According to the latest Sevens Report, divergence between AI chipmakers and the broader equity market may be pointing toward early risks of an “AI bubble.”
Therefore, investors are being advised to monitor the semiconductor sector for signs of a market peak.
“Every bubble in modern market history has been based on a narrative. That potentially bubble-inflating theme is unquestionably AI technology.”
While AI-driven market sentiment is largely driven by chipmaker Nvidia, Sevens argues how solely relying on one stock can be misleading.
“There are a lot of various factors that can impact a single stock, including a ‘cult following’… a dynamic that has appeared to have emerged with NVDA as well.”
Instead of reliance on one stock, the firm believes it is better to watch the Philadelphia Semiconductor Index (SOX), which includes multiple AI-related chipmakers such as AMD, Qualcomm, and more.
“It would be much more prudent to keep tabs on the broader-based semiconductor index, SOX.”
They explain that the SOX hasn’t had a new high since July 2024. This is despite S&P 500 being up roughly 13% over the same period.
“If AI remains the primary source of bullish optimism… this market is in trouble and at risk of rolling over sooner than later.”
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 Q1 2025.
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An analyst studying charts and graphs in her office, pouring over details of the company’s portfolio performance benchmarking.
10. Pony AI Inc. (NASDAQ:PONY)
Number of Hedge Fund Holders: 13
Pony AI Inc. (NASDAQ:PONY) is one of the 10 AI Stocks Analysts Are Watching Closely. On August 4, UBS analyst Paul Gong initiates coverage on the stock with a Buy rating and a $20 price target.
According to UBS analysts, Pony is best positioned for China’s robotaxi commercialization considering it is the only robotaxi company to initiate commercial fee-charging and driverless operations in all four tier-one Chinese cities.
The firm came away impressed from test drives, particularly looking at the company’s ability to handle complicated road situations without human help.
“We initiate coverage with a Buy rating and a PT of US$20, implying 53% upside potential. Pony is the first and only robotaxi company to start commercial fee-charging and driverless robotaxi operations in all four tier 1 cities in China. During our test drives in Guangzhou and Shenzhen, Pony impressed us with its capability in handling complicated road situations without human intervention. We forecast a 2025-30 sales CAGR of 96% on Pony’s robotaxi technology and operating scaling efforts.”
Pony AI Inc. (NASDAQ:PONY) specializes in autonomous mobility, offering AI-driven robotruck and robotaxi services, intelligent driving software, and vehicle integration 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 Closely. On July 31, Raymond James analyst Srini Pajjuri raised the price target on the stock to $165.00 (from $140.00) while maintaining an “Outperform” rating.
The rating affirmation follows Arm’s fiscal first-quarter results, which were in-line with expectations. However, fiscal second-quarter outlook was weaker than anticipated.
Royalty revenue grew 25% year-over-year backed by strong data center performance. This was, despite weakness in smartphone and IoT units. The firm also talked about royalty rate expansion.
“Secular royalty rate expansion remains on track driven by continued ARMv9 adoption. We are also encouraged by early CSS progress (including at Samsung, MSFT, Xiaomi), which essentially doubles the royalty rate. Licensing declined slightly y/y but was better than our model while annualized contract value (ACV) grew 28%.”
Looking ahead, the firm is optimistic on the back of strong v9/CSS adoption and growing Data Center opportunity.
“Management also alluded to expanding into chiplets and full end solutions, which could significantly expand SAM, although margin impact remains unclear. We are lowering EPS partly due to higher OpEx but are raising price target from $140 to $165 on recent peer multiple expansion. Reiterate Outperform.”
Arm Holdings plc (NASDAQ:ARM) is a semiconductor and software design company that designs and manufactures semiconductor technology and other related products.
8. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 44
Bloom Energy Corporation (NYSE:BE) is one of the 10 AI Stocks Analysts Are Watching Closely. On August 1st, BMO Capital analyst Ameet Thakkar raised the price target on the stock to $33.00 (from $18.00) while maintaining a “Market Perform” rating.
Bloom Energy reported its second quarter 2025 financial results on July 31st, which was the third straight quarter of quarterly record revenue and profits for the company. The firm beat revenue estimates ($401.2M versus the consensus estimate of $376.24M).
“2Q results came in ahead of our estimates. Importantly, service gross margins improved further, which given large service backlog is positive as margins here have historically been weak. Order momentum within data center appears strong as evidenced by recent Oracle announcement and potential role in Crusoe/Tallgrass data center project in WY driving shares +39% since 7/23/25 announcement. That said, 2Q and YTD cash burn again significantly negative and with BE shares trading at 37x and 22x our 2026 and 2027 EBITDA estimate, we remain Market Perform. Raising target to $33.”
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.
7. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 82
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the 10 AI Stocks Analysts Are Watching Closely. On July 31, Cantor Fitzgerald analyst C.J. Muse reiterated a “Neutral” rating on the stock with a $150.00 price target.
