Markets are getting jittery after JPMorgan CEO Jamie Dimon pointed to potential cracks in the credit markets following a few regional bank earnings. However, Wall Street bulls continue to believe that AI will fuel the current market rally until at least the end of this year amid rising demand. Tom Lee from Fundstrat said in a recent interview with CNBC that despite credit market concerns and rising volatility, the AI trade remains strong and the S&P 500 could hit at least 7,000 by the end of the year. Here is what Lee said:
“Markets still have a lot of tailwinds into year end. And part of it is AI is like I think demand is accelerating there and we know that investors are sitting on a lot of cash and institutional investors are really having a terrible year. Only 22% are beating the benchmark. So I think there’s a bit of a chase and then sentiment has flipped negative which is always a contrarian buy signal. So you know, I think despite this mounting wall of worries, including the shutdown, I think it sets us up for a pretty good rally into the end of the year.”
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
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10. Sixth Street Specialty Lending Inc (NYSE:TSLX)
Number of Hedge Fund Investors: 10
Jenny Van Leeuwen Harrington, the Chief Executive Officer of Gilman Hill Asset Management, said in a recent program on CNBC that she likes Sixth Street Specialty. Here is why:
“There’s been a weird phenomenon in the last couple weeks where you see the private equity stocks like KKR and Carlyle really trade down, but the private lenders trade down way more. That relationship should be reversed. This is a very high-quality private credit lender. Nine and a half percent yield. I largely agree with Joe that I don’t want to touch them, but I’m very comfortable with this particular company and it’s been dragged down more than it should.”
9. KB Home (NYSE:KBH)
Number of Hedge Fund Investors: 26
Stephen Kim, Evercore ISI head of housing research, recently downgraded several housing stocks. During a program on CNBC, the analyst said that he believes the US government plans to find supply-side solutions to the housing problem, and that could negatively impact housing companies. Here is what the analyst said:
“They look at the builders and say these builders are deliberately building fewer homes than they could. They’re posting strong profitability and cash flow and buying shares back. They say, if the builders could produce more homes at lower prices, homebuyer affordability gets better, inflation improves, employment will improve, and new home prices can decline, even without dragging down existing home prices, which, by the way, has kind of been happening. There’s a lot of truth in what they say, but it misses something critically important, which I think the builders are really hoping they recognize: we have a demand problem right now. We don’t actually have a supply problem currently. If they had gotten builders to build a lot more three or four years ago, that would have been different, but today you’re slamming the gate shut when the horses already left the barn. We don’t have enough demand, so having the administration focus on supply-side solutions as opposed to mortgage spreads is a problem, and it’s unfortunate for the builders.”
However, the analyst believes housing stocks could trade at higher multiples in the long term.
“We believe the builders deserve and will get a revaluation to higher multiples than they have historically received. The basis for that is that if you look at how much the builders have improved their operations, how they have become more asset-light, and how they have more competitive advantages relative to their smaller peers. We look at all of what they’ve done and they’ve delivered significantly. These are companies that, if you compare them across almost any metric that matters relative to their S&P peers, they outperform them, but they trade at a fraction of what the other peers trade. We think that’s going to change. By the way, there’s a builder out there in the wild called NVR that’s already done this, and the other builders are following in its footsteps. We actually think that the builders are looking really good from a multi-year perspective, but unfortunately, you cannot disregard what the government and the administration are seeking to do here. In the near term, it’s going to be, we think, a depressant on the builder stocks.”
8. DR Horton Inc (NYSE:DHI)
Number of Hedge Fund Investors: 64
Stephen Kim, Evercore ISI head of housing research, explained in a recent program on CNBC why he downgraded several housing stocks, including DR Horton Inc (NYSE:DHI). The analyst said the US government’s reasoning on the housing problem could negatively impact homebuilders. He said as of now, there is no supply problem.
“A big part of our downgrade was our understanding that the administration was going to aggressively pursue supply-side solutions to affordability, which is really the worst possible thing that the builders could hear. FHFA Director William Pulte has been very clear and increasingly clear in his tweets and interviews about what he’s looking for. The administration seems to believe that we have a national housing deficit because we didn’t build enough homes. The deficit is why home prices are so high and housing has become unaffordable. Higher home prices are also contributing to inflation because the shelter component of CPI is high. They look at the builders and say these builders are deliberately building fewer homes than they could. They’re posting strong profitability and cash flow and buying shares back. They say, if the builders could produce more homes at lower prices, homebuyer affordability gets better, inflation improves, employment will improve, and new home prices can decline, even without dragging down existing home prices, which, by the way, has kind of been happening. There’s a lot of truth in what they say, but it misses something critically important, which I think the builders are really hoping they recognize: we have a demand problem right now. We don’t actually have a supply problem currently. If they had gotten builders to build a lot more three or four years ago, that would have been different, but today you’re slamming the gate shut when the horses already left the barn. We don’t have enough demand, so having the administration focus on supply-side solutions as opposed to mortgage spreads is a problem, and it’s unfortunate for the builders.”
