In this article, we will take a detailed look at the 10 AI News You Can’t Miss.
The AI stocks selloff that started following the launch of DeepSeek is still impacting the US markets. Aswath Damodaran, NYU Stern School of Business professor of finance, said in a recent program on CNBC that he believes innovation in AI technology like DeepSeek and new models would “commoditize” AI products and could result in lower spending.
“In my view, what it does is reduce the total size of the segment of the AI market that needs high-power chips and immense amounts of data. Whether deep seek is a fake or whether it’s going to pass by, what it opens people’s eyes to is that not all AI products and services need these incredibly powerful chips and huge amounts of data and huge data centers. You can get there with much cheaper devices. I think for many companies, when they look at the AI products and services they have to develop, they don’t need this high-powered stuff. They don’t need to spend the tens of billions of dollars up front. So, I think that’s the real worry you have to have.”
READ ALSO 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In
For this article, we picked 10 stocks trending based on the latest news. For 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Yuganov Konstantin/Shutterstock.com
10. Snap Inc (NYSE:SNAP)
Number Of Hedge Fund Investors: 44
Andy Swan from LikeFolio said in a latest program on Schwab Network that Snap Inc (NYSE:SNAP) is getting traction among advertisers.
“Snapchat is kind of the new frontier for digital ads. Snapchat had a great report, and while the market reacted a little bit off, the initial reaction was very good because Snapchat showed that advertisers are flocking to these platforms.”
RiverPark Large Growth Fund stated the following regarding Snap Inc. (NYSE:SNAP) in its Q3 2024 investor letter:
“Snap Inc. (NYSE:SNAP): SNAP was a top detractor in the third quarter following a second quarter earnings report that fell short of high expectations. While the company reported strong Daily Active User (DAU) growth (432 million +10% year-over-year) and time spent watching content on the app (+25% year-over-year), revenue of $1.24 billion was below the midpoint of the company’s guidance and slightly below investor expectations. Management pointed to weakness in their Brand Advertising vertical, specifically highlighting demand for retail, technology, and entertainment advertising for slowing through the quarter. SNAP did exceed EBITDA expectations by $15 million due to better operating leverage, but guided third quarter EBITDA below expectations as the company plans to make some targeted investments around AI infrastructure.
We believe that improvements in SNAP’s ad platform and continued growth in DAU should lead to continued acceleration in revenue growth over the next several quarters and years. With 2023 revenue of $4.6 billion (as compared with Meta’s $134 billion), we believe SNAP has a long runway for both revenue growth and expanded profitability.”
9. Super Micro Computer Inc. (NASDAQ:SMCI)
Number Of Hedge Fund Investors: 45
Matthew Tuttle from Tuttle Capital said in a Schwab Network program recently that Super Micro Computer Inc. (NASDAQ:SMCI) has further room to grow if accounting violation confusions are cleared and the stock sees a further pullback.
“There’s still room for growth—AI is the future. They’ve been a leader in the AI server market, but I’d like to hear how they’re handling competition and the risk of becoming commoditized. If everything looks solid and there’s a bit of a pullback, that could be an opportunity to buy in.”
Columbia Acorn Fund stated the following regarding Super Micro Computer, Inc. (NASDAQ:SMCI) in its Q3 2024 investor letter:
“Super Micro Computer, Inc. (NASDAQ:SMCI) had a tough quarter due to a confluence of negative events. It declined, but is still up significantly for the year. While demand for the company’s AI server racks remains strong, with revenue up over 100%, gross margins have fallen sharply for two straight quarters, implying a price war. In addition, Super Micro was the subject of a short-seller report and a delay in filing its annual report with the SEC. We have been taking profits in the stock all year and have only a small position, which we are maintaining given the strong performance and demand for Super Micro’s AI racks and a depressed stock valuation.”
8. Shopify Inc (NYSE:SHOP)
Number Of Hedge Fund Investors: 64
Chris Wang from Runnymede Capital explained in a latest program on Schwab Network how Shopify Inc (NYSE:SHOP) is using AI to its advantage.