The rating affirmation follows Qualcomm’s quarterly report where the chipmaker announced revenues of $10.4 billion and earnings per share of $2.77. These figures slightly exceeded consensus estimates of $10.3 billion and $2.71.
Looking ahead, guidance for the September quarter was also raised to $10.7 billion in revenue and $2.85 in earnings per share, surpassing analyst expectations.
“QCOM reported a modest beat ($10.4B/$2.77 vs. cons $10.3B/$2.71) and raise ($10.7B/$2.85 vs cons $10.6B/$2.83) despite fears of pull-ins setting up for a Sept Q miss. In fact, mgmt. noted no signs of tariff-related pull-ins currently (a bit surprising given recent commentary from QRVO, MTK, etc.), with handset upside in the Sept Q driven exclusively from the strength of a new product launch.”
The firm discussed how Qualcomm boasts strong positioning in XR/AR markets. Meta’s smart glasses have exceeded expectations while new Snapdragon-powered devices are expected from key partner Xiaomi. The firm is also optimistic that the company is on track to hit the FY26 revenue target of $4B.
“Automotive is also likely ahead of schedule with revenues expected to be ~$1.0B in the September Q, leaving the company well on track to hit the FY26 revenue target of $4B. “
There was some bad news, too.
“As for the bad news, on the call the company guided for typical seasonality into the December Q ex- AAPL – which we believe implies a bit downside to consensus numbers coming in. Also, EBT margins in QCT of 28% in the Sept Q are a clear disappointment and are only likely to get worse as AAPL is fully removed from the model – we believe a primary driver of the after-hours weakness.”
The firm sees better opportunities in other semiconductor stocks right now.
QUALCOMM Incorporated (NASDAQ:QCOM) develops wireless technologies, supplies chips for mobile, automotive, and IoT, licenses patents, and invests in emerging tech.
6. Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders: 84
Datadog, Inc. (NASDAQ:DDOG) is one of the 10 AI Stocks Analysts Are Watching Closely. On August 4, UBS analyst Karl Keirstead reiterated a “Buy” rating on the stock with a $165.00 price target.
The company is expected to report earnings for the fiscal quarter ending June 2025 on 08/07/2025 before market open. The firm believes that Datadog is heading into earnings with strong cloud tailwinds overblown concerns regarding OpenAI.
However, the recent 54% rally since early April makes the stock less compelling.
“Ahead of Datadog’s 2Q25 print on Thursday morning, we review the key debates, including overall observability software spending trends, the health of the OpenAI-Datadog relationship and the impact of the (slightly) disappointing AWS results. While the 54% rally in the stock since early-April (the shares are back to 12x/42x on CY26E revs/FCF) makes the set-up less compelling, we still lean positive given Datadog’s correlation to a very healthy cloud infra market as well as our view that the Street is over-indexing too negative on the OpenAI risk.”
Datadog, Inc. (NASDAQ:DDOG) offers a cloud-based SaaS platform for monitoring and analytics, specializing in cloud computing and AI-powered cybersecurity products.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 104
Tesla, Inc. (NASDAQ:TSLA) is one of the 10 AI Stocks Analysts Are Watching Closely. On August 4, Piper Sandler analyst Alexander Potter reiterated an Overweight rating on the stock with a $400.00 price target.
The firm said investors shouldn’t be over-reacting to headlines surrounding Tesla’s recent Autopilot-related jury verdict in Florida. It believes the case is less significant than it seems.
“In our years covering TSLA, we’ve learned to ignore headlines related to Autopilot liability. But the robotaxi roll-out has breathed new life into this topic, and we feel compelled to comment on recent media intrigue. On Friday, when a jury in Florida found Tesla partially liable for a 2019 crash, headlines began proliferating, referring to a “stunning rebuke”, a “massive blow”, and a $243M obligation. In our view, these headlines paint an unrealistically negative picture. In short, we don’t think shareholders should be losing sleep over this.”
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives.
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 159
Apple Inc. (NASDAQ:AAPL) is one of the 10 AI Stocks Analysts Are Watching Closely. On August 4, BofA Securities analyst Wamsi Mohan reiterated a Buy rating on the stock with a $240.00 price target.
According to the firm, Apple may lose half of the $20 bn along with annual payment from Google if it is not required to pay Apple anything related to search.
“In our opinion, if Google is mandated to not pay Apple for anything related to search, then Apple could potentially lose half of the $20bn+ annual payment from Google. This amount is accounted for as part of Apple Services revenue (as Google TAC) and has a high drop-through to the bottom line (it’s a pure royalty type payment).
The firm believes the ruling would only apply to the US, and that Apple should be able to receive payment for search traffic sent to Google outside the US.
