Is China finally gaining supremacy in the AI arms race? Not quite, but executives from some of the top artificial intelligence companies believe that the country needs to tweak its infrastructure and boost exports to stay ahead in the game.
In a US Senate hearing held last Thursday, American AI giants’ leaders stressed that even though the US is ahead in the AI race, Washington needs to boost infrastructure and champion AI chip exports to maintain its supremacy over Beijing.
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The U.S. Senate Commerce Committee, chaired by Republican Senator Ted Cruz, is aiming to reduce the regulatory barriers to artificial intelligence in the U.S. This is particularly after China managed to woo the world with its AI advancements, such as cheaper and efficient AI models from DeepSeek and an advanced AI chip from Huawei.
The US tech industry is using these concerns to push the Trump administration toward favourable policies, including loosening the limits on the export of AI chips.
“The number-one factor that will define whether the U.S. or China wins this race is whose technology is most broadly adopted in the rest of the world. The lesson from Huawei and 5G is that whoever gets there first will be difficult to supplant”.
-Microsoft President Brad Smith
Sam Altman, CEO of OpenAI, also testified at the hearing. He stated how he believes societal advances from AI will accelerate in the next few years through U.S. innovation. However, he also stated that “investment in infrastructure is critical.”
In a written testimony reviewed earlier by Reuters, it was reported how the AI leaders would also be urging U.S. lawmakers to streamline federal permitting for artificial intelligence energy needs and initiate more government data sets for AI training.
“America’s advanced economy relies on 50-year-old infrastructure that cannot meet the increasing electricity demands driven by AI, reshoring of manufacturing, and increased electrification.”
-Brad Smith’s written testimony for a Senate Commerce Committee hearing on “Winning the AI Race”.
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 Q4 2024.
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: 11
SoundHound AI, Inc. (NASDAQ:SOUN) is a voice artificial intelligence company offering voice AI solutions to businesses. On May 9, Wedbush lowered the firm’s price target on the stock to $15 from $22 but kept an “Outperform” rating on the shares. The firm noted how the company has reported its Q1 earnings, where there was a slight miss on the top line in revenue and a beat on the bottom line. Nevertheless, SoundHound AI continues to capitalize on strong demand for its voice AI solutions.
9. Himax Technologies, Inc. (NASDAQ:HIMX)
Number of Hedge Fund Holders: 13
Himax Technologies, Inc. (NASDAQ:HIMX) a fabless semiconductor company that provides display imaging processing technologies. On Friday, May 9th, Morgan Stanley initiated the stock as “Overweight,” and set a price target of $8.80. The firm stated that the company has “top-line growth and margin expansion.”
“We expect Himax to expand its non-driver IC [integrated circuits] businesses by tapping the cloud AI and edge AI (AI glasses and PC) markets, which bodes well for top-line growth and margin expansion.”
8. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 56
International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products. On May 8, Stifel analysts maintained a “Buy” rating on the stock with a price target set at $290.00. The rating has been issued after the company’s investor event at its annual user conference.
The analysts noted that the event focused on how IBM is using AI and hybrid cloud tools like Red Hat to help businesses adopt AI. Stifel analysts particularly highlighted three areas that can influence IBM’s earnings growth over the short and long term. The first substantial factor that analysts noted for margin expansion and free cash flow (FCF) growth has been IBM’s internal efforts to deploy AI. Through the said deployment, IBM will be able to increase internal investments in areas such as research and development, marketing, and more.
Second, watsonx Orchestrate, IBM’s generative AI and automation solution, was recognized as having the potential to become a commercial product that helps other businesses increase productivity. Finally, the next generation of IBM’s mainframe, z17, was pointed out as a way for IBM to reclaim workloads that have shifted to x86 servers and cloud platforms. The analysts concluded with a positive outlook on IBM, stating that the company’s focus on growth appears stronger now than before.
7. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 63
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. On May 8, the company announced a long-term strategic partnership with The Joint Commission to boost patient safety and healthcare standards. Established in 1951, the Joint Commission is a United States-based nonprofit tax-exempt 501 organization that aims to improve healthcare for the public, in collaboration with other stakeholders. It will be leveraging Palantir’s cutting-edge data analytics and artificial intelligence to improve how healthcare data is collected and used. Hospitals and healthcare organizations will be able to deliver the highest level of patient care through patient wait time reductions, clinical decision-making improvements, and streamlined reimbursement processes.
