US stocks edged higher on Monday, extending last week’s gains as AI-related deal making and a softer labor market boosted expectations for an interest-rate cut, according to a Reuters report.
Optimism grew that a wave of significant mergers could follow after Fifth Third Bancorp’s deal to buy Comerica in a $10.9 billion all-stock transaction, while AMD shares also surged on news of a partnership with OpenAI.
These stocks have been resilient despite the federal government shutdown entering its sixth straight day, reflecting upon the steady investor demand for tech shares and increasing focus on the upcoming earnings season.
“The current AI infrastructure buildout is structurally more durable than prior large cycles. It’s funded by strong cash flows and AI adoption can happen without costly consumer device upgrades.”
-BofA Securities senior analyst Vivek Arya.
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. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 44
Bloom Energy Corporation (NYSE:BE) is one of the 10 AI Stocks Investors Are Watching Closely. On October 2nd, JPMorgan maintained its “Overweight” rating and more than doubled the price target to $90 per share.
The firm said its standing by BE even as its stock trades at a significant premium on data center demand for its onsite power generation systems.
According to analyst Mark Strouse, investors are struggling with a lack of visibility into Bloom’s backlog considering data center customers don’t allow the company to disclose order details.
However, the firm believes that “positive catalysts remain on the horizon.” The company should log more bookings with existing customers such as AEP and Oracle and capture new opportunities.
Strouse said that Bloom’s factory utiliziation has stood at an estimated 35% to 40% of its one gigawatt capacity over the past year. However, it has been pricing in higher utilization levels.
“In short, we believe risks remain skewed to the upside if BE can secure further order activity,” he said.
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. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders: 58
Lam Research Corporation (NASDAQ:LRCX) is one of the 10 AI Stocks Investors Are Watching Closely. On September 29, Deutsche Bank upgraded the stock to “Buy” from Hold with a price target increase to $150 from $100.
The firm stated that the semis company is best positioned amid a booming semiconductor-equipment market.
In particular, the firm believes that LRCX’s exposure to memory and leading-edge logic chips positions it for growth.
“Despite the impressive move in shares YTD (+77%) and even in the last 3 months (+31%), we believe LRCX is well positioned to outperform peers over the next twelve months given these cyclical and secular tailwinds.”
Lam Research Corporation (NASDAQ:LRCX) is a semiconductor stock that offers semiconductor equipment and services used in the making of integrated circuits.
8. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 82
Intel Corporation (NASDAQ:INTC) is one of the 10 AI Stocks Investors Are Watching Closely. On September 29, Deutsche Bank reiterated the stock as “Hold” and raised its price target to $30 per share from $23.
Intel has had a busy month lately, from multiple equity raises involving the U.S. government and Nvidia, collaborations with Nvidia, the divestiture of Altera, and macro-related impacts such as tariffs and trade restrictions.
Discussing these events, the analysts noted that the company’s recent actions are reflective of an “aggressive pursuit” to strengthen its balance sheet at all costs.
Deutsche Bank is supportive of these moves, stating that Intel exists in a period of high investment for both its product roadmap and continued development of Foundry Services.
“INTC has had a busy month in the news, with multiple equity raises (USG, NVDA, etc.), collaborations (NVDA), divestitures (Altera), and macro related impacts (tariffs and trade restrictions) all acting as event driven catalysts for the stock”
Intel Corporation (NASDAQ:INTC) designs, manufactures, and sells computer products and technologies, delivering data storage, computer, networking, and communications platforms.
7. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 109
AppLovin Corporation (NASDAQ:APP) is one of the 10 AI Stocks Investors Are Watching Closely. On September 29, Morgan Stanley reiterated the stock as “Overweight” and raised its price target to $750 per share from $480.
According to the firm, AppLovin’s self-serve tool for non-gaming, the AXON Ads Manager, is likely to be a “key catalyst” that will prove that the company can “tap into billions of ad dollars outside the game industry.”
“This is a key catalyst to grow its ad business and prove that it can tap into billions of ad dollars outside the game industry.”
It said that a successful launch would be “the most important proof point yet” on the scalability of its non-gaming advertising product.
AppLovin Corporation (NASDAQ:APP) provides a leading marketing platform powered by AI technology.
6. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 115
Tesla, Inc. (NASDAQ:TSLA) is one of the 10 AI Stocks Investors Are Watching Closely. On October 3, Goldman Sachs reiterated the stock as “Equal Weight” and raised the price target to $425 from $395. The firm stated that Tesla’s delivery numbers were better than expected.
“While the expiration of IRA credits will likely be a headwind in 4Q, we see the potential for several events to be positives over the next month including 3Q earnings (which we expect to benefit from the stronger 3Q deliveries and increased Energy deployments), and the 11/6 shareholder meeting.”
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. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 125
Alibaba Group Holding Limited (NYSE:BABA) is one of the 10 AI Stocks Investors Are Watching Closely. On September 29, Morgan Stanley reiterated the stock as “Overweight” and raised its price target to $200 per share from $165. The firm cited accelerating growth in its cloud division and sustained momentum in core operations behind the raise.
“We raise our cloud growth estimates to 32% for F26 and 40% for F27, driven by increased capex, model upgrades, strategic partnerships and accelerated international expansion.”
The firm is more bullish on Alicloud following the company’s Apsara Conference.
“On the supply end, we increase our capex estimates to Rmb130-135bn each year over F26-28, from Rmb100bn-108bn previously, assuming 10-15GW additional datacenter capacity by 2032.”
Morgan Stanley also pointed to “solid demand with the number of tokens doubling every 2-3 months.”
Alibaba Group Holding Limited (NYSE:BABA) is an internet giant that offers e-commerce services in China and internationally.
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 156
Apple Inc. (NASDAQ:AAPL) is one of the 10 AI Stocks Investors Are Watching Closely. On October 3, Jefferies downgraded the stock to “Underperform” from Hold stating that expectations are too high for a foldable iPhone 18 for Apple. It also lowered its price target to $205.16 from $205.82.
Analyst Edison Lee stated that the stock’s current valuation prices in an “overly bullish iPhone outlook.”
“Better demand for iPhone 17, partly due to a price cut on the base model, is already in the price. That has led to excessive expectations on 18 Fold, and the replacement cycle.”
Lee further stated that he is unclear how big of a market there would be for a phone that costs around $2,000. A price-driven replacement cycle is unlikely to be sustainable, particularly one without new features. This could in turn result in margin pressure.
The firm noted how the new iPhone Air, the thinnest iPhone yet, isn’t resonating well with customers which makes “any bullish view on foldable risky.”
Apple is a technology company known for its consumer electronics, software, and services.
3. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 156
Broadcom Inc. (NASDAQ:AVGO) is one of the 10 AI Stocks Investors Are Watching Closely. On October 3rd, Mizuho reiterated the stock as a “Top Pick.” The firm said the stock is on the top picks list.
“AVGO remains an industry leader with strong profitability…”
Following the October 3 reiteration, the firm once again reiterated an Outperform rating on the stock on October 6, with a price target of $410.00. The move came despite investor concerns about potential margin dilution.
Accelerating ASIC revenues and expanding customer engagement has led the firm to term the stock as the “King of AI Custom Silicon.” It recommends customers to buy the stock on the recent pullback.
Broadcom is a technology company uniquely positioned in the AI revolution owing to its custom chip offerings and networking assets.
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 235
NVIDIA Corporation (NASDAQ:NVDA) is one of the 10 AI Stocks Investors Are Watching Closely. On October 3, Bank of America reiterated the stock as “Buy” stating that the stock remains a top idea.
“We continue to prefer NVDA as our top AI pick, levered to the most critical compute (accelerator) and networking (scale-up links/switches, scale-out switches, NICs, DPUs), components of the $1.2tn potential data center capex.”
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 294
Microsoft Corporation (NASDAQ:MSFT) is one of the 10 AI Stocks Investors Are Watching Closely. On October 3, RBC reiterated the stock as “Outperform”
“We think Microsoft’s position as an Al leader stems from its ability to monetize across both infrastructure and applications.”
The firm believes that Microsoft is an AI leader not only from the infrastructure layer but also from end-user applications. This dual strategy enables the company to capture revenue throughout the entire ecosystem.
On the same day, BMO Capital analyst Keith Bachman reiterated a Buy rating on the stock and set a price target of $650.00
Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements.
While we acknowledge the potential of MSFT 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 MSFT and that has 100x upside potential, check out our report about this cheapest AI stock.
READ NEXT: 10 AI Stocks Every Investor Should Watch and 10 Buzzing AI Stocks on Wall Street.
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