According to Bret Taylor, co-founder of the AI startup Sierra, AI is “probably” a bubble drawing both “smart money” and “dumb money” to fund competitors across every layer of the tech stack. Describing himself as an AI optimistic, he believes that the free market will ultimately determine which AI players are serving the best products.
When everyone knows that AI is going to have a huge impact on the economy across a huge range of industries and workflows, money is plentiful..I think over the next few years, you’ll see a correction, you also see consolidation, but I don’t think you can get innovation without that kind of messy competition.
-Taylor told CNBC at the World Economic Forum in Davos, Switzerland.
Taylor believes that AI is going to have a huge impact across sectors, but adoption is going to take time as industries adjust, regulations evolve, and supporting infrastructure is built out.
If we are in an AI bubble as Taylor and numerous others believe, head of Google’s parent firm Alphabet Sundar Pichai believes every company is going to be impacted.
I think no company is going to be immune, including us.
Pichai also noted how even though the growth of AI investment had been an “extraordinary moment”, there has also been some “irrationality” in the current AI boom.
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. The hedge fund data is as of Q3 2025.
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10. SAP SE (NYSE:SAP)
Number of Hedge Fund Holders: 34
SAP SE (NYSE:SAP) is one of the 10 AI Stocks Analysts Are Watching. On January 20, HSBC analyst Abhishek Shukla initiated coverage on the stock with a Hold rating and a price target of EUR178. The firm noted that SAP’s robust fundamentals and cloud-driven growth are already reflected in the share price, leaving room for limited upside.
HSBC noted how SAP’s valuation is already a reflection of its leadership in the ERP market and a robust double-digit earnings growth outlook. The firm forecasts its revenue to grow at a CAGR of 9.6% over 2025 to 2028, particularly as customers transition from on-premise software to the cloud.
It estimates 5% of on-premise customers to make the shift each year, slightly faster than recent years (about 4.5% over 2022 to 2025). These moves typically generate a revenue uplift of around 2.5 times.
At the same time, HSBC also flagged how the market may be too overoptimistic about how quickly customers migrate and the extent to which it boosts revenues and margins. An estimated 60% of SAP’s on-premise customers have yet to begin migrating to the cloud, even though maintenance fees are expected to rise in 2027 and support will end by 2030.
Rising competition, analysts flagged, may lead to customers delaying cloud upgrades. As such, current cloud backlog has shown passive growth, which is why the firm will look to fourth-quarter 2025 results for clearer signals.
SAP SE (NYSE:SAP) is a leader in ERP software that leverages artificial intelligence to enhance its enterprise resource planning (ERP) solutions.
9. Arm Holdings plc (NASDAQ:ARM)
Number of Hedge Fund Holders: 42
Arm Holdings plc (NASDAQ:ARM) is one of the 10 AI Stocks Analysts Are Watching. On January 21, Susquehanna analyst Christopher Rolland upgraded the stock from Neutral to “Positive” and maintained a price target of $150. The firm sees the recent pullback as a buying opportunity driven by robust growth drivers, particularly AI silicon initiatives and server CPU expansion.
Susquehanna’s upgrade on ARM comes despite recent market concerns about higher memory prices impacting the Mobile and PC markets. Previously, these concerns had led to several competitor downgrades, pressuring ARM’s share price.
The firm views this sell-off as an opportunity, citing two company-changing initiatives as key catalysts behind the upgrade. These include the development of an AI XPI ASIC in partnership with SoftBank and Broadcom for OpenAI, as well as a custom sever CPU, which is likely for Meta, marking its first full-silicon offering and meaningful expansion of its data center addressable market.
Other positives working in favor of the company include the migration from v8 to v9 products, early volume ramp of high-royalty CSS-based Aps, continued server CPU share gains at hyperscalers, and higher royalty rates driven by doubling of core counts and adoption of DC CSS designs.
Susquehanna acknowledges that a royalty reset is coming for 2026 models due to memory-driven headwinds in Mobile and PC markets, it believes these challenges are “well known” and that the subdued sentiment doesn’t seem to align with upcoming catalysts.
