According to Morgan Stanley, 60% of CIOs anticipate having generative AI workloads in production by end-2025. Their top priorities are going to be employee productivity, labor savings and customer-facing tools.
With artificial intelligence adoption aggressively accelerating across industries, companies are keen on leveraging it for functions such as fraud detection, predictive maintenance, autonomous robotics, virtual assistants, and more.
Keeping this in mind, Morgan Stanley screened its coverage universe to create five ways of finding good AI-related investments. These companies include those who flaunt AI at their core, have improving AI relevance, high pricing power, undervaluation in options market, or high-quality large cap characteristics.
The names include Nvidia, Microsoft, Apple, Amazon, Meta, Alphabet, Shopify, Walmart, UnitedHealth, and BlackRock.
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. SoundHound AI, Inc. (NASDAQ:SOUN)
Number of Hedge Fund Holders: 18
SoundHound AI, Inc. (NASDAQ:SOUN) is one of the 10 AI Stocks Making Waves on Wall Street. On July 31st, SoundHound AI and Acrelec, a leader in quick service restaurant (QSR) technology, announced a strategic partnership to bring advanced, voice-enabled drive-thru systems to restaurants worldwide.
SoundHound’s Dynamic Drive-Thru voice AI technology will work alongside Acrelec’s content management system and digital signage enclosures to deliver complete next-generation drive-thru ecosystems.
Customers will be able to use the integrated solution to place orders seamlessly by means of an automated voice assistant. The assistant will process requests and send them directly to the point-of-sale system.
This partnership between SoundHound AI and Acrelec aims to offer customers with greater speed and convenience while enabling labor optimization so that employees can focus on restaurant operations while being available when needed.
“As restaurants continue to turn to AI to meet rising customer expectations and alleviate staffing pressures, we’re excited to partner with Acrelec to deliver impactful AI solutions at scale. Together, we’re helping brands modernize the drive-thru and deliver seamless, future-ready experiences.”
-Michael Lauricella, VP of Channel Partnerships at SoundHound AI.
SoundHound AI, Inc. (NASDAQ:SOUN) is a voice artificial intelligence company offering voice AI solutions to businesses.
9. CoreWeave, Inc. (NASDAQ:CRWV)
Number of Hedge Fund Holders: 36
CoreWeave, Inc. (NASDAQ:CRWV) is one of the 10 AI Stocks Making Waves on Wall Street. On July 31, Citi upgraded the stock to Buy from Neutral, citing Microsoft’s robust earnings report.
Analysts led by Tyler Radke upgraded the stock to Buy/High-Risk and also removed its 90-day downside catalyst watch on the company.
“We are upgrading CRWV to Buy/High-Risk and removing our 90-day downside catalyst watch with shares down -45% from the peak and -32% since the M & A announcement. Though we still expect some trading volatility into the lockup expiry starting on August 15th, we come away with a much stronger fundamental view on the demand picture highlighted by MSFT…”
CoreWeave, Inc. (NASDAQ:CRWV) is a cloud platform provider that provides equipment for AI and other computing purposes.
8. Arm Holdings plc (NASDAQ:ARM)
Number of Hedge Fund Holders: 42
Arm Holdings plc (NASDAQ:ARM) is one of the 10 AI Stocks Making Waves on Wall Street. On July 31, Benchmark analyst Cody Acree reiterated a Hold rating on the stock without a price target.
Bechmark noted that Arm has delivered “a very respectable quarter”, delivering robust growth across major metrics. Even though the report and outlook aligned with Street expectations, it failed to offer upside that investors had grown accustomed to since the company’s debut.
“Although Arm turned in a very respectable quarter, its second best ever, with solid growth across most its major metrics, the report and outlook were just in-line with Street expectations and its EPS guidance was light by $0.02, at the midpoint, on higher expected R&D spending. With the stock down about 8% after hours, the lack of upside to estimates looks to have disappointed investors, who had become used to Arm delivering strong beat and raise reports every quarter since the company came public in 2023, except for now the past two quarters where their outlook was softer than anticipated.”
The in-line results are a consequence of a softer smartphone market and a slight 1% annual decline in licensing revenue after a strong previous quarter.
“While there were many positives in this quarter, we believe investors will once again need time to fully consider the details of this report, with the company’s shares likely lacking a material positive catalyst for at least the short-term.”