“They are developing a lot of AI tools for their merchants. They’ve heavily invested in AI with Shopify Magic and Shopify Sidekick. And as you can see, their operating efficiency is really improving each and every quarter. So I think the AI tools are benefiting not only their customers but also their bottom line. So AI is just doing great things for Shopify.”
For the first quarter, Shopify expects revenue growth at a mid-twenties percentage rate year-over-year, reaching about $2.31B (+25% YoY) and estimated operating income of $190M (+120% YoY). The company expects to see accelerated top- and bottom-line growth at a CAGR of +22.6%/ +25% through FY2027. This compares to previous estimates of +17.8%/ +14.2%, and reflects a strong history of 5-year growth at +41.3%/ +111.2%, highlighting SHOP’s promising long-term outlook. This growth is supported by the projected rise in the e-commerce SaaS market size from $9.4B to $29.82B by 2032 at a CAGR of +15.5%.
Rowan Street Capital stated the following regarding Shopify Inc. (NYSE:SHOP) in its Q4 2024 investor letter:
“Shopify Inc. (NYSE:SHOP): Investment Initiated: February 2022
Internal Rate of Return (IRR): 23%
Our IRR for Shopify aligns closely with the growth in revenues and gross profits the company has delivered over the past three years since we first purchased it in February 2022 (as shown in the table below). However, the path to achieving this return has been far from smooth-as is often the case with investments.
In fact, for the first 2.5 years of holding Shopify, our position generated little to no return. Nearly all of the gains have come within the past six months. This illustrates a fundamental principle of long-term investing: the longer your holding period, the more closely your returns will reflect the underlying fundamentals of the business…” (Click here to read the full text)
7. QUALCOMM Incorporated (NASDAQ:QCOM)
Number Of Hedge Fund Investors: 79
Olivier Blanchard from The Futurum Group in a latest program on Schwab Network made the case for QUALCOMM Incorporated (NASDAQ:QCOM).
“One that seems consistently under-indexed is Qualcomm. First of all, they’re kind of everywhere. They have a dominant position in the premium Android market, an increasingly dominant position in automotive as well—and that’s not just EVs, but what we call software-defined vehicles, basically smart vehicles. Qualcomm is in a really unique position. They have extremely low-power, power-efficient AI chips that go into phones, PCs, cars, and also IoT—specifically commercial IoT, where a lot of intelligence is done locally on-device instead of being pushed to the cloud. That makes it much cheaper, delivers a better ROI, and offers better security. I think we’re going to see a resurgence in 2025 in the commercial or industrial IoT segments, and companies like Qualcomm and Broadcom will be right there with that bump.”
Qualcomm shares have wavered amid reports that Apple plans to move modem production in-house. However, QCOM bulls believe the company can thrive without Apple. Qualcomm had a $10 billion annual run rate for non-handset revenue as it reported $8.3 billion in revenue for FY24. The company expects the AI PC market to reach $4 billion in sales by FY29, with only a 12% market share. QCOM management said during a latest earnings call that it aims to reach $22 billion in non-handset revenues by 2029.
Fidelity Dividend Growth Fund stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q3 2024 investor letter:
“At the stock level, QUALCOMM Incorporated (NASDAQ:QCOM) was a major detractor, returning about -14% the past three months. The firm develops and manufactures semiconductors, software and services used in mobile phones, and other wireless technologies. On July 31, the company reported second-quarter results, and issued guidance for Q3, both of which solidly exceeded expectations. The stock slid, however, on concerns about a slow recovery for smartphones. Additionally, shares dipped this quarter in step with other semiconductor-related names.”
6. Intel Corp (NASDAQ:INTC)
Number Of Hedge Fund Investors: 83
Steven Dickens from HyperFRAME Research said during a program on Schwab Network that he believes Intel Corp (NASDAQ:INTC) is still in its early stages of chip buildup. According to Schwab Network, Dickens believes Intel is undervalued.
