According to Barclays, the U.S. is in the middle of its biggest capex cycle in many decades. This cycle, they noted, has been fueling stock market performance over the past three years.
Artificial intelligence stocks have contributed between 75% and 80% of the S&P 500′s earnings and total performance, with the rally anticipated to continue the year ahead. Easing financial conditions and a more favorable regulatory environment in 2026, noted the firm, will also likely push equity valuations higher.
“When thinking about the critical drivers of risk assets and the economy at large heading into 2026, AI stands head and shoulders above the rest. With AI capex numbers projected to be in the trillions, it’s hard to discount the impact it has already had and the impact it is going to have in the future for companies and investors around the globe,” analyst Andrew Ferremi wrote in a Thursday note to clients.
Ferremi acknowledged that “with the strong wealth gains helped by AI, it leaves the US in particular vulnerable if the AI narrative runs out of steam.”
Overall, the firm believes that AI will remain the dominant force shaping market performance next year.
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. NICE Ltd. (NASDAQ:NICE)
Number of Hedge Fund Holdings: 22
NICE Ltd. (NASDAQ:NICE) is one of the 10 AI Stocks Investors Are Watching. On December 23, Piper Sandler reiterated its Neutral rating on the stock with a $122.00 price target. Firm analysts remain cautious on Cloud ramp feasibility amid pressure on mid-term outlook.
In an investor note, analysts at the firm questioned how NICE can achieve its aggressive Cloud targets for 2028 without major drivers such as new customers, and mergers and acquisitions.
“Is the Cloud ’28 Target Aggressive? Following NICE’s recent analyst day, many have wondered how NICE can achieve the Cloud targets. We took the time to back into what’s implied across the three drivers of new-only, expansion, and M&A. Given this company’s history, we expect a combination of the drivers would be required, including further M&A like the acquisition of Cognigy earlier this year.”
The recent acquisition of Cognigy does give NICE a foothold in conversational AI, the firm noted. However, private competitors such as Sierra.AI and Decagon have stronger momentum. This is why investors remain cautious for now.
“All of these scenarios also embed that the expansion rate comes in better than PSC and current levels, which should be interpreted to being ‘aggressive’. NICE has many options to create shareholder value (see ‘Play is Under Review’), including divesting / selling the FCC business, and we expect the stock to remain pressured given the view around the mid-term targets.”
NICE Ltd. is a technology company that provides AI-powered cloud platforms.
9. Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 66
Accenture plc (NYSE:ACN) is one of the 10 AI Stocks Investors Are Watching. On December 22. Mizuho reiterated an “Outperform” rating on the stock with a $309.00 price target. The rating affirmation follows the company’s fiscal first-quarter 2026 results.
The company beat Wall Street expectations for revenue, supported by robust demand for its artificial intelligence-driven IT services.
Besides robust quarterly revenue, the company maintained its fiscal year 2026 revenue guidance of 2% to 5% growth in constant currency. This includes an estimated 150 basis points from mergers and acquisitions and a roughly 100 basis point headwind from Accenture Federal Services.
According to the firm, the robust quarter and slightly reduced Accenture Federal Services headwind may have had investors anticipating an upward revision to guidance. However, the maintained outlook is most likely a reflection of management conservatism instead of weakening business conditions.
The firm also highlighted ACN’s second consecutive quarter of robust bookings acceleration, a factor investors were concerned about for fiscal 2026. Overall, with the company investing in the accelerating generative AI services market, Mizuho anticipates Accenture to capture an increasing market share.
Accenture plc (NYSE:ACN) offers strategy and consulting services.
8. Reddit, Inc. (NYSE:RDDT)
Number of Hedge Fund Holders: 80
Reddit, Inc. (NYSE:RDDT) is one of the 10 AI Stocks Investors Are Watching. On December 22, Needham reiterated the stock as “Buy” with a $300 price target. The firm said that the stock is firing on all cylinders and is a best idea in 2026.
“We add RDDT to the Conviction List, replacing Roku, which is up 48% YTD in 2025.”
According to the firm, Reddit’s advantage of having 100% human-created content optimizes trust, authenticity, and value to LLMs. The company is already generating over $100M per year in fees from OpenAI and Google’s (GOOGL) Gemini.
“RDDT has no high-quality substitutes at similar scale, which should give RDDT pricing power. We believe RDDT’s data will become table stakes for all GenAI LLMs, over time.”
-Analyst Laura Martin.
This revenue, it noted, may even double with Anthropic and Perplexity fees provided it resolves the lawsuit against the AI startups for alleged misuse of content.
The firm also said while the stock looks stuck for now, its advertising advantages have the capability to change that. Owing to its growing audience, new ad tools, and engaged users, Reddit may grow its advertising revenue at an exorbitant pace.