The firm reiterated its hold rating, looking for improving market trends and a possibly more attractive valuation.
Arm Holdings plc (NASDAQ:ARM) is a semiconductor and software design company that designs and manufactures semiconductor technology and other related products.
7. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Fund Holders: 77
Palo Alto Networks, Inc. (NASDAQ:PANW) is one of the 10 AI Stocks Making Waves on Wall Street. On July 31, KeyBanc analyst Eric Heath downgraded the stock from Overweight to “Sector Weight”.
The rating downgrade follows news that Palo Alto is acquiring CyberArk in an estimated $25 billion deal. In particular, the firm has talked about platformization strategy concerns with CyberArk.
Heath talked about four key strategic concerns.
“We are downgrading shares of PANW to Sector Weight given four key strategic concerns following the announced acquisition of CyberArk. First, we don’t think there are meaningful synergies between identity and a broad platform vendor focused on network and SecOps. Second, we think customers will prefer to use an independent vendor solely focused on identity. Third, unlike prior instances when Palo expanded into new markets, we don’t see this benefiting from either a replacement cycle, a first mover advantage into a new market, or as a natural extension to an existing product. Fourth, we’ve had some increasing concerns recently following some customer and partner checks suggesting more aggressive behavior on pricing increases.”
Heath further noted that the firm would get more constructive on the shares if:
- There is substantial demand for the existing NGS offerings to drive meaningful subscription revenue acceleration.
- AI agents are put into production and PAM [Privileged Access Management] vendors are the foremost manner customers choose to secure them
- Success with CyberArk
- Analysts had visibility to free cash flow, or FCF, margin expansion beyond 37.5%.
Palo Alto Networks, Inc. (NASDAQ:PANW) is a leader in AI-powered cybersecurity.
6. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 82
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the 10 AI Stocks Making Waves on Wall Street. On July 31, Benchmark analyst Cody Acree reiterated a “Buy” rating on the stock with a $200.00 price target.
The firm noted how Qualcomm’s recent quarterly performance was “very clean,” with the company reporting growth across all major business categories. However, there have been major concerns about the financial impact of losing Apple’s business.
The company has, however, communicated the said issue effectively, and there has been sufficient opportunity for them to factor this in their models and valuations, the firm noted.
Qualcomm shares were weak after its earnings report as investors were disappointed that it’s earnings per share (EPS) guidance mid-point only matched Street estimates instead of exceeding them.
“Automotive grew 21% annually IoT grew 24%, and even Handsets managed to grow 7%, driven by demand for Snapdragon 8 Elite platform in premium-tier handsets. While a big part of the company’s current and recent weakness is the result of lingering investor fears regarding the long-term financial impact of the loss of Apple’s business. We believe the company has been communicating this issue well with the Street for quite some time and analysts and investors have had ample opportunity to factor the event into models and estimates, and ultimately investors have factored this into Qualcomm depressed valuation. During this same time, Qualcomm has been aggressively pursuing areas of diversification, with Autos now at $1 billion of quarterly contribution and IoT at almost $1.7 billion.”
QUALCOMM Incorporated (NASDAQ:QCOM) develops wireless technologies, supplies chips for mobile, automotive, and IoT, licenses patents, and invests in emerging tech.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 104
Tesla, Inc. (NASDAQ:TSLA) is one of the 10 AI Stocks Making Waves on Wall Street. On July 31, Wolfe Research analyst Emmanuel Rosner reiterated a “Peerperform” rating on the stock without a price target.
According to the firm, near-term Street estimates for the stock appear high, particularly for 2025 and 2026. Free cash flow is also likely to remain under pressure even though in the company’s energy business could be a vital factor.
“TSLA shares are down 21% YTD, below the broader S&P up 8% and RIVN down 2%, with Ford up 9% and GM down 2%. Near-term, Street estimates still appear high, especially for 2025 and 2026. And FCF is likely to remain under pressure, with strong growth in the company’s burgeoning Energy business a key swing factor. That said, this name trades more around the narrative than the numbers. “
Nevertheless, the firm tactically sees an improving narrative.
