Investors in the artificial intelligence trade have been frantic ever since the tariff frenzy started. Particularly on April 2, dubbed Liberation Day by President Donald Trump, the administration announced sweeping tariffs that led to significant market volatility and a sharp downturn in stock indices.
While the President may strive to make the United States the “world capital” of artificial intelligence, the aggressive trade and tariff moves that have since followed have been threatening the crucial technology and weakening competition with China.
Executives and experts in AI and data center construction have been worried about how trade levies would significantly increase the cost of constructing, equipping, and operating the data centers that will, in turn, power AI development.
READ ALSO: 10 AI Stocks in the News Today and 10 AI Stocks in the Spotlight This Week.
Fast forward to earnings reports from some of the Big Tech, and it can be noted how investors have been worried more than necessary about the AI trade. Meta and Microsoft, in particular, reported strong quarterly results that demonstrated how artificial intelligence progress won’t necessarily slow amid economic turmoil.
“Few stocks are truly immune to Trump tariffs [and] trade war, but AI is a lot less impacted than investors currently believe. We’re early in a very steep growth curve right now, and that goes for AI infrastructure.”
-Jed Ellerbroek, portfolio manager at Argent Capital Management.
What happens next to AI stocks largely depends on what’s next for tariffs. If it’s better than expected, these and other AI stocks may climb and lift valuations. On the other hand, if tariffs seem high, these stocks could fall further.
Nevertheless, strong companies, particularly the likes of Nvidia and Palantir, are likely to win over the longer term due to their smart innovations. According to Wells Fargo’s Christopher Harvey, it may be time for investors to reenter the trade.
“The group’s risk/reward today is much more attractive than a year ago. We remain in a durable AI investment super cycle.”
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 Q4 2024.
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).
10. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 13
BigBear.ai Holdings, Inc. (NYSE:BBAI) is an artificial intelligence specialist that provides decision intelligence solutions. On May 6th, the company announced a collaboration with Hardy Dynamics, a provider of advanced AI capabilities for defense applications, to support a U.S. Army initiative under Project Linchpin. Project Linchpin is a U.S. Department of Defense (DoD) effort integrating artificial intelligence and machine learning (AI/ML) into future warfighting capabilities. Through the collaboration, BigBear.ai will work as a subcontractor that will help develop next-generation AI technologies. These technologies will enable secure, resilient communication and coordination among unmanned aerial systems. Hardy Dynamics will leverage BigBear.ai’s AI, data, and sensor orchestration platform, ConductorOS, to enable interoperability between various autonomous systems.
“In supporting the U.S. Army’s Project Linchpin, BigBear.ai is advancing the frontiers of AI-powered operations across the defense ecosystem. We are excited to work with Hardy Dynamics to deliver mission-focused, scalable solutions to meet the evolving needs of our warfighters, where they operate. Most importantly, this collaboration is directly aligned to the U.S. Secretary of the Army and Chief of Staff of the Army’s joint Letter to the Force: Army Transformation Initiative, which prioritizes the delivery of warfighting capabilities including ‘close the C-sUAS capability gap’ and ‘Command and control nodes will integrate Artificial Intelligence to accelerate decision-making and preserve the initiative.’ We are at the forefront of this transformation and will deliver.”
-Kevin McAleenan, CEO of BigBear.ai.
9. Strategy Incorporated (NASDAQ:MSTR)
Number of Hedge Fund Holders: 25
Strategy Incorporated (NASDAQ:MSTR) (formerly MicroStrategy Incorporated), offers AI-powered enterprise analytics software and services. Strategy World 2025, the annual flagship conference by the company, officially began on May 5th at the Signia by Hilton and Waldorf Astoria Bonnet Creek in Orlando, Florida. More than 1500 attendees from the world’s leading companies gathered at the conference to discover the latest developments in AI-powered digital information and digital asset strategies.
“Strategy World is where vision meets execution. Bitcoin and AI are the two most transformative technologies of our time, and we’re empowering the world’s forward-thinking organizations with the tools, insights, and technologies they need to lead in the digital age.”
-Phong Le, President & CEO of Strategy.
8. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 60
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. On May 6th, the company announced that it is working with Oracle to bring the power of watsonx, IBM’s flagship portfolio of AI products, to Oracle Cloud Infrastructure (OCI). This move will help the companies to fuel a new era of multi-agentic, AI-driven productivity and efficiency across the enterprise. With AI agents being able to offer a single, easy-to-use interface to complete tasks, IBM’s watsonx Orchestrate AI agent will be available on OCI in July to support multi-agent workflows. Moreover, IBM’s Granite family of AI models will be accessible through OCI Data Science, and IBM Envizi ESG Suite will launch on OCI with an initial release in Saudi Arabia.
“Agents are becoming an important strategic advantage for organizations to optimize operations and deliver better customer and employee experiences. Today’s most advanced agents are able to interact across different systems and processes, unleashing greater productivity and driving wider adoption. The Agentic AI approach IBM is taking with Oracle is a leading example of how the ability to orchestrate agentic workflows across systems can drive significant advantages, streamlining how work gets done and unlocking growth and innovation.”
-Ritu Jyoti, IDC General Manager and Group Vice President.
7. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 63
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. One of the most notable analyst calls on May 6th, Tuesday, was for Palantir Technologies. Wedbush analyst Daniel Ives raised the firm’s price target on the stock to $140 from $120 and kept an “Outperform” rating on the shares. Several analysts have raised their price targets on Palantir after it posted better-than-expected first-quarter results for 2025.
The company posted a figure of $884 million (vs. expectations for $863 million) while adjusted earnings came in line at a profit of $0.13 per share. The company also raised its full-year guidance from its earlier forecast of sales between $3.74 billion and $3.76 billion to now between $3.89 billion and $3.90 billion.
These figures reflect on Palantir’s ability to capitalize on the AI demand with its AIP product moat as well as its recent NATO partnership. The firm’s raised price target reflects its belief in the Palantir story and how Palantir is a core name in the AI Revolution theme over the coming years.
Despite the earnings beat and raised guidance, Palantir’s shares fell about 7% in premarket trading today as the figures failed to meet the high expectations of Wall Street investors. The AI stock could lose more than $19 billion from its market valuation if premarket losses hold.
“We believe we have reached a point where respectable earnings beats and raised guidance aren’t enough to materially move the stock to the upside.”
-Morningstar analyst Mark Giarelli said.
6. Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders: 83
Datadog, Inc. (NASDAQ:DDOG) offers a cloud-based SaaS platform for monitoring and analytics, specializing in cloud computing and AI-powered cybersecurity products. On May 5, the company announced that it had acquired Eppo, a feature flagging and experimentation platform, to enhance its existing Product Analytics suite. The acquisition will enable Datadog to create a full end-to-end product analytics solution on one platform with the unified approach allowing engineers to track code changes with feature flags, data science leaders and product managers to help design and measure impact with experiments, and business analysts to use Datadog’s Product Analytics suite to understand overall product usage and business outcomes. With the AI workload growing, Eppo’s experimentation capabilities will help developers safely scale complex systems and accelerate the safe roll-out of changes.
“The use of multiple AI models increases the complexity of deploying applications in production. This complexity makes it difficult for developers to quantify the business impact of different models, agent behaviors, prompts or UI changes. Experimentation solves this correlation and measurement problem, enabling teams to compare multiple models side-by-side, determine user engagement against cost tradeoffs and ultimately build AI products that deliver measurable value.”
-Michael Whetten, VP of Product at Datadog.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 126
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives. On May 6, Goldman Sachs reiterated the stock as “Neutral” with a $235 price target. The firm said that China remains Tesla’s largest market and that it is bullish on the company’s full self-driving capabilities despite its existing software having only minimal local data adaptations. Nevertheless, it is sticking with its neutral rating right now.
“We believe that Tesla’s ability to leverage its Full Self Driving software in China will be important for the stock going forward given the size of the China market for vehicles, the increasingly competitive landscape for ADAS [advanced driver assistance systems] software and robotaxi offerings in the region and the role that future profits from AI enabled products like FSD have for Tesla’s valuation.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology company. On May 6, the stock was revisited by a Wall Street analyst, Wamsi Mohan from Bank of America Securities, who maintained a “Buy” rating on the stock with a $235.00 price target. Apple’s App Store revenues have demonstrated substantial growth with a notable rise in dollars per download.
This, in turn, indicates a healthy demand for Apple’s digital services. App Store continues to contribute significantly to Apple’s overall revenue despite legal rulings that could allow developers to bypass Apple’s commission structure. Moreover, the productivity category in the App Store has also shown considerable growth owing to popular applications such as ChatGPT.
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 223
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services. Bank of America reiterated the stock as “Buy” and said that Nvidia remains one of the most highly owned names in semiconductors. Nevertheless, it is still “relatively underweight.”
“Notably, despite confidence in NVDA’s l-t [long term] growth prospects, the stock’s weighting still remains relatively low at 1.05x, up slightly from the 1.01x level cited in the last update.”
2. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 234
Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses. On May 6, Optimum, an American telecommunications brand, and Google Cloud announced an expanded collaboration that will help develop an intelligent and personalized customer experience across web interactions, mobile apps, call centers, and in-person kiosks. Optimum will leverage Google Cloud’s generative AI (gen AI) technology – including Google’s Customer Engagement Suite, Vertex AI platform, and Gemini models – to boost customer service and develop stronger relationships with customers.
By building human-centered tools with Google Cloud’s gen AI technology and Optimum’s virtual AI agent, AVA, Optimum will help improve customer interactions and make the job easier for employees by offering personalized support, offering more understanding interactions, creating seamless experiences, and using AI-driven insights to enhance service quality.
“Customer service is one of the most critical differentiators for telecommunications companies today. By using our AI-powered solutions, Optimum is ensuring that its customers receive the support they need, when and where they need it, making interactions more intuitive, and ultimately, more satisfying. We’re pleased to help Optimum continue to build upon its incredible customer experience.”
-Oliver Parker, vice president, Global Generative AI GTM, Google Cloud.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 339
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. On May 6, Tigress Financial raised the firm’s price target on the stock to $305 from $290 and kept a “Buy” rating on the shares following the Q1 report. According to the firm, Amazon is well-positioned to deal with the economic and consumer spending environment due to its strong e-commerce and fulfillment capabilities. The analyst told investors in a research note that the company continues to lean into artificial intelligence integration and innovation to boost revenue, cash flow growth, and increase shareholder value.
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 doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. 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 this cheapest AI stock.
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