“Our channel checks with ad buyers suggest that customers value RDDT’s niche communities, high-intent audiences, growing user base, and longer engagement lengths.” -Analyst Laura Martin.
Needham noted that Reddit is the fastest growing company in their coverage.
Reddit, Inc. (NYSE:RDDT) is a social media platform that leverages AI to strengthen search functionality and improve user engagement.
7. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 115
Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the 10 AI Stocks Investors Are Watching. On December 23, Raymond James reiterated the stock as “Outperform,” noting that it has upside following reports that Nvidia plans to resume chip shipments to China. The firm believes that Nvidia and AMD could both see moderate upside from US export approvals.
“In the wake of recent news regarding potential resumption of GPU sales to China, we take the opportunity to assess the potential upside for AMD and NVIDIA. Several moving pieces remain, making it difficult to assess the exact outcome, but in an optimistic scenario, we estimate AMD could see ~$500-800M of revenue upside and ~$0.10-0.20 of non-GAAP EPS upside, and NVDA could see ~$7-12.5B of revenue upside, which translates to ~$0.15-0.30 of non-GAAP EPS upside in 2026.”
US President Donald Trump has recently approved the sale of Nvidia’s H200 GPUs to China, albeit only to “approved customers.”
Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $289.00 implies a 34.87% upside; however, the Street-high target of $380 implies an upside of 77.34%.
6. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 120
Tesla, Inc. (NASDAQ:TSLA) is one of the 10 AI Stocks Investors Are Watching. On December 22, Canaccord Genuity raised its price target on the stock to $551.00 from $482.00 while maintaining a “Buy” rating. Despite near-term delivery softness, the firm sees long-term upside for the stock from autonomy, energy storage, and robotaxi momentum.
The firm acknowledged how delivery expectations for 4Q25 are being revised lower. However, it also noted that the reset in the US EV market will create a foundation for more durable and attractive long-term demand.
The firm also discussed accelerating EV penetration in emerging markets, reinforcing the company’s multi-year growth trajectory beyond the US. Two factors were highlighted as important components for Tesla’s equity story:
“Global progress in FSD and the anticipated rollout of a larger robotaxi fleet in 2026 are increasingly important components of the Tesla equity story and could provide sentiment tailwinds. Recently approved compensation packages for Mr. Musk appear to align incentives and long-term value creation – integrating major platform milestones in autonomy and AI.”
More news about Tesla’s Optimus humanoid robot program in 2026 is also expected to enhance perceptions of the company’s profit opportunities beyond automotive.
“Taken together, these underlying positives outweigh the near-term earnings reset in the valuation framework, supporting an increase in our target price from $482 to $551 even as 4Q25 delivery estimates move lower.”
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives.
5. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 122
Oracle Corporation (NYSE:ORCL) is one of the 10 AI Stocks Investors Are Watching. On December 22, Wells Fargo reaffirmed its ‘Overweight’ rating on the stock with a $280 price target. Firm analysts believe that artificial-intelligence related concerns related to the stock are overblown and that the stock remains undervalued.
Analyst Michael Turrin noted that sentiment for Oracle has skewed more negative in the near term. Some analysts, in particular, have been worrying about Oracle’s high OpenAI exposure and the sustainability of its commits over the next few years.
“Feedback post launch has leaned more bearish, w/ investors asking questions around ORCL’s ability to deliver both from a financing & execution perspective given prior framed targets. We see all of the bad, but hardly any of the good being priced in,”
However, things have started taking a turn for the better, particularly due to Oracle’s deal to run TikTok’s US business.
“More generally, bulls on ORCL: 1) view the sharp pullback as overdone w/ shares back to pre-OpenAI levels, 2) see potential for meaningful market share gains in cloud IaaS, & 3) think AI still v. early innings,”
Overall, the firm is bullish on the stock driven by a sentiment rebound and Oracle’s AI tailwinds.
“Investors are overemphasizing AI and OpenAI risks while underpricing positives, with improving sentiment around Oracle’s TikTok US deal and AI growth prospects supporting the bullish outlook.”
Oracle Corporation (NYSE:ORCL) is a database management and cloud service provider.
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is one of the 10 AI Stocks Investors Are Watching. On December 23, JPMorgan reiterated the stock as “Overweight” and a $305 price target. According to the firm’s survey checks, Apple’s iPhone 17 lead times have moderated by a few days this week from last week.
“In Week 15 of our Apple Product Availability Tracker, lead times across the iPhone 17 series moderated by three days, relative to unchanged lead times observed from Wk14 to Wk15 in the prior year for iPhone 16, with average lead times now tracking at ~3 days, which is in line with the prior year.”
The firm noted that this moderation implies that demand and supply are reaching a balance, and that this may reduce concerns about supply constraints heading into F2Q26.