“I think Intel’s early in its journey with the lab. They’ve got some breakthrough wins with AWS for some of the stuff they’re doing there. 18A is coming, and what I hear about that is all positive. They’re probably going to beat TSMC to the market for that. Where we’re looking at is building out a fab facility. We’re talking about ASML machines—they’re $350 million each. So it’s a “build it and they will come” strategy. I think Pat Gelsinger was right in trying to keep IFS as part of Intel. And I think what we’re seeing is if Intel’s board is given time and we can fill the void left by Pat Gelsinger, that strategy is going to work out.”
Invesco Growth and Income Fund stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter:
“Intel Corporation (NASDAQ:INTC): The chipmaker reported weaker-than-expected quarterly results as revenues declined and earnings were below expectations. Management also provided weaker guidance going forward; the stock fell on the news. We sold the position during the quarter.
The chipmaker’s quarterly earnings report was weaker than anticipated as revenues declined and earnings were below expectations. Management also provided weaker guidance going forward. Given that a potential recovery appears to be further in the future than we originally anticipated, we sold the position.”
5. Reddit Inc (NYSE:RDDT)
Number Of Hedge Fund Investors: 87
Andy Swan from LikeFolio said in a latest program on Schwab Network that advertisers are “flocking to” Reddit Inc (NYSE:RDDT) amid the value they are getting on the social platform.
“I think advertisers are figuring out what a great value advertising on Reddit is and what great technology they have in place there. It delivers a higher ROI, I think, than some of the more traditional digital advertising platforms like Facebook, Google, etc. Those have kind of squeezed everything they can out of the ROI for advertisers, and Reddit is kind of the new frontier, if you could say it that way, and it’s growing really fast. If we look at Reddit web visits, they are up—digital traffic is up 21% year-over-year, and that’s off a really strong base and a strong uptrend. Things are a little seasonally flat right now, but you can see that uptrend really began over the last couple of years and seems to be continuing. More importantly, on the ad-related web visits—so this is potential advertisers or advertisers looking at Reddit’s advertising solutions—that’s up 90% year-over-year.”
4. Alibaba Group Holding Limited (NYSE:BABA)
Number Of Hedge Fund Investors: 107
Thomas Hayes from Great Hill Capital said in a recent program on Schwab Network that he’s been invested in Alibaba Group Holding Limited (NYSE:BABA) for about two years and still believes it’s a “no-brainer” stock to buy amid several growth catalysts.
“We’ve been in Baba for almost two years now, and we are more investors than traders. So we’ve bought in the hundreds and we bought a ton in the 60s, so our base is around $83. This is an absolute no-brainer. We look at intrinsic value—we think it’s well in excess of $200 per share. This is the number one cloud provider in China. Obviously, you had the announcement yesterday that Apple is going to be using Alibaba AI for Apple Intelligence, which was big news but only part of the story here. Complete play on the middle-class recovery with Taobao and T-Mall, as the one and a half years of non-stop stimulus is starting to kick in the economy. International growing up 40%. Any weakness in the coming months is an opportunity to buy for the long term.”
Conventum – Alluvium Global Fund stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its Q3 2024 investor letter:
“On 24 September the People’s Bank of China unveiled a massive three part stimulus package involving: (1) slashing the amount of cash banks need to hold in reserve and lowering the main policy interest rate; (2) cutting mortgage rates on existing home loans by 0.5% and reducing down payment requirements for second homes from 25% to 15%; and (3) supporting equity markets by a USD 114b lending pool to encourage companies to buy back shares and non-bank financial institutions to buy local equities (which may be expanded by the same amount two more times)5 . We are flabbergasted. But we shouldn’t be. After all, these types of arrangements have been all too common over the last 15 years. The local equity markets responded with gusto, and for the last week of the quarter the CSI 300 Index (Shanghai and Shenzen listed companies) was up 25.1%. Alibaba Group Holding Limited (NYSE:BABA) was not lost in all this, and returned 26.8% over that one week period. But Alibaba had already performed well so during the whole September quarter it was up a staggering 56.0%. As a result, Alibaba is no longer the cheap stock it once was. It now trades at a premium to our valuation – a valuation which admittedly had been progressively reduced over our holding period as a result of deteriorating business fundamentals. As a result of Alibaba’s significant outperformance, by the end of the quarter it had reached 3.7% of the Fund. We are weighing up our options here, considering the relative risk.”