As such, we argue that depressed investor/sell-side sentiment and the stock’s recent ~40% correction stand in stark juxtaposition with these important coming initiatives that we believe could accelerate growth and royalties well beyond Arm’s model’s ~10% royalty contribution today. These catalysts should spur shares well and underpin our upgrade from Neutral to Positive, while we reiterate our $150 price target (27.5x EV/sales).
Arm Holdings plc (NASDAQ:ARM) is a semiconductor and software design company that designs and manufactures semiconductor technology and other related products.
8. Super Micro Computer, Inc. (NASDAQ:SMCI)
Number of Hedge Fund Holders: 42
Super Micro Computer, Inc. (NASDAQ:SMCI) is one of the 10 AI Stocks Analysts Are Watching. On January 22, BofA Securities analyst Ruplu Bhattacharya reiterated an “Underperform” rating with a $34.00 price target. The firm sees robust AI server demand for SMCI, but cautions about margin profile and execution risks limiting upside.
BofA noted that while its revenue estimates for FY26/27 are already above Street expectations, it sees potential for further upside. There is robust demand for AI servers and racks, with SMCI bearing the potential to witness growth from existing and new customers both.
However, the firm also cautioned how the market remains very competitive, and that future large deals may come at low margins amid aggressive bidding. SMCI ramped the GB300 platform in the December quarter (F2Q26), although revenue recognition of the large $12 billion design win announced last year would depend on manufacturing yield and timing of shipments.
Looking ahead, the firm sees margins remaining pressures, and keeps it estimates unchanged.
We see margins remaining pressured by overhead costs, expedite costs, and investments in additional engineering support and services, and so future revenue growth could be low-calorie. Reiterate Underperform. No change to estimates. PO stays at $34 on 15x our C26E EPS estimate of $2.24.
Super Micro Computer, Inc. (NASDAQ:SMCI) designs and manufactures high-performance server and storage solutions for data centers, cloud computing, AI, and edge computing worldwide.
7. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 66
International Business Machines Corporation (NYSE:IBM) is one of the 10 AI Stocks Analysts Are Watching. On January 22, Stifel analyst David Grossman reiterated a Buy rating on the stock with a $325.00 price target. The firm sees IBM as a safe compounder benefiting from software-led growth, margin expansion potential, and even upside from its post-mainframe cycle anniversary.
According to the research firm, IBM is trading at a 40% premium to equal-weight S&P 500 multiple, broadly in line with its long-term average range of 20-55%, but above the pre-2025 trend of around 10-20%.
This re-rating is a reflection of several factors, including better software execution, margin improvement, defensive characteristics, and possibly the mainframe cycle effect.
Stifel anticipates organic software growth of around 7-8%, consistent with 2025 performance. Software acquisitions are also likely to provide organic growth tailwinds into 2027. Meanwhile, services fundamentals, which represent around 32% of revenue, are viewed as bottoming and showing signs of modest improvement.
The firm sees continued scope for margin expansion in years 2026/2027. Stifel noted that it is maintaining its 2026 estimates, which are broadly in line with consensus. The Confluent acquisition has not yet closed and therefore isn’t reflected in estimates, and is expected to be modestly dilutive.
We are maintaining our 2026 estimates (revenue +4%, cc margins +75bp, EPS +8%/$12.23, FCF +7%/$15bn), consensus largely in line. Confluent acquisition not closed or reflected in estimates, which we expect to be modestly dilutive to 2026/2027 EPS/FCF (known). We estimate stronger USD reduced 2026 f/x tailwind from 90bp to 40bp. We continue to recommend IBM for defensive minded investors.
International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products.
6. Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 66
Accenture plc (NYSE:ACN) is one of the 10 AI Stocks Analysts Are Watching. On January 22, Berenberg analyst Meha Pau initiates coverage on the stock with a Buy rating and a price target of $313. According to the firm, a retest is underway in the IT services sector, with AI reshaping demand in favor of large, embedded vendors.