“The company has in most product cycles reached parity of demand and supply towards the end of the year, and the same appears to be the case with the iPhone 17 series cycle, where the higher y/y demand drove extended delivery times for most part of the post-launch quarter. While the demand-supply parity implies that there will be limited supply constraints to worry about into F2Q26, the robust sell-through for the iPhone 17 series will continue to likely drive higher iPhone units and revenue through the rest of the product cycle.”
Apple is a technology company known for its consumer electronics, software, and services.
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 234
NVIDIA Corporation (NASDAQ:NVDA) is one of the 10 AI Stocks Investors Are Watching. On December 19, Bernstein analyst Stacy Rasgon reiterated an “Outperform” rating on the stock with a $275 price target.
According to the firm, Nvidia is trading at 25-times forward earnings, which puts the stock in the eleventh percentile of valuation over the past 10 years.
“Just How Cheap Is It? Nvidia’s performance has been somewhat challenged as of late…While putting up decent overall performance (with the shares up ~30% YTD), the stock has stagnated since July, and has substantially underperformed the SOX index this year (with the broader semi space up 38% YTD) even as earnings estimates have continued to march ever higher. Consequently, the shares have seen substantial multiple compression with Nvidia’s P/FE falling by 27% through the year, currently sitting just a hair under 25x.
But how cheap is it? 25x P/FE may not seem particularly cheap for your ordinary stock. But this is NVIDIA. For this company, 25x forward EPS would suggest the shares are trading in the 11th percentile of valuation over the last 10 years (i.e., pretty cheap on an absolute basis) (Exhibit 4). And relative to the broader semiconductor industry the situation is much more stark. Relative to the SOX NVDA currently trades at a ~13% discount, in the FIRST percentile; indeed, over the last 10 years there have only been THIRTEEN DAYS where NVDA’s stock traded cheaper relative to the SOX than it is trading now.”
Even though the AI stock has lost some momentum, shares are poised to gain ground in the year ahead, noted the firm. Firm optimism is largely based on capex intentions looking fine, recovering GPU narrative, and Rubin. H200 approvals may also offer some China upside at some point.
“And overall numbers appear likely low in the context of the company’s $500B+ Blackwell/Rubin guidance. Coupled with what appears to be extremely attractive valuation we believe the set-up is looking good into the new year; we would be buyers here.”
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services.
2. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 243
Alphabet Inc. (NASDAQ:GOOGL) is one of the 10 AI Stocks Investors Are Watching. On December 22, BNP Paribas Exane maintained an Outperform rating on the stock with a $355.00 price target.
The rating affirmation follows Alphabet’s agreement to acquire Intersect, which the firm views as a prudent investment to scale its data center footprint.
The tech giant said on Monday that it will acquire Intersect, a provider of data center and energy infrastructure solutions, for $4.75 billion in cash, plus assumed debt. According to BNP Paribas, the acquisition of Intersect will allow Alphabet Inc. to enable faster deployment of data center and generation capacity for itself.
“The acquisition of Intersect is strategically aligned with Alphabet’s accelerating data centre and AI infrastructure needs, helping enable faster deployment of data centre and generation capacity for the company. While we do not view the acquisition as material to numbers near-term, it helps strengthen Alphabet’s long-term AI infrastructure positioning by improving control over energy sourcing and capacity expansion. Overall, we view the deal as a prudent investment to support further AI and cloud growth from here.”
Alphabet Inc. (NASDAQ:GOOGL) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses.
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 273
Meta Platforms, Inc. (NASDAQ:META) is one of the 10 AI Stocks Investors Are Watching. On December 23, Baird reiterated the stock as “Outperform” and cut its price target to $815 per share from $820. Despite the price target cut, Baird believes that investors should buy the dip.
Analyst Colin Sebastian said that Meta has emerged as a controversial “battleground” stock following the release of its third-quarter earnings report. While near-term risks to sentiment still exist, expectations are now in better balance compared to three months ago.
“Reviewing the current bull vs. bear battleground for Meta, we acknowledge further near-term risks to sentiment, but believe embedded expectations are in better balance vs. three months ago, and encourage investors to be opportunistic buyers.”
The firm further said that mixed sentiment may persist heading in 2026, but narrative may shift to become more constructive through the year.
“While mixed sentiment could persist into early 2026 amid margin uncertainty, we believe the narrative can shift more constructively through the year through a possible margin-clearing event; launch of next Llama model; updates to Meta AI; ramping WhatsApp and Threads monetization, etc.” Sebastian wrote.
Meta Platforms has been expanding its advertising capabilities and also invests heavily in artificial intelligence and the metaverse.
While we acknowledge the potential of META 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 META and that has 100x upside potential, check out our report about this cheapest AI stock.
READ NEXT:12 Hot AI Stocks on Wall Street’s Radar and 12 AI Stocks in the Spotlight for Investors.
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