“Tesla has several catalysts coming w/r/t FSD and robotaxi, including an expansion of their AV service into several new US markets (San Francisco, Nevada, Arizona, Florida, etc). The company plans to unlock hands-free / eyes-off autonomy for FSD owners in select US locations by YE25. Supervised FSD in China and Europe is expected to launch over the next ~12 months. And Optimus is expected to enter scale production in 2026.”
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives.
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 159
Apple Inc. (NASDAQ:AAPL) is one of the 10 AI Stocks Making Waves on Wall Street. On July 30, Jefferies analyst Edison Lee reiterated a Hold rating on the stock with a $188.32 price target
According to the analysts, Apple may increase prices for the upcoming iPhone line-up due to strong second-quarter demand and increasing cost pressures.
“We saw more evidence of strong iPhone demand in 2Q25, as key US telcos reported ~22% growth in equipment sales in 2Q driven by pull-in, the highest in the last 6 Qs. So CP/IDC’s reported growth (4%/1.5%) may be an under-estimate. Separately, we expect a US$50 selling price hike for iPhone 17 Slim/P/PM to offset higher component costs and China tariff. Others such as India tariff, sectorial tariff and lower yield in India are not yet covered.”
The firm believes that the price hike “may barely cover the above cost increases.”
Apple is a technology company known for its consumer electronics, software, and services.
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 212
NVIDIA Corporation (NASDAQ:NVDA) is one of the 10 AI Stocks Making Waves on Wall Street. On July 31, Citi reiterated Nvidia and Broadcom as buy and Advanced Micro Devices as neutral.
The firm believes that all three stocks are beneficiaries of Microsoft and Meta’s increased capex.
“We believe AVGO and AMD will be the primary beneficiaries of Microsoft’s and Meta’s increased capex. We note that Microsoft is roughly 8% of AMD’s sales and Meta is roughly 2% of AVGO’s sales. Citi expects cloud data center capex to grow 35% YoY in 2025 and 15% YoY in 2026. We view this as positive for AI-exposed stocks such as AVGO, AMD, MU, and NVDA.”
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 273
Meta Platforms, Inc. (NASDAQ:META) is one of the 10 AI Stocks Making Waves on Wall Street. On July 31, Morgan Stanley analyst Brian Nowak raised the price target on the stock to $850.00 (from $750.00) while maintaining an “Overweight” rating.
According to the firm, improvements in GPU-enabled algorithmic are helping drive better-than-expected engagement and monetization metrics. This is, it believes, evident in Meta’s second-quarter results and third-quarter guidance.
“Super Core and Superintelligence… and More to Come: META’s 2Q results and 3Q guide speak to how continued GPU-enabled algorithmic improvements and advances are driving even better-than-expected lifts to engagement and monetization… as our ‘25/’26 revenue estimates rise by ~3%/4%. ’25/’26 EPS rises by 5%/9%.
The firm further highlighted how Meta has been increasing investments in core operations and long-term projects. It’s improving core business can fund these initiatives, and boost profitability at the same time.
“META’s investment is stepping up (in core and long-term projects)… but the continuously improving core can fund this… while also driving higher profitability. “
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 284
Microsoft Corporation (NASDAQ:MSFT) is one of the 10 AI Stocks Making Waves on Wall Street. On July 31, Morgan Stanley analyst Keith Weiss raised the price target on the stock to $582.00 (from $530.00) while maintaining an “Overweight” rating.
The rating affirmation by Morgan Stanley is backed by durable margins at Microsoft, with the company ending FY25 with operating margins at 45.6%.
The firm also noted how capital expenditures have been aggressive, and cloud revenue contribution has been growing. However, analysis at Morgan Stanley reveals that gross margins are currently 100 basis points higher than FY20 levels.
“There are multiple components of this improving margin equation including: 1) while mixing down with lower-margin business like Azure, the margins within these businesses are improving as Microsoft finds ways to run them more efficiently (see the 90% token growth comment above); 2) extending the useful life of the infrastructure given an expansive portfolio of solutions with varying resource needs; and 3) optimizing lower-growth areas to fund the higher-growth portions of the portfolio – More Personal Computing revenues grew 9% YoY, while operating income grew 33% YoY. With headcount roughly flat exiting FY25 and management guiding to flat operating margins in FY26, this trend looks poised to continue. With Productivity and Business Processes growing 14% cc and Intelligent Cloud growing 25% cc, we are likely far from seeing a ‘fully optimized’ Microsoft.”
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.
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