Heartland Mid Cap Value Fund stated the following regarding D.R. Horton, Inc. (NYSE:DHI) in its third quarter 2025 investor letter:
“Consumer Discretionary. Our best-performing holding in the quarter, D.R. Horton, Inc. (NYSE:DHI), came from our Deep Value bucket. The largest homebuilder in the country, DHI enjoys around a 10% market share with scale advantages in a highly fragmented industry.
The company has a particularly strong position in entry-level homes. To produce affordable housing, D.R. Horton runs the business with speculative inventory, meaning it builds homes before buyer contracts are signed. This allows the company to operate the business more like a manufacturer thereby reducing unit costs with most savings passed to the homebuyer. To accommodate this business model, the company’s balance sheet is notably strong, allowing for maximum flexibility in capital allocation. For more than a decade, management pivoted the company’s balance sheet away from owning large swaths of undeveloped land, preferring instead to use less capital-intensive methods to source buildable lots. This self-help strategy reduced the capital commitment to the business and increased returns on investments…” (Click here to read the full text)
7. AbbVie Inc (NYSE:ABBV)
Number of Hedge Fund Investors: 89
Jim Lebenthal from Cerity Partners said in a recent program on CNBC that he likes AbbVie amid “attractive” valuation and dividend yield.
“If I’m a little nervous, just a little nervous, I’m going to go with something that’s kind of on the safe side. AbbVie Inc (NYSE:ABBV). Now, this has been an aggressive name this year, up about 30%, still has a good dividend yield, attractive valuation. So, regardless of whether I need to be nervous, this is a good pick.”
ABBV shares are up 27% so far this year.
Carillon Eagle Growth & Income Fund stated the following regarding AbbVie Inc. (NYSE:ABBV) in its second quarter 2025 investor letter:
“AbbVie Inc.’s (NYSE:ABBV) shares were a detractor for the portfolio in the second quarter. We attribute the weakness primarily to the underperformance of the broader biopharmaceutical industry, which is under pressure as it navigates policy threats from the Trump administration surrounding both tariffs on the pharmaceutical sector and a proposal to explore most-favored nation prescription drug pricing.”
6. Datadog Inc (NASDAQ:DDOG)
Number of Hedge Fund Investors: 103
Joseph Terranova, Senior Managing Director, Virtus Investment Partners, said in a recent program on CNBC that he likes Datadog and believes the stock has more room to run. Here is what he said:
“Two years ago, Josh Brown and I were having a dinner on Long Island with a huge fan of the show and a New York sports legend. We discussed this stock, Datadog Inc (NASDAQ:DDOG). Certainly hope he purchased it because it’s going to break out further to new highs.”
Datadog Inc (NASDAQ:DDOG) makes observability services for cloud-scale applications, providing monitoring of servers, databases and tools. One of the company’s AI offerings is Bits AI, a suite of apps used for critical monitoring.
ClearBridge Large Cap Growth Strategy stated the following regarding Datadog, Inc. (NASDAQ:DDOG) in its third quarter 2025 investor letter:
“During the quarter, the Strategy initiated new positions in infrastructure software providers Oracle and Datadog, Inc. (NASDAQ:DDOG) and added to custom silicon developer Broadcom. Datadog operates a monitoring, observability and data security platform for cloud applications. Observability is a large and growing end market with penetration rising as use and complexity of applications grow, requiring more performance monitoring. Datadog is a leader in cloud application monitoring, offering ease of use, breadth and scalability superior to its competitors. We believe large language model (LLM) observability, a rapidly growing market due to the acceleration of Gen AI workloads, creates a new vector for growth not reflected in fundamental estimates. Datadog’s mission critical offering and rapid innovation should support attractive >20% revenue growth with an attractive valuation as the company further scales margin and cash flow.”
5. Advanced Micro Devices Inc (NASDAQ:AMD)
Number of Hedge Fund Investors: 113
Joe Tigay from Equity Armor Investments said in a recent program on Schwab Network that he’s bullish on AMD amid rising demand for AI chips. Here is what the analyst said:
“When I just listened to the CEO’s comments a week and a half ago, just saying, “Hey, we’re just scratching the surface of what this potentially could be when it comes to production of chips or where we’re going to be in how many more of these chips we’re going to be pushing out there,” which is just phenomenal because you could have said that a year and a half ago. Every quarter we’re saying, “Wow, this is incredible. I can’t believe the increase or I can’t believe how much this company has grown, Advanced Micro Devices Inc (NASDAQ:AMD), Nvidia specifically. I can’t believe how many more chips are needed.” And we’re still at this ramping up phase, which is really phenomenal, really exciting to see. I think it’s branching out. Yes, Nvidia is the leader of the world, but there are other options out there and other requirements for chips, not only GPUs, but also for all of these servers and data centers. Advanced Micro Devices Inc (NASDAQ:AMD) is a big part of that. It’s exciting to see and, of course, exciting to see their partnership with OpenAI.”
Macquarie Large Cap Growth Fund stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its third quarter 2025 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD), a US semiconductor company, was also added to the portfolio. The total addressable market for AI chips is vast and in need of a second supplier to complement NVIDIA. We believe AMD is now positioned to supply a competitive, and possibly superior, chip for inference on a price/performance basis. Additionally, its next-generation chip for AI training should be a viable option to supplement NVIDIA supply.”
