According to analysts at Capital Economics, the S&P 500 isn’t likely to lose momentum any time soon despite years of strong gains and all-time highs. Enthusiasm around artificial intelligence, together with factors such as Fed policy, and economic growth, will likely lead it further.
“It can be tempting to think the risks will be skewed to the downside,” wrote the firm, noting the recent all-time high. “But 12-month inflation-adjusted returns since 1964have been slightly stronger following new all-time highs compared to the average day.”
While the data is “often sensitive to time horizons,” the analysts said that they “don’t find any compelling evidence that real returns are significantly different to average after hitting all-time highs.”
“The upshot is that while headlines about the level and momentum of the stock market are understandable, we aren’t convinced either has a clear implication for future returns.”
Instead, they believe drivers such as Fed rate cuts, GDP growth, valuations, and new technologies will impact upon performance.
“On past form, the macro backdrop we envisage over the next year…looks consistent with decent returns,” wrote Capital Economics. “But given starting valuations and the fact 125bps worth of cuts are priced, we think the cyclical backdrop is consistent with the S&P 500 drifting sideways.”
However, they believe “this relatively neutral cyclical backdrop” will coincide with the enthusiasm for AI.
“We continue to think that the rally in AI-related stocks has room to run, lifting the S&P 500 both in absolute terms and relative to markets elsewhere,” concluded Capital Economics.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. SoundHound AI, Inc. (NASDAQ:SOUN)
Number of Hedge Fund Holders: 18
SoundHound AI, Inc. (NASDAQ:SOUN) is one of the 10 AI Stocks In The Spotlight For Investors. On September 9, the company announced the acquisition of Interactions, an artificial intelligence leader in customer service and workflow orchestration. The deal will allow SoundHound to strengthen its growing leadership in Agentic AI and improve its market penetration in customer service.
The company announced that major new powerhouse brands will be introduced to SoundHound’s customer portfolio through the strategic deal. These include global consumer icons, large technology device brands, insurers, automakers, and other famous Fortune 100 companies across industries.
Interactions offers businesses with AI-powered voice assistants that improve customer engagement and productivity. By integrating with SoundHound’s existing solutions, its solutions will help grow the company’s enterprise business.
The merged entity will hold an estimated 400 patents and over $270 million in cash, with no outstanding debt. It is expected that the transaction will offer immediate accretion to operating profitability.
“We’re rapidly moving towards a future of AI agents, where voice and conversational AI are absolutely integral to high quality customer service. This has always been SoundHound’s vision, and we’re committed to working with the very best to get there. Interactions is unquestionably a pioneer in the field, with a client roster with incredible breadth and depth. Bringing them on board makes SoundHound even stronger as we establish the company as a true leader for the new AI era.”
-Keyvan Mohajer, CEO & Co-Founder of SoundHound AI.
SoundHound AI, Inc. (NASDAQ:SOUN) is a voice artificial intelligence company offering voice AI solutions to businesses.
9. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 33
Baidu, Inc. (NASDAQ:BIDU) is one of the 10 AI Stocks In The Spotlight For Investors. On September 10, the company released an updated version of its proprietary reasoning showcasing capabilities similar to advanced AI systems from DeepSeek, OpenAI and Google.
According to Baidu chief technology officer Wang Haifeng, third-party AI benchmarks reveal that the firm’s X1.1 reasoning model had surpassed the performance of DeepSeek-R1, while it matched OpenAI’s GPT-5 and Google’s Gemini 2.5 Pro.
Wang further said that the model has shown a 34.8 per cent improvement in knowledge accuracy, as well as enhanced agentic capabilities and instruction compliance based on a “mixed reinforcement learning” process.
According to South China Morning Post, the closed-source X1.1 model is now available to corporate clients through Baidu’s cloud computing platform. Meanwhile, individual users can gain access through Baidu’s Ernie Bot website and app.
“From reasoning improvements to slow, deep thinking and multimodal abilities, [our] model’s performance and efficiency have increased.”
-Wang.
Baidu, Inc. (NASDAQ:BIDU) is a Chinese internet giant and AI pioneer, known for its noteworthy investments in artificial intelligence technology and its position as the dominant search engine within the country.