“The Joint Commission is committed to building the accreditation and certification process of the future, today. This work will improve global health outcomes by utilizing AI to drive performance improvements around the world.”
-Alex Karp,co-founder and chief executive officer of Palantir Technologies.
6. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 70
Marvell Technology, Inc. (NASDAQ:MRVL) engages in the development and production of semiconductors, focusing heavily on data centers.
On May 8, J.P. Morgan analyst Harlan Sur reiterated a “Buy” rating on the stock with a $130.00 price target. Sur has emphasized that Marvell holds a strong position in the ASIC market, especially with major clients like Microsoft and AWS. The company’s custom chip programs, such as the Trainium 3 at AWS and the Maia Gen 2 at Microsoft, are set for major production ramps in 2026.
They also have no loss of market share to competitors. The firm further noted how Marvell has major growth potential in the AI sector as exemplified by recent wins in AI accelerator programs and other advanced chip designs. In particular, its AI and networking segments are anticipated to bring in $4 billion in AI revenues this year.
5. Arista Networks, Inc. (NYSE:ANET)
Number of Hedge Fund Holders: 78
Arista Networks, Inc. (NYSE:ANET) develops, markets, and sells cloud networking solutions. On May 7, Bank of America reiterated the stock as “Buy.” The firm said it’s standing by Arista following earnings on Tuesday. “
We remain positive on management’s ability to execute, the company’s technological differentiation, product positioning, and its [total addressable market] growing to $60bn by 2027.”
On Wall Street, analysts have an average price target of $108.08 on ANET stock, which implies an upside of 25% from current levels.
4. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 95
AppLovin Corporation (NASDAQ:APP) provides a leading marketing platform powered by AI technology. On May 8, Goldman Sachs analyst Eric Sheridan reiterated a “Neutral” rating on the stock following the first-quarter earnings report and raised the price target from $335 to $435. The company reported quarterly sales of $1.48 billion, surpassing the consensus estimate of $1.38 billion. Meanwhile, adjusted earnings per share of $1.67 beat the consensus estimate of $1.45.
Analyst Sheridan’s rating update follows the company’s first-quarter revenue beat driven by continued success with its AI-powered Axon 2.0 platform and its push into the e-commerce opportunity. The firm strongly believes in the company’s ability to outperform the average growth of the advertising and marketing industry. It also expects that AppLovin’s diverse business portfolio will continue to bring strong margins in the normalized mobile ads and mobile gaming market. Sheridan has projected second-quarter revenue of $1.51 billion and an EPS of $2.12.
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
On May 8, Bloomberg News reported that the company is developing specialized chips to power future devices, including its first smart glasses, artificial intelligence servers, and new MacBooks. According to the report, Apple has made considerable progress on the chip that it is developing for smart glasses. These chips are expected to compete with Meta’s Ray-Ban models. Apple aims to begin mass production of the glasses processor by the end of next year or in 2027, which means that the glasses may hit the market in roughly two years.
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 223
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services. On Friday, May 9th, UBS reiterated the stock as “Buy” with a $180.00 price target. The firm said that it is standing by the stock after the Taiwan Ministry of Finance released April export data. However, it remains cautious on the results of the export data despite April being another “strong month.”
“Although unclear to what extent this reflects tariff pull-ins rather than underlying strength, we express caution on the positive read-through for NVDA as the data has not been predictive over the past several Qs and continues to decouple by as much as mid-teens in either direction in recent years.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 339
Amazon.com Inc. (NASDAQ:AMZN) is an American technology company offering e-commerce, cloud computing, and other services, including digital streaming and artificial intelligence solutions. On May 9, Wedbush reiterated Amazon, Alphabet, and Microsoft as “Outperform.” The firm said that Amazon, Alphabet and Microsoft remain well-positioned.
“The stalwart cloud/hyper scale players have been another instrumental part of this first key phase of the AI Revolution being led by Microsoft and now also seeing Google (GCP) and Amazon (AWS) finding major cloud and AI momentum”.
Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $236 implies a 22% upside, however, the Street-high target of $290 implies an upside of 50%.
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