According to Bank of America’s October Global Fund Manager Survey, fund managers are positive about stocks but fear that the market may be slipping into an AI-driven bubble.
The increasing expectations for a soft landing have risen to 54%, and optimism related to growth has also been strong.
However, concerns about valuations are growing at the same time, with 60% surveyed investors believing that global equities are overvalued, and about 54% stating that AI-related assets are in bubble territory.
AI has overtaken inflation and geopolitics as the top perceived tail risk, with long gold being the most crowded trade.
“A 2nd wave of inflation (27%), ‘Fed loses independence & US dollar debasement’ (14%), complete the podium of the biggest tail risks this month.”
-BofA strategist Michael Hartnett.
Hartnett also highlighted how the trade war risk (5%) has “eased significantly since peaking in April.” This is when a record 80% surveyed investors recognised it as the single biggest tail risk.
Despite the risks involved, investors believe possible profits are worth it even as positioning stretches. Therefore, they remain confident for now.
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 Q2 2025.
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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
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10. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 44
Bloom Energy Corporation (NYSE:BE) is one of the 10 AI Stocks in Focus on Wall Street. On October 13, Mizuho reiterated its Neutral rating on the stock with a $79.00 price target. The rating affirmation follows Bloom Energy’s announcement of a significant partnership with Brookfield, a leading global investment firm, to build AI factories that can meet compute and power demands of artificial intelligence.
According to the deal, Brookfield will invest up to $5 billion to deploy Bloom’s advanced fuel cell technology, reaffirming Bloom’s role in data center projects. Mizuho estimates reveal that Bloom will supply an estimated one-sixth of Brookfield’s data center power needs over the next five years.
This translates to roughly 200 MW per year of orders. The first order for Europe is anticipated later this year and will likely be approximately 100 MW.
Mizuho now tracks over 850 MW per year of order visibility for Bloom Energy over the next 3-5 years. However, it noted how Bloom still faces manufacturing limits. While current visibility doesn’t support more than 2 GW per year of manufacturing capacity, the firm continues to estimate Bloom will reach 5 GW per year of capacity by 2029.
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.
9. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Fund Holders: 77
Palo Alto Networks, Inc. (NASDAQ:PANW) is one of the 10 AI Stocks in Focus on Wall Street. On October 13, BTIG upgraded the stock to “Buy” from Neutral with a $248 price target. The rating upgrade follows a series of channel checks.
The firm engaged in discussions with seven contacts, which were “surprisingly positive.” Based on checks, the firm is now increasingly optimistic that the company holds the potential to achieve growth targets of 14% total revenue growth and 26% growth in NGS ARR in FY26.
“We spoke with seven contacts on PANW. The partners in our discussions combine for ~$1.2B in annual PANW sales. Feedback was surprisingly positive and improved meaningfully from our work in prior quarters.”
The brokerage also noted how Palo Alto’s pending acquisition of CyberArk may help the company expand into new arenas and sustain growth of more than 20% in identity protection.
Palo Alto Networks, Inc. (NASDAQ:PANW) is a leader in AI-powered cybersecurity.
8. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 81
Applied Materials, Inc. (NASDAQ:AMAT) is one of the 10 AI Stocks in Focus on Wall Street. On October 13, Bank of America upgraded the stock to “Buy” from Neutral with a $250 price target. The firm believes that the semiconductor stock’s valuation is attractive.
The rating upgrade reflects prospects of wafer fab equipment, or WFE, growth in 2026. This would be the first time in four years, driven by robust Dynamic Random Access Memory, or DRAM, investments and an attractive valuation gap to large peers.
The firm has raised its calendar 2025 and 2026 WFE growth estimates by 6% and 9%, respectively.
“We upgrade AMAT to a Buy (from a Neutral) and raise our PO to $250 on prospects of WFE [wafer fab equipment] outgrowth in CY26, the first time in four years, due to robust DRAM investments and an attractive valuation gap to large peers.”
Applied Materials, Inc. (NASDAQ:AMAT) is a leader in materials engineering solutions engaged in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries.