AI is disrupting the labor-intensive delivery model, the firm noted, enabling employee productivity to be a key differentiator. Berenberg highlighted Cognizant as one of the leading peers adapting to the change, while Accenture has also been showing clear productivity gains.
The firm particularly noted how Accenture holds a premium position in the IT services industry’s AI-led transformation. This transformation is underpinned by it its scale, first-mover advantages, and deep ecosystem partnerships which serve as key factors empowering the company to secure major enterprise transformation deals.
Even though the IT services sector has been experiencing softer revenue growth, the firm noted that Accenture’s bookings remain above the company’s 2022-2024 averages. Moreover, improving value per contract signal better medium-term revenue visibility.
Berenberg anticipates Accenture to sustain its share-gaining momentum, being a strategic partner for clients.
Accenture plc (NYSE:ACN) offers strategy and consulting services.
5. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 81
Palantir Technologies Inc. (NASDAQ:PLTR) is one of the 10 AI Stocks Analysts Are Watching. On January 22, Phillip Securities analyst Alif Fahmi initiated coverage on the stock with a Buy rating and a price target of $208. The firm holds a strong conviction in Palantir’s AI-driven growth, US market strength, and attractive forward valuation.
It anticipates group revenue to grow 47% year on year to $4.2 billion in FY25. With revenue mix shifting, commercial revenue is likely to increase 51%, compared with government revenue of 43% as more companies increasingly adopt artificial intelligence and use cases expand beyond defense.
Net profit is forecast to nearly double in FY25e. US growth, which is Palantir’s largest market at 66% of revenue, is expected to grow 66% year over year in FY25. This growth is supported by government demand amid geopolitical tensions and increasing US intelligence spending, as well as stronger commercial demand.
US growth, Palantir’s largest market at 66% of revenue, is accelerating 66% YoY in FY25e, driven by government demand amid geopolitical tensions and rising US intelligence spending, and by US Commercial deal values surging ~2x YoY in 3Q25 on AIP adoption and ontology-driven productivity. We initiate coverage of Palantir with a DCF-based target price of US$208.
The firm’s model assumes a WACC of 8.3%, a risk-free rate of 4.2%, and a terminal growth rate of 8%. With the forward P/E sitting at 170x as of January 16, 2026; the firm noted that it could allow a potential rerating supported by improving fundamentals and a growing addressable market.
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems.
4. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 105
Micron Technology, Inc. (NASDAQ:MU) is one of the 10 AI Stocks Analysts Are Watching. On January 22, William Blair analyst Sebastien Naji initiated coverage on the stock with an “Outperform” rating. The firm sees Micron well-positioned to deliver sharp profit growth amid AI-fueled memory bottlenecks.
According to William Blair, the AI-driven memory boom is sustainable, at least for the next couple of years.
While valuation increasingly embeds significant growth expectations, we believe shares can continue to work on the back of a multiyear, AI-driven product cycle characterized by tight supply. We estimate a fair value for shares of roughly $450.
The firm believes that a multiyear memory upcycle will lift pricing and margins, particularly by HBM (high-bandwidth memory). Customers have been pursuing higher-performance products with higher average selling prices, particularly because memory has become a bottleneck in AI systems.
The firm anticipates Micron to grow its HBM revenue 164% in fiscal 2026 and 40% in fiscal 2027, being the number two player in the market. Since HBM chips cost more and have better margins than Micron’s other products, its sales are likely to result in a 275% rise in adjusted EPS over the next two years, it noted.
William Blair forecasts MU to report an adjusted earnings of $41.77 a share in fiscal 2027, up from $8.29 in fiscal 2025.
Memory Supercycle Driving Record Profitability. Micron has been a U.S. semiconductor stalwart serving as one of the three major global memory suppliers (alongside Samsung and SK Hynix). Access to memory has become a key bottleneck in AI racks/systems, increasing demand for more performant, higher bandwidth memory solutions. Against a backdrop of limited supply that is likely to remain in place into 2027, Micron is poised to benefit from significant ASP growth and higher margin products. We expect the company to grow non-GAAP EPS over 275% over the next two years.