“We estimate that Apple may lose half of the $20bn since we believe the judge’s ruling would likely apply only in the U.S. (given the court’s jurisdiction) and we estimate about ½ of Google’s search Ad revenue comes from the U.S. Apple should still be able to get paid for search traffic sent to Google outside the U.S. In this scenario. We estimate that the potential loss $10bn+ would represent about 8% of Apple’s annual operating profit dollars.”
Apple is a technology company known for its consumer electronics, software, and services.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 273
Meta Platforms, Inc. (NASDAQ:META) is one of the 10 AI Stocks Analysts Are Watching Closely. On July 31, BofA Securities analyst Justin Post raised the price target on the stock to $900.00 (from $775.00) while maintaining a “Buy” rating.
Post’s optimism stems from Meta being a top AI beneficiary. The price target for the stock has been raised on the back of BofA’s higher 2026 earnings per share estimates and an increased price-to-earnings multiple of 27x due to higher revenue growth expectations and artificial intelligence opportunities.
“Raising revenues, expenses and 2026E EPS by 12% A strong 3Q outlook suggests AI investments are delivering results & we think street will remain optimistic on future revenue upside potential. We are raising estimates reflecting higher users, usage & monetization.”
The firm also raised its estimates for revenue and earnings per share.
“For 2025E, we raise rev. by 5% to $199bn & EPS by 11% to $29.73. For 2026E, we raise rev. by 9% to $237bn, expenses by 8% to $143bn (+26% y/y) and EPS by 12% to $32.63. We raise PO to $900 (from $775) based on higher 2026 EPS & higher 27x multiple (vs 26x prior) reflecting higher rev growth & AI opportunity.”
Meta’s AI investments have been delivering results with increasing usage, AI ad stack integrations, and advertising opportunities acting as growth drivers for the second half of the year.
“A growing list of new ad capabilities reinforces our confidence in the strength of Meta’s AI ad engine. We continue to view Meta as one of the top AI beneficiaries in our coverage & believe the company is well positioned to lead in an emerging agentic AI ecosystem.”
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 284
Microsoft Corporation (NASDAQ:MSFT) is one of the 10 AI Stocks Analysts Are Watching Closely. On July 31, KeyBanc analyst Jackson Ader upgraded the stock from Sector Weight to “Overweight” with a price target of $630.00.
Microsoft’s Azure cloud segment has been accelerating, growing 39% in constant currency by the end of the fiscal year. Azure has been outperforming the firm’s expectations over the recent quarters due to increasing core Cloud migrations among large enterprise customers.
Back in April, capital expenditure concerns and depreciation expenses impact on gross margins had led the firm to downgrade the stock. Microsoft has since laid off 1,000 employees, and there has been no mention of macroeconomic headwinds that analysts had previously feared.
“The reasons for our April downgrade were centered around worries that capex and depreciation expense would hamper gross margins and again inflame the debate on AI return-on-investment, coupled with a skepticism that the Company would have the willingness or ability to continue to cut headcount enough to defend its margins. Plus there were macro concerns picked up in our survey work during the spring that we felt would impact Microsoft more than the rest of the sector. Azure growth accelerated eight full percentage points in constant currency over the second half, from 31% in January to 35% in March to 39% exiting the year. The last two quarters have rendered the debates all but irrelevant for the time being. The Azure segment produced roughly $500M and $700M of upside to guidance in the last two quarters, respectively, the equivalent of finding a Monday.com in your couch cushions. Upside like this is why we do not expect the costs of supporting the Azure business to be debated much for the remainder of the year. Further, there was no material mention of macro headwinds on the call and, since the time of our fears over needing to cut operating expenses in order to defend margins, Microsoft has laid off over 10,000 employees.”
Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 328
Amazon.com, Inc. (NASDAQ:AMZN) is one of the 10 AI Stocks Analysts Are Watching Closely. On August 4, HSBC analyst Paul Rossington reiterated a Buy rating on the stock with a $256.00 price target.
Amazon has had a strong second quarter due to its growth in North America and International divisions. AWS growth was not as hoped, highlighting the need to spend more money to allow AI and cloud growth which are currently at early stages.
“While AWS growth disappointed vs Microsoft’s 4QFY25 result, both updates outline the increased investment required to support growth at what remains the early stages of cloud and AI cycles, for which AMZN, with a leading share of the cloud market, looks well placed. As a result, 2Q25 capex of USD32.2bn was 25% higher than consensus of USD25.6bn. We believe this should now be considered the quarterly run-rate going forward. Cash & cash equivalents of USD61.5bn were broadly in line after taking higher capex into account.”
Amazon.com Inc. (NASDAQ:AMZN) is an American technology company offering e-commerce, cloud computing, and other services, including digital streaming and artificial intelligence solutions.
While we acknowledge the potential of AMZN 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 AMZN and that has 100x upside potential, check out our report about this cheapest AI stock.
READ NEXT: 10 AI Stocks in the Spotlight Today and 10 AI Stocks Analysts Are Tracking Closely
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