than doubled since 2021, providing a greater supply of capital that can be invested in highly rated private credit.”
8. Intel Corp (NASDAQ:INTC)
Number of Hedge Fund Investors: 75
Intel Corp (NASDAQ:INTC) shares have been trending on various news: reports of a takeover approach from Qualcomm, the company partnering with Amazon and turning its foundry business into a subsidiary.
According to Intel’s partnership with Amazon, the chips company will make AI fabric chips on its advanced 18A node.
But all of this does not change the core problems haunting Intel Corp (NASDAQ:INTC). The company faces challenges as it navigates a major restructuring plan, which includes cutting around $10 billion in operating expenses and reducing its workforce by 15,000 this year. Intel is only expected to achieve free cash flow positivity by 2025, and for 2024, it anticipates modestly negative adjusted free cash flow due to restructuring costs and reduced capital spending.
Intel’s plan involves lowering operating expenses to about $17.5 billion while keeping net capital expenditures between $12 billion and $14 billion in 2025. However, with $25 billion in net debt and ongoing restructuring, Intel’s path to recovery and rebound is long.
Intel Corp (NASDAQ:INTC) expects its gross margin in the third quarter to decline to 34.5% from 38.7% reported in the second quarter, which was a significant decline from the company’s expectation of 43.5%.
While Intel Corp (NASDAQ:INTC) has suspended its dividend and announced massive layoffs, its problem of inventory won’t be resolved anytime soon. Intel has 137 days of inventory, worth over $11.2 billion. This is much higher than the industry average of 90 days. Intel Corp (NASDAQ:INTC) has close to $52 billion in long-term debt and analysts believe its cost-cutting measures along with AI growth initiatives won’t let it fix this problem soon. S&P Global recently put the stock’s credit rating on “watch” saying:
“While these cost-cutting measures, including significant capital expenditure reductions, could alleviate some near-term cash-flow-generation challenges, it is unclear whether these steps will be sufficient to maintain its business competitiveness and enable healthy growth.”
Ariel Global Fund stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q2 2024 investor letter:
“Alternatively, several positions weighed on performance. One of the world’s largest semiconductor chip manufacturers by revenue, Intel Corporation (NASDAQ:INTC), underperformed in the period on news of a longer than expected turnaround in profitability within the Foundry business. This was exacerbated by disappointing near-term guidance due to a weakening demand environment signaling an extended replacement cycle. We view the quarter as a temporary trough that should dissipate as we see signs of a cyclical recovery for personal computers (PCs) and central processing units (CPUs), driven by the Windows 11 upgrade. In our view, the market is overlooking the progress Intel is making to advance its manufacturing process. Not to mention, the company’s efforts to serve as a viable second source foundry partner of leading-edge silicon. We believe the separation of the design and manufacturing businesses will be a key catalyst in unlocking improved financial performance while also enhancing the competitiveness of the foundry business.”
7. Oracle Corp (NYSE:ORCL)
Number of Hedge Fund Investors: 93
Earlier this month, Wedbush Dan Ives said in a note that several AI stocks were headed for gains on the back of a Fed rate cut.
“In a nutshell we believe the stage is set for tech stocks to move higher into year-end and 2025 in our opinion as the Fed and Powell kick off its rate cutting cycle this week, macro soft landing remains the path, and tech spending on AI remains a generational spending cycle just starting to hit the shores of the tech sector,” said Wedbush analysts, led by Daniel Ives.
Oracle Corp (NYSE:ORCL) was one of the stocks Ives said would benefit from rate cuts.
“As more tech vendors show the monetization piece of AI this will ultimately drive the next leg of the tech bull market in a very stable overall IT spending environment that is a bullish backdrop for tech stocks in our opinion,” Ives added.
Oracle Corp (NYSE:ORCL) is rising after the company’s latest quarterly results. Oracle’s Cloud services segment remains in strong growth mode. Revenue in the segment rose 21.3% year over year as Oracle Corp’s (NYSE:ORCL) Cloud is becoming a crucial player for firms developing AI, providing essential database systems for major players like OpenAI, AWS, and Google Cloud.
Oracle Corp’s (NYSE:ORCL) technology is critical for AI development, serving as a key foundation much like GPUs are for AI processes. Oracle says it has built large data centers with ultra-fast RDMA networks and massive 32,000-node NVIDIA GPU clusters, boosting its presence in AI training.
Oracle Corp (NYSE:ORCL) has increased its revenue outlook for fiscal 2026 to $66 billion from a prior target of $65 billion. It expects its revenue to reach a towering $104B by fiscal 2029. The Street expects Oracle’s EPS to grow at a compounded rate of 13.4% for fiscal 2025, rising to 14.41% in 2026, and continuing at a low double-digit pace in the following years. The company’s remaining performance obligations (RPO) jumped 53% year-over-year to $99 billion by the end of the first fiscal quarter, outpacing revenue growth.
Oracle Corp’s (NYSE:ORCL) forward P/E is about 25, slightly above the sector median of 23.17. Given the strong growth catalysts Oracle has, the stock is currently undervalued.
Carillon Eagle Growth & Income Fund stated the following regarding Oracle Corporation (NYSE:ORCL) in its Q2 2024 investor letter:
“Oracle Corporation (NYSE:ORCL) stock rose to all-time highs after the company announced better than expected cloud infrastructure revenue. Oracle signed dozens of new customers, including two leaders in generative artificial intelligence. The backlog remains, and strong growth appears poised to accelerate.”
