Elon Musk has recently been in the news for his vain attempt to buy the nonprofit that controls OpenAI, but that’s not all. It has recently come to light that Musk’s artificial intelligence company, xAI, is canvassing potential investors for a roughly $10 billion funding round. This could value the company at an estimated $75 billion.
According to media reports, existing investors, including Sequoia Capital, Andreessen Horowitz, and Valor Equity Partners, are in discussions to participate in the transaction. However, the terms of the round aren’t finalized yet and may change.
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According to data compiled by PitchBook, xAI was last valued at $51 billion. The startup was launched by Musk in 2023, a rival to OpenAI. xAI has recently revealed that Grok3, its AI chatbot, is in the final stages of development and will be released in a week or two.
“Grok 3 has very powerful reasoning capabilities, so in the tests that we’ve done thus far, Grok 3 is outperforming anything that’s been released, that we’re aware of, so that’s a good sign”.
-Elon Musk
With the competition in the AI world heating up fast, OpenAI CEO Sam Altman has recently revealed its plans around GPT-5, and how the company is going to work on simplifying its offerings. He stated that he realizes how the company’s models and product offerings are getting complicated, bringing a solution for user ease.
“We hate the model picker as much as you do and want to return to magic unified intelligence”.
-Sam Altman.
Currently, users are required to manually select various AI models for different tasks. According to Altman, GPT-4.5, internally known as Orion, will be the company’s final “non-chain-of-thought model.” After its release, the company will unify o-series and GPT-series models.
It will do so by offering a system that can use all of its features and determine when to take more or less time to think. The GPT-5 model will be launched as a comprehensive AI system that will incorporate o3 along with other technologies.
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).
A financial analyst looking through a microscope at stocks to determine their market value.
10. Informatica Inc. (NYSE:INFA)
Number of Hedge Fund Holders: 22
Informatica Inc. (NYSE:INFA) is a leader in enterprise AI-powered cloud data management. On February 14, BofA analyst Koji Ikeda downgraded the stock to “Neutral” from Buy with a price target of $20, down from $35. The rating follows Informatica’s “challenging” Q4 results and “soft” 2025 guidance. Even though the company’s adjusted earnings per share of $0.41 surpassed the consensus forecast of $0.38, revenue for the quarter came in at $428.3 million, considerably below the $456.86 million analysts were expecting.
The firm strongly believes that Informatica offers a proven enterprise-class solution that will benefit from artificial intelligence over the long term. However, challenges such as execution issues around renewals, revenue sensitivity, pushing professional services to partners, and foreign exchange are pushing the 2025 total revenue outlook 5% below the Street. The analyst told investors that they are “most concerned on the execution challenges”.
9. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 25
Bloom Energy Corporation (NYSE:BE) develops solid-oxide fuel cell systems for on-site power generation, helping meet the growing energy demands of AI data centers. On February 13, the company announced that it had entered into a “carbon capture” partnership with equipment manufacturer Chart Industries. The partnership aims to generate near zero-carbon power using natural gas and fuel cells.
The companies noted that they intend to offer easily deployable power solutions such that they meet emission targets for customers such as data centers without compromising reliability or emission goals. Under the partnership, Chart Industries will use its carbon capture technology to process Bloom’s high-purity carbon dioxide (CO2) exhaust stream into outputs. This process is not only cost-effective but also effective in capturing high-purity CO2 for industrial applications or secure storage. Bloom’s fuel cell technology produces CO2 rich stream with a higher concentration of gas, making the process simple and cost-effective.
“Our partnership with Chart aims to demonstrate that cost-effective, onsite baseload power from natural gas with carbon capture is feasible at scale. Bloom fuel cells generate electricity without combustion, producing a concentrated CO₂ stream that lowers extraction costs, making carbon capture more affordable and efficient. For energy-intensive industries like data centers and large manufacturers, this will provide a path to reliable, scalable power while significantly reducing carbon emissions. I am excited about the opportunities this partnership can unlock and the positive impact for our planet.”
-KR Sridhar, Founder, Chairman, and CEO at Bloom Energy.
8. Twilio Inc. (NYSE:TWLO)
Number of Hedge Fund Holders: 52
Twilio Inc. (NYSE:TWLO) is a leading cloud communications platform-as-a-service (CPaaS) company. On February 13, the company reported its fourth quarter and full-year financial results ended December 31, 2024. The company reported fourth-quarter 2024 earnings of $1.00 per share, missing the consensus estimate of $1.02, while revenue came in at $1.19 billion, versus the consensus estimate of $1.18 billion. Following the earnings report, Needham analyst Ryan Koontz maintained a “Buy” rating on the stock with an associated price target of $165.00.
Koontz is bullish on Twilio considering its strong performance and strategic positioning. The analyst noted that its fourth-quarter results align with previous positive forecasts, with considerable growth in SMS and voice communications revenue across multiple sectors. As such, the management expects a positive growth trajectory driven by expanding operating margins. Moreover, the company is also well-positioned in the AI-driven customer experience market given its strategic shift toward integrating communications, data, and AI. Twilio’s prospects are expected to further enhance with the new strategy due to its ability to capture a considerable portion of the AI value chain.
7. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 97
Vistra Corp. (NYSE:VST) operates as an integrated retail electricity and power generation company. On February 11, Jeremy Tonet from J.P. Morgan maintained a “Buy” rating on the stock with a price target of $203.00.
Vistra has positioned itself well to capitalize on the growing energy needs of AI data centers. Several analysts have been bullish on the stock. Morgan Stanley has listed the stock as one of its “high conviction” picks for 2025. The firm raised its price target from $135 to $169 in November 2024 largely due to its growth opportunities driven by AI-powered energy demand and data center expansion. The stock plunged after the emergence of DeepSeek stemming from concerns that more efficient AI models meant reduced electricity usage, partially recovering since.
6. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 107
Advanced Micro Devices, Inc. (NASDAQ:AMD) develops semiconductors, providing processors and graphics technologies for gaming, data centers, and AI-driven high-performance computing. On February 14, Daiwa downgraded the stock to “Outperform” from Buy with a price target of $130, down from $170. The firm has cited weaker-than-expected first-half guidance for 2025 as a reason for the downgrade.
While Q4 2024 results were strong, analysts view the “big issue” to be “material disappointment” in graphics processing units as MI325 seems to be ramping slower than expected. According to the firm, this is holding the company back from achieving an “AI premium”. The firm said that AMD’s Q1 2025 revenue guidance of $7.1 billion came in $105 million above Street estimates, but noted that data center revenue for the first half of the year is anticipated to decline.
“The DC guidance for 1H25 is to be ‘consistent’ with results of 2H24, which was revenue of $7.4b. This would suggest that DC 1H25 has to come down ~$800m from our/street expectations”.
-Daiwa explained.
All in all, the firm currently remains cautious on the weaker-than-expected first-half guidance but anticipates the second half to be robust with AMD’s MI350 GPU ramping up earlier than planned.
5. 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. On February 12, Mizuho Securities analyst Gregg Moskowitz maintained a “Buy” rating on the stock with a price target of $425.
Salesforce has garnered significant attention in the AI world following its release of Agentforce. The platform allows businesses to develop powerful, customizable AI agents that can autonomously handle customer interactions across various channels nonstop. Other analyst firms, such as Piper Sandler, are also bullish on the stock particularly due to Agentforce. Last month, the firm contended that even though Agentforce has garnered significant customer engagement, it is not likely to materialize in revenues until fiscal year 2027. However, it is still confident about the competitive advantage that the AI-powered platform brings to the company.
“Early But Promising Feedback on Agentforce. We hosted investor meetings with Alexandra Chan and Valmik Desai in Europe last week which reinforced prior commentary that 1) the demand environment remains measured, 2) Agentforce has reinvigorated customer engagement but not likely a material revenue driver until F2027E (CY26E), 3) investor fears that Agentforce investments could pressure margins appear overstated and unlikely, 4) internal confidence in agent potential is building with clear competitive differentiation on time-to-value (days vs. weeks), and 5) indirect AI monetization via multi-cloud cross-sell and premium editions could be underappreciated”.
-Piper Sandler
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 193
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services. On February 14, Reuters reported that the chip maker has reduced its stake in Arm Holdings by about 44%. It also exited its holdings in Serve Robotics and SoundHound AI in the fourth quarter while reporting a position of 1.7 million shares in China’s self-driving startup WeRide Inc. The company also disclosed that it owns 1.2 million shares of the AI cloud firm Nebius Group. Nvidia’s investment shifts demonstrate its growing focus on AI and driving technology.
3. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 202
Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses. On February 13, it was reported that Google has participated in a funding round for Apptronik, the AI-powered humanoid robotics company. The $350 million Series A funding round was co-led by B Capital and Capital Factory, with participation from Google. The move is a pivotal moment for Apptronik, powering the deployment of Apptronik’s innovative humanoid robot Apollo. The funding will allow the humanoid robotics company to accelerate the development of next-generation humanoid robots, further expand humanoid robot design and development, and fulfill growing customer demand.
“We’re creating the world’s most advanced and capable humanoid robots, designed to work alongside humans in meaningful and transformative ways. By uniting cutting-edge AI with hardware engineered for meaningful interaction, we’re shaping a future where robots become true partners in driving progress. It’s inspiring to have investors who believe in this vision and are committed to helping us bring it to life.”
-Jeff Cardenas, CEO and co-founder of Apptronik.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On February 14, Bloomberg reported that the company is making a significant investment in AI-powered humanoid robots. These robots will have the ability to act like humans and assist with physical tasks. According to the report, Meta is forming a new team within its Reality Labs hardware division to proceed with the initiative. The company will start working on its humanoid robot hardware, initially focusing on household chores. Unitree Robotics and Figure AI Inc. are two companies that Meta has started discussing its plans. Meta confirmed the creation of the new team to employees on Friday. It informed its employees that it will be led by Marc Whitten. Whitten resigned as chief executive officer of General Motors Co.’s Cruise self-driving car division earlier this month.
“The core technologies we’ve already invested in and built across Reality Labs and AI are complementary to developing the advancements needed for robotics”.
– Andrew Bosworth, Meta’s chief technology officer.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements. On February 14, UBS analyst Karl Keirstead maintained a “Buy” rating on the stock and set a price target of $510.00.
“We hosted a group of investors at Microsoft’s campus, meeting with Azure and M365 execs as well as IR. The investor focus was on the root cause and time to fix the non-AI Azure deceleration and to a lesser extent the capex trajectory. Microsoft refrained from being too specific about the GTM changes and appeared to downplay the changes as mere “tweaks”. In our view, the lack of visibility into the cause of the Azure set-back and the length of the fix may weigh on the stock near-term, but the secular growth tailwinds remain in place and we remain Buy-rated.”
Previously, the firm has highlighted Microsoft’s partnership with OpenAI, and how the company’s overall AI-related decisions have the potential to shape its financial trajectory and market standing in the coming years. The emphasis the firm is currently giving to Azure’s non-AI deceleration echoes the importance of cloud services in Microsoft’s overall business strategy.
While we acknowledge the potential of MSFT 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 MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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