8. Rubrik, Inc. (NYSE:RBRK)
Number of Hedge Fund Holders: 52
Rubrik, Inc. (NYSE:RBRK) is one of the 10 AI Stocks In The Spotlight For Investors. On September 10, Mizuho analyst Gregg Moskowitz reiterated a Neutral rating on the stock with a $97.00 price target. The neutral rating comes despite Rubrik’s strong quarterly results.
According to the company, the company’s subscription annual recurring revenue grew 36% from last year, better than Street forecasts of 33%. Net new subscriptions were $71 million, up 12% but a slower growth than the 23% improvement in the previous quarter.
Cloud subscriptions were particularly strong, growing 57% year-over-year. Management also raised its full-year guidance.
Analysts believe that Rubrik’s focus on data security and ransomware sets it apart from others. At the same time, it believes that shares are fairly priced considering that the stock has risen 200% since its IPO in mind 2024 and 51% this year alone.
“More broadly, we firmly believe that RBRK’s intense focus on protecting and operationalizing data, along with best-in-class ransomware defenses, has enabled it to significantly separate from most legacy and next-gen vendors in this space. With that said, as we noted in our recent downgrade note, with RBRK having appreciated a material 200%+ since its mid-2024 IPO and 51% YTD, we view the shares as fairly valued. We reiterate our Neutral rating and $97 PT.”
Rubrik, Inc. (NYSE:RBRK) provides data security solutions to individuals and businesses worldwide.
7. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 78
ASML Holding N.V. (NASDAQ:ASML) is one of the 10 AI Stocks In The Spotlight For Investors. On September 11, ASML Holding NV and France-based AI leader Mistral AI announced a strategic partnership to explore AI model integration across ASML’s product portfolio as well as research, development and operations.
This will benefit ASML customers to benefit from faster time to market and higher performance holistic lithography systems.
ASML is also leading a €1.3 billion Series C funding round for Mistral AI which gives it an estimated 11% ownership in the AI firm on a fully diluted basis. The investment aims to support ASML’s development and strengthen their long-term partnership benefits.
“The collaboration between Mistral AI and ASML aims to generate clear benefits for ASML customers through innovative products and solutions enabled by AI, and will offer potential for joint research to address future opportunities. We believe that this strategic partnership with Mistral AI, which goes beyond a traditional vendor-client relationship, is the best way to capture this significant opportunity. We also believe that this collaboration is value enhancing to Mistral AI.”
-ASML President and Chief Executive Officer Christophe Fouquet.
ASML Holding N.V. (NASDAQ:ASML) develops and sells advanced semiconductor equipment, including lithography, metrology, and inspection systems for chip manufacturing.
6. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 78
Palantir Technologies Inc. (NASDAQ:PLTR) is one of the 10 AI Stocks In The Spotlight For Investors. On September 9, UBS analyst Karl Keirstead reiterated a Neutral rating and $165.00 price target on the stock following research on the company’s demand trends.
Speaking with three sources, the firm came away constructive on the stock, particularly Palantir’s fundamentals. It didn’t find any pressure from commercial or government segments either.
“Over the last few weeks we spoke with 3 checks (one of Palantir’s largest customers as well as two Palantir services partners) to stay current on demand trends and we also recently met with the CFOs of Palantir as well as privately-held Anduril to sharpen our view of both stories as well as Defense spending trends. Bottom line, we remain very constructive on Palantir’s fundamentals and didn’t pick up any evidence of emerging pressure in the commercial or government segments.”
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems.
5. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 104
Adobe Inc. (NASDAQ:ADBE) is one of the 10 AI Stocks In The Spotlight For Investors. On September 9, Oppenheimer analyst Brian Schwartz lowered the price target on the stock to $460.00 (from $500.00) while maintaining an Outperform rating.
The rating, issued as part of a fiscal Q3 earnings preview, reflects low expectations into the earnings print considering how its valuation has “a lot of bad news.”
Nevertheless, Q3 report may not change investor sentiment and that Adobe is unlikely to offer any product or financial updates until its MAX customer conference.
“Bottom Line: Sentiment and expectations remain low on Adobe over growth concerns and with it residing in the less defensible business cohort in the AI transition by investors. Nevertheless, there are drivers to sustain top-line growth with faster earnings growth. Further, ADBE looks washed out with multiples trading at five-year lows. This suggests limited downside despite well-understood concerns over AI positioning, competition, and penetration. Lower PT to $460 from $500 on group-multiple compression.”
4. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 115
Tesla, Inc. (NASDAQ:TSLA) is one of the 10 AI Stocks In The Spotlight For Investors. On September 10, Wells Fargo analyst Colin Langan reiterated the stock as “Underweight” and noted that Tesla’s sales data remains weak.
“Available TSLA August sales data remains weak despite the end of IRA on Sept 30. Of the 3 major mkts we track, Aug TSLA deliveries are trending down 9% y/y, though 37% higher m/m.”
The firm further added that Q3 deliveries are still at risk as compared to consensus. The firm holds an Underweight rating with a $120 price target.
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives.
3. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 124
Oracle Corporation (NYSE:ORCL) is one of the 10 AI Stocks In The Spotlight For Investors. On September 10, UBS analyst Karl Keirstead raised the price target on the stock to $360.00 (from $280.00) while maintaining a Buy rating.
The rating affirmation follows Oracle’s disclosure of $317 billion in incremental backlog, supporting the growth forecast for its cloud infrastructure segment to expand from $10 billion in fiscal year 2025 to $144 billion in fiscal year 2030.
While the company hasn’t disclosed its customers, the firm believes that the largest boost comes from OpenAI. On the same day, The Wall Street Journal reported that indeed, OpenAI has signed a contract to purchase $300 billion in computing power over the course of five years from Oracle.
“The key take from the quarter is really the $317b of incremental backlog, that drives the growth guide for Oracle’s cloud infra segment – 14x over the next 5 years from $10b in FY25 to $144b in FY30. Oracle didn’t disclose customers but we’re assuming that the largest boost is from OpenAI ($100b+), alongside xAI and Meta. This diversity (not just OpenAI, training AND inference) lowers the stock’s risk profile, although concentration with OpenAI will still be high. The guide for FY26 operating income growth of mid-teens (we modeled 8%) was another positive and speaks to tight opex/headcount control. While our FY28+ revs estimates are moving up sharply, we’re assuming some portion of the cloud infra growth comes via database migrations and hence on-prem database support revs could go ex-growth. Net, for FY29, we’re raising our revs estimate from $134b to $163b, our OM estimate from 38% to 37% and our non-GAAP EPS estimate from $12.51 to $13.98.”
Oracle Corporation (NYSE:ORCL) is a database management and cloud service provider.
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 156
Apple Inc. (NASDAQ:AAPL) is one of the 10 AI Stocks In The Spotlight For Investors. On September 10, Wedbush analyst Daniel Ives reiterated an Outperform rating on the stock with a $270.00 price target. The firm believes that significant upgrade opportunities are ahead of the tech giant following Apple Event 2025.
The firm said that an identified approximately 315 million iPhone users out of Apple’s global user base of 1.5 billion have not upgraded their devices in over four years. This, it believes, represents a substantial potential for future sales growth.
“The Spark for a New Era at Apple. We estimate roughly 315 million iPhone users of 1.5 billion users worldwide have not upgraded their phones in over 4 years speaking to an upgrade opportunity on the horizon for Cupertino with China front and center. The company’s focus on much-improved internal product efficiencies balanced with bold redesigns and practical new features interwoven with Apple Intelligence sets Apple up to launch towards an eventual super cycle over the next 12 to 18 months while the company looks to improve its AI strategy that’s holding the stock back.”
Apple is a technology company known for its consumer electronics, software, and services.
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 235
NVIDIA Corporation (NASDAQ:NVDA) is one of the 10 AI Stocks In The Spotlight For Investors. On September 10, Wells Fargo reiterated the stock as “Overweight” stating that the bank is sticking with the stock after it displayed its latest graphic processing unit chip at an AI conference.
“Our Overweight rating is based on our positive stance on NVIDIA’s competitive positioning in gaming GPUs and expanding growth opportunities in data center, HPC [high performance computing], and emerging / expanding AI opportunities (autonomous vehicles, healthcare, robotics, etc.).”
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services.
While we acknowledge the potential of NVDA 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 NVDA and that has 100x upside potential, check out our report about this cheapest AI stock.
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