Artificial-intelligence bulls have been running the floor this past week, and it’s evident that the optimism is here to stay. However, in the case that it wears down, the market may face a significant headwind.
According to the latest Sevens report, a fading enthusiasm for AI stocks is bad news for the market, even if the economy remains stable. The note pointed to steep declines in two AI bellwethers, C3.ai and CoreWeave, who plunged after soft guidance and disappointing results respectively.
“Those moves put a question in my head… What happens to this market if AI loses momentum?”
-Sevens Report.
Even though investors are focused on economic data, tariffs, and Fed policy, the report has cautioned that “the economy could stay resilient… but AI begins to disappoint and the market drops despite macroeconomic stability.”
Five stocks, notably Nvidia, Microsoft, Meta, Broadcom, and Palantir, have accounted for 56% of the S&P 500’s 10.8% year-to-date gain, it said.
“C3.ai and CoreWeave’s declines are a reminder that the AI revolution is continuing to mature and that execution will be important going forward,” Sevens said, warning that “if AI enthusiasm begins to fade, this market will face a headwind regardless of whether the economy is stable.”
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 Q1 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).
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10. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 17
BigBear.ai Holdings, Inc. (NYSE:BBAI) ) is one of the 10 AI Stocks Making Headlines This Week. On August 14, the company announced the successful integration of its Pangiam® Threat Detection solution with Smiths Detection’s HI-SCAN 6040 CTiX computed tomography screening systems.
The integrated system is now available for airports worldwide, aiming to deliver real-time detection of prohibited items in luggage, and also improve overall security operations. BigBear.ai reported that the solution has completed testing and is being trialed at multiple international airports.
Originally developed under the “Project Dartmouth” initiative, the Pangiam® Threat Detection platform is characterized by an open architecture that supports integration with several third-party scanning hardware, detection algorithms, and decision support tools.
“Our ability to interoperate with Smiths Detection equipment brings together best-in-class technologies to accelerate threat detection and streamline screening workflows. By connecting BigBear.ai’s platform with Smiths Detection’s advanced CT scanners, we’re helping airports adopt open architecture solutions that adapt quickly to emerging threats, while also improving throughput and the passenger experience.”
-Kevin McAleenan, CEO of BigBear.ai.
BigBear.ai Holdings, Inc. (NYSE:BBAI) is an artificial intelligence specialist that provides decision intelligence solutions for national security, digital identity, supply chain and logistics, enterprise operations, and manned-unmanned teaming in autonomous systems.
9. Coherent Corp. (NYSE:COHR)
Number of Hedge Fund Holders: 61
Coherent Corp. (NYSE:COHR) is one of the 10 AI Stocks Making Headlines This Week. On August 14, Rosenblatt lowered the firm’s price target on the stock to $135 from $150 and kept a Buy rating on the shares. The rating affirmation follows Coherent’s fiscal Q4 report.
According to Rosenblatt, the company tends to guide conservatively. However, it does not see any fundamental impairment to the positive thesis following the earnings report.
The firm did acknowledge that competitor Lumentum has gained steam with its stronger near-term performance in laser chip, OCS, and CPO sales categories.
“We would note that Coherent management tends to guide conservatively. We do not think there is a fundamental impairment to the positive thesis. Lumentum has grabbed the momentum with stronger relative near-term performance in laser chip, OCS, and CPO sales. Nevertheless, we like the industry thesis and competitive environment, and think both LITE and COHR will do well.”
Even though Coherent is subject to this competitive pressure, Rosenblatt anticipates it to “catch up in these key AI Optical categories over the course of FY26 and into FY27.” Moreover, it believes both Lumentum and Coherent will execute well in the industry.
Coherent Corp. (NYSE:COHR) is an American manufacturer of optical materials and semiconductors.