Micron Technology, Inc. (NASDAQ:MU) develops and sells memory and storage products for data centers, mobile devices, and various industries worldwide.
3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 120
Tesla, Inc. (NASDAQ:TSLA) is one of the 10 AI Stocks Analysts Are Watching. On January 22, Morgan Stanley analyst Andrew Percoco reiterated an Equalweight rating on the stock with a $425.00 price target. The rating affirmation follows digital insurance company Lemonade’s launch of “Autonomous Car Insurance” that slashes per-mile rates for Tesla’s FSD-engaged driving by approximately 50%.
According to Lemonade, it’s newly launched insurance product marks a significant step forward in “legitimizing autonomous driving, and in particular, Tesla’s Full Self-Driving (FSD) technology.”
The policy serves as a direct link between insurance pricing to miles driven under Tesla’s FSD, which cuts rates by up to 50% for those miles. It differentiates between human-driven and FSD-driven mileage, signaling how its underwriting models recognize autonomous operations as carrying a lower risk.
This is a notable shift in how insurers treat advanced driver-assistance and autonomy features, signaling confidence in real-world driving data, particularly from Tesla’s fleet.
Morgan Stanley’s investor note highlights how Lemonade’s insurance product can encourage increased FSD usage and adoption. Moreover, lower insurance premiums offer financial incentives for drivers to use Tesla’s FSD more frequently, which reinforces Tesla’s value proposition.
Particularly for Tesla, this means that FSD is beginning to gain recognition beyond mere experimentation, transitioning towards its broader acceptance.
As insurers incorporate increasingly granular driving data into pricing, technologies that demonstrably reduce risk should be rewarded faster and more transparently. For Tesla, this marks another step toward external recognition that FSD is moving from an experimental feature to an economically relevant safety system.
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives.
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is one of the 10 AI Stocks Analysts Are Watching. On January 20, Aletheia Capital analyst Warren Lau lowered the price target on the stock to $205.00 (from $215.00) while maintaining a Sell rating.
According to the firm, Apple’s hardware margins have peaked and face pressure until the company raises prices or pushes harder on supplier negotiations. Memory costs are set to triple year-over-year in the first quarter of calendar 2026, with further increases in the second quarter.
The firm believes that the memory budget for the iPhone 17 will jump 80-100% sequentially in the second quarter, followed by a further 30–40% QoQ increase in the third quarter as the tech giant replenishes depleted inventories through January supplier renegotiations.
As a result, it anticipates iPhone17’s Bill of Materials to rise 500–600 basis points in 2Q26E, cutting gross margin by about 400bps, with a further ~250bps decline in the third quarter. Aletheia Capital noted that other hardware products may face even greater margin pressure due to lower profitability.
At the same time, the firm noted how Apple is accelerating its research and development investments focused on AI deployment.
Apple is accelerating R&D investment—up 25–30% YoY—focused on AI deployment, which could dilute operating leverage. Despite these headwinds, iPhone 17 demand remains robust. We have trimmed EPS forecast and cut our target price to $205 (SOTP) from $215.
Apple is a technology company known for its consumer electronics, software, and services.
1. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 219
Alphabet Inc. (NASDAQ:GOOGL) is one of the 10 AI Stocks Analysts Are Watching. On January 22, TD Cowen analyst John Blackledge reiterated a Buy rating on the stock with a $355.00 price target. The firm cited accelerated market expansion plans for the company’s autonomous vehicle unit Waymo.
In an investor note, the firm said that it is raising its Waymo estimates to reflect an accelerating pace of market launches in 2026. It now anticipates that an estimated 6000 vehicles will be offering paired rides across 17 cities by the end of 2026.
These will lead to 28 million paid rides and gross bookings of $463 million, equivalent to about 0.7% of the US rideshare market. Besides the 12 expected city launches in 2026, Waymo is also testing several other markets, TD Cowen noted.
We left GOOG est’s unchanged; PT remains at $355.
Alphabet Inc. (NASDAQ:GOOGL) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses.
While we acknowledge the potential of GOOGL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than GOOGL and that has 100x upside potential, check out our report about this cheapest AI stock.
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