6. ServiceNow Inc (NYSE:NOW)
Number of Hedge Fund Investors: 97
Earlier this month, Wedbush Dan Ives said in a note that several AI stocks were headed for gains on the back of a Fed rate cut.
“In a nutshell we believe the stage is set for tech stocks to move higher into year-end and 2025 in our opinion as the Fed and Powell kick off its rate cutting cycle this week, macro soft landing remains the path, and tech spending on AI remains a generational spending cycle just starting to hit the shores of the tech sector,” said Wedbush analysts, led by Daniel Ives.
ServiceNow Inc (NYSE:NOW) was one of the stocks Ives said would benefit from rate cuts.
“As more tech vendors show the monetization piece of AI this will ultimately drive the next leg of the tech bull market in a very stable overall IT spending environment that is a bullish backdrop for tech stocks in our opinion,” Ives added.
ServiceNow Inc (NYSE:NOW) impressed the market with strong second-quarter results which have proved the company’s AI potential. Morgan Stanley’s Keith Weiss maintained his Overweight rating on the stock and a $900 price target, saying the AI momentum is real and continues to build. ServiceNow Inc (NYSE:NOW) said additional annual revenue from new Pro Plus edition contracts, which include generative AI features, doubled from the previous quarter. The company secured 11 new contracts worth over $1 million each. Analysts believe ServiceNow Inc (NYSE:NOW) strength is its NOW platform as it makes it easier for companies to integrate all tools and software in one place, including Salesforce, Microsoft, and SAP. The company’s portfolio has 168 digital workflow solutions with a 98% renewal rate.
In a tough environment for SaaS companies, ServiceNow Inc (NYSE:NOW) managed to raise its full-year guidance. It also raised its operating income by 50 basis points.
NOW is trading at 40 times its estimated earnings for 2025, which is not a high multiple when compared with over 20% revenue growth estimates for ServiceNow Inc (NYSE:NOW) and an increasing number of growth catalysts.
Lakehouse Global Growth Fund stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its April 2024 investor letter:
“US-based software company,ServiceNow, Inc. (NYSE:NOW), provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
5. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 130
A soft demand for the new iPhone means bad news for companies that make chips and connectivity equipment for the company. Broadcom Inc (NASDAQ:AVGO) supplies 5G radio frequency chips to Apple. However, Broadcom is in a strong position to offset these declines thanks to its diverse revenue stream.
Jordan Klein, TMT desk analyst at Mizuho Americas, while talking to CNBC earlier this month, said that high expectations weighed on Broadcom shares despite the company posting a strong quarter.
The analyst, while commenting on Broadcom’s Q4 revenue guidance, said:
“In semis especially if you are probably the second most owned name in the sector after Nvidia, you can’t miss the top-line even though you raise your AI number.”
Klein said that one of the reasons why he “loves” owning Broadcom Inc (NASDAQ:AVGO) is that it offers diversification beyond Nvidia since over $250 billion hyperscaling AI spending would not just go to Nvidia.
“So I think going forward it’s going to be spread to areas that are in Broadcom’s wheelhouse – optical, connectivity, networking, and these customer ASIC chips that are going to be built by these Cloud companies to do inference and that’s where they are going to win.”
Broadcom Inc (NASDAQ:AVGO) recently posted quarterly results and while they beat estimates on both EPS and revenue, guidance failed to impress the Street, resulting in a share price decline. However, Jefferies said the dip was a buying opportunity.
“Guidance came in a bit lighter than expected, but management has been messaging lumpiness in AI revenue and growth is set to reaccelerate in 4Q,” said Jefferies analyst Blayne Curtis, in a note. “The cyclical correction in non-AI revenue is in-line with peers, and our view is the long-term trend in AI still favors an industry shift to custom ASICs, where Broadcom Inc (NASDAQ:AVGO) remains well-positioned. Factor in the added benefit of the VMware acquisition running ahead of schedule on both revenue and earnings, and it’s easy to look past one minor bump in the road.”
Mar Vista Focus strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“During the quarter, we established new investments in Broadcom Inc. (NASDAQ:AVGO) and Meta Platforms. We initiated a position in Broadcom in Q2. As a skilled aggregator, Broadcom acquires firms, streamlines their operations, and invests R&D dollars in mission critical products that generate industry leading profit margins, robust cash flows and high returns on invested capital. Its primary markets include AI accelerators targeting generative AI applications, networking & wireless semiconductors, and mission-critical infrastructure software solutions.
Broadcom is well-positioned to benefit from the rapidly expanding demand for custom AI accelerator chips that support the evolution of the generative AI market. The company is the second-largest producer of AI accelerator chips behind Nvidia and leads the market in custom AI ASIC chips. Its customers include leading hyper scalers like Alphabet and Meta who are turning to Broadcom for custom silicon due to its performance and cost advantages. We believe the company is a direct beneficiary of a multi-year capital cycle driven by hyper scalers building out next-generation AI factories.
Broadcom recently acquired VMware, the leader in virtualization software targeting the enterprise market. The integration of VMware is tracking ahead of plan as management has simplified its product bundles, transitioned to a subscription revenue model, and reduced operating costs. We believe this simplified go-to-market structure will result in strong top-line revenue growth and expanding operating margins. We believe Broadcom will compound intrinsic value per share in the mid-20% range over the intermediate term as it benefits from the AI-infrastructure build-out, a cyclical recovery in its legacy semiconductor business, and modestly accelerating growth from its infrastructure software business as VMware is successfully integrated.”