3. Nvidia CORP (NASDAQ:NVDA)
Number Of Hedge Fund Investors: 223
Jerry Sneed from Procyon Partners said in a recent program on Schwab Network that Nvidia CORP (NASDAQ:NVDA) shares were a buy on the latest pullback amid the DeepSeek-triggered selloff. He believes the chip demand will remain strong.
“In 1995, Toy Story was created by Pixar, and it took 200 supercomputers to make that movie. Fast forward to 2023, Elemental, another movie, came out, and it took 151,000 supercomputers to create it. Just because technology gets more efficient doesn’t mean we stop needing high-powered chips. We evolve and push the limits. One of the clusters that helped create that movie in 2023 even caught on fire due to how it was set up. I’ve been trying to explain to my clients that this is complicated, and these chips are necessary. We’re just pushing the limits to the next level. It’s a good thing that DeepSeek came out. Whether or not they ran it more cheaply, they definitely ran it more efficiently, which I think is a positive story for all these companies.”
The market will keep punishing Nvidia for not coming up to its gigantic (and sometimes unrealistic) growth expectations. About 50% of the company’s revenue comes from large cloud providers, which are rethinking their plans amid the DeepSeek launch and looking for low-cost chips. Nvidia’s Q1 guidance shows a 9.4% QoQ revenue growth, down from the previous 12% QoQ growth. Its adjusted margin is expected to be down substantially as well to 71%. The market does not like when Nvidia fails to post a strong quarterly beat. The stock will remain under pressure in the coming quarters when the company will report unimpressive growth.
Nvidia is facing challenges at several levels. Competition is one of them. Major competitors like Apple, Qualcomm, and AMD are vying for TSMC’s 3nm capacity, which could limit Nvidia’s access to these chips. Why? Because Nvidia also uses TSMC’s 3nm process nodes. Nvidia is also facing direct competition from other giants that are deciding to make their own chips. Amazon, with its Trainium2 AI chips, offers alternatives. Trainium2 chips could provide cost savings and superior computational power, which could shift AI workloads away from Nvidia’s offerings. Apple is reportedly working with Broadcom to develop an AI server processor. Intel is also trying hard to get back into the game with Jaguar Shores GPU process, set to be produced on its 18A or 14A node.
Mairs & Power Growth Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“We prefer to invest in our backyard, as Minnesota and the Upper Midwest are blessed with a rich and diverse business community. As such, seven out of our 10 largest relative bets are based in our region (MN, WI, IA, SD, ND, IL). That said, we are unafraid to look beyond our geographic area if we find exceptional opportunities. In 2019, we found such an opportunity in a graphics processing technology company called NVIDIA Corporation (NASDAQ:NVDA). At the time, we felt NVIDIA would be a good way to leverage the growing interest in video games, as most of its chips were popular amongst “gamers” to enhance graphics. But what really grabbed our interest was its smaller, albeit faster-growing, data center business that was positioned to benefit from the emergence of high-performance computing, such as deep learning and machine learning, and the related field of AI. The rest, as they say, is history. NVIDIA is one of a number of Technology holdings that we have added over the past decade, which has raised eyebrows since our Firm was well-known for avoiding the Tech Bubble in the late 1990s. Unlike the dot-com companies that operated at the turn-of-the-century, many of today’s technology companies are established businesses with significant cash flows. We have argued, and continue to argue, that many of these investments are perfectly aligned with our investments process in that they embody durable competitive advantages, above-average growth prospects, and excellent management teams.”
2. Microsoft Corp (NASDAQ:MSFT)
Number Of Hedge Fund Investors: 317
Salesforce CEO Marc Benioff said in a program on CNBC a few weeks ago that he believes Microsoft Corp (NASDAQ:MSFT) will not be using OpenAI because the company is making its own models. Benioff explained the reasons behind this belief:
“It’s extremely important that OpenAI expands to other platforms quickly because Microsoft is building its own AI. I don’t think Microsoft will use OpenAI in the future—they’ll have their own Frontier models.
They’ve stated very clearly that it’s too expensive and too difficult for them, and they want to develop their own. That’s why they hired Mustafa Suleyman. And Mustafa Suleyman and Sam Altman are not best friends.”
Mairs & Power Growth Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q4 2024 investor letter:
“Unlike the dot-com companies that operated at the turn-of-the-century, many of today’s technology companies are established businesses with significant cash flows. We have argued, and continue to argue, that many of these investments are perfectly aligned with our investments process in that they embody durable competitive advantages, above-average growth prospects, and excellent management teams.
A perfect example is Microsoft Corporation (NASDAQ:MSFT), which has grown to become the largest holding in the Growth Fund. Microsoft has a near monopoly on the office software productivity market with its Microsoft Office Suite. The company’s Azure platform is a leader in cloud computing and has been steadily gaining share. Thanks to its Office and Azure products, the company is deeply embedded within many enterprise IT ecosystems. Therefore, it should be well-positioned to expand its presence within its customer base, as it rolls out premium-price AI solutions. The company is not resting on its laurels and plans on spending an astounding $80 billion in 2025 to build out AI data centers.”
1. Amazon.com (NASDAQ:AMZN)
Number Of Hedge Fund Investors: 338
Steven Dickens from HyperFRAME Research was recently asked about Amazon.com (NASDAQ:AMZN) during a latest program on Schwab Network. He mentioned how Amazon.com (NASDAQ:AMZN) is quickly integrating DeepSeek with its systems and launching new models.
“Last year, just after Thanksgiving, the team graciously gave me a deep dive. This week, we went deep on everything AWS and AI. They’ve got these Nova models—six Frontier models, four for reasoning, and two for content creation—doing fantastically in the benchmarks. So, I think there’s a play there to put AWS in that model discussion. But then they’ve also got this “bring your own large language model” approach with Bedrock. The team demoed what they’re doing with DeepSeek running on AWS. According to them, they’ve now got two or three U.S. companies with those systems in production. They were up within the week. As soon as DeepSeek came out over the weekend, they were demoing it to me that Friday—running DeepSeek on AWS’s Bedrock.”
Despite weak guidance, Amazon could easily surpass $100 billion in operating income within the next two years because of its AWS growth engine. In the latest reported quarter, Amazon Web Services sales jumped 19% and operating profit for the segment jumped 62% in 2024 on an annual basis.
The market is currently forecasting $6.27 per share in profits this year (a 13% YoY growth) and $7.59 per share next year (a 21% YoY growth). Amazon’s stock is priced at a profit multiple of 30.2x. This valuation might look rich, but when we incorporate AWS growth, the stock seems to have more upside potential.
Alger Spectra Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a renowned online retailer and leader in cloud computing. The company’s Amazon Web Services (AWS) division offers utility-scale cloud solutions that support corporate America’s digital transition. During the quarter, Amazon’s shares contributed to performance as the company reported better-than-expected fiscal third-quarter results, with revenues and earnings beating analyst estimates. Operating margins expanded to 11%, driven by efficiency gains in logistics and robust AWS performance. Notably, AWS revenue growth accelerated during the quarter, along with recording its highest-ever operating margin of 38.1%, driven by easing cloud cost optimizations, renewed workload migrations, and an increasing contribution from AI workloads. On their earnings call, management highlighted plans to increase capital expenditures to enhance their technology infrastructure, catering to the surging demand for AI-driven computing.”
While we acknowledge the potential of Amazon.com (NASDAQ:AMZN), our conviction lies in the belief that under the radar 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also look at the Top 9 AI News and Ratings Sending Shockwaves and 10 AI Stocks Surging on News and Analyst Calls.
