Money is pouring into artificial intelligence at unprecedented levels, alleviating initial concerns. Soaring investments from big tech companies, national governments, and venture capitalists come amid a technological shift from conventional large language models toward reasoning models and AI agents.
The shift follows the DeepSeek breakthrough that showed it’s possible to reduce the amount of resources needed to run large language models. While DeepSeek did cause panic by showing it could develop an AI model at a fraction of the costs of other models, the same has not stopped capital inflows into AI infrastructure.
That’s evident in the $500 billion Stargate project that promises to enhance US data center capacity. Joining the Fray is Chinese Internet giant Alibaba, which plans to invest $52 billion in AI and cloud infrastructure, an amount that is much more than what the company has spent over the past decade. Major hyperscalers plan to spend $215 billion in capital expenditures collectively in 2025 on AI data centers, affirming that the AI investment spree is alive and growing.
“I think it’s entirely possible that frontier labs need to keep pumping in staggering amounts of money in order to push the frontier forward,” says Chris Taylor, CEO of Fractional AI, a San Francisco-based startup.
Investors of all stripes, from corporates to venture capitalists, are going crazy over the widespread belief that artificial intelligence is the next big thing in technology. According to preliminary PitchBook data for the fourth quarter of 2024, AI-focused companies accounted for 50.8% of global venture capital funding in value terms, nearly doubling the share from the same quarter in 2023.
According to Bill Janeway, a venture capitalist and economist, the VC industry’s herd mentality is reflected in the concentration of investment in AI.
“This is what we see again and again, whenever any of these new technological innovations have a broad range of potential applications. But nobody knows yet [which] will prove to be sustainable on a longer basis,” Janeway said.
The investment spree comes as businesses increasingly use AI models as they learn more about their capabilities. This is causing the demand for processing power to change from training models to using them, or what the AI industry refers to as inference.
According to Tuhin Srivastava, CEO of Baseten, a company that offers AI computing resources to other businesses, this trend toward inference is already well underway. His clients include tech firms that use AI in their services and apps,
By developing ever-more-capable AI models, large AI labs at companies like OpenAI, Google, and Meta continue competing against each other. According to Tomasz Tunguz, a venture capitalist and founder of Theory Ventures, the goal is to take as much of the still-developing AI market share as possible at any cost. Therefore, demand for AI models could increase by a factor of a trillion or more on the development of AI-specific microchips that deliver efficient systems.
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10. Hyperscale Data, Inc. (NYSE:GPUS)
Number of Hedge Fund Holders: N/A
Hyperscale Data, Inc. (NYSE:GPUS) is an industrial company providing advanced data center solutions that support the growing artificial intelligence (AI) industry. It offers high-capacity data center services with robust infrastructure designed to handle AI applications’ significant computational power and storage needs. The company partnered with Northland Capital Markets on February 24, to evaluate strategic alternatives for its Michigan data center.
Engaging Northland Capital markets underscores Hyperscale Data, Inc.’s (NYSE:GPUS) commitment to unlocking value for stockholders amid growing demand for data center facilities and capacity amid the AI boom. Having successfully advised on more than $6 billion in high-performance computing data center-related transactions in the last 12 months, Northland brings a wealth of experience to the data center industry. They specialize in helping clients with a bitcoin mining focus move to high-performance computing-related data centres.
William B. Horne, CEO of Hyperscale Data, Inc. (NYSE:GPUS), commented, “We are excited to partner with Northland, a highly respected investment bank with deep industry expertise. We are confident in its ability to help us evaluate and execute the best path forward for our Michigan Facility, which sits on 34.5 acres and currently has approximately 30 megawatts of available power and has reached an agreement in principle with the local utility enabling Alliance Cloud Services, LLC, an indirectly wholly owned subsidiary of the Company, to increase its power capacity to approximately 300 megawatts.”
9. Tempus AI, Inc. (NASDAQ:TEM)
Number of Hedge Fund Holders: 17
Tempus AI, Inc. (NASDAQ:TEM) is a technology company leveraging AI-driven solutions to revolutionize the healthcare sector. Its Intelligent Diagnostics suite leverages advanced AI, including generative AI, to enhance laboratory tests’ accuracy, personalization, and effectiveness. On February 25, the company delivered solid fourth quarter and full year 2024 results that affirm progress in transforming precision medicine through AI.
Strong market adoption of both genomic testing and data services was the catalyst behind 35.87% revenue growth in Q4 to $200.7 million. Tempus AI, Inc. (NASDAQ:TEM) also delivered a 49.7% increase in gross profit, affirming the impact of increased pricing power and operational efficiency.
“We believe our investments in AI have positioned us well for the future, as technologies that seemed unimaginable a few short years ago increasingly allow us to make our diagnostics intelligent, helping patients live longer and healthier lives. We remain on track to achieve our key financial milestones, with expected robust revenue growth and positive Adjusted EBITDA in 2025,” said Eric Lefkofsky, Founder and CEO of Tempus.
8. GDS Holdings Ltd (NASDAQ:GDS)
Number of Hedge Fund Holders: 32
GDS Holdings Ltd (NASDAQ:GDS) is a company that builds and runs data centers in China and Southeast Asia. It offers various services, including colocation, managed hosting, and managed cloud services. It also provides the data center infrastructure necessary to power AI applications and meet the high computing demands of artificial intelligence workloads. On February 24, Edison Lee, an analyst at Jefferies, downgraded the stock to a Hold from a Buy and hiked the price target to $45 from $27.06.
The price target increase comes amid expectations that GDS Holdings Ltd (NASDAQ:GDS) will be one of the beneficiaries amid China’s expected artificial intelligence capital expenditure increase. The Capex increase will be fueled by heightened demand for internet data centers as China is on the brink of a significant AI infrastructure spending spree among cloud service providers.
While China is expected to spend more than $100 billion a year on AI infrastructure, GDS Holdings Ltd (NASDAQ:GDS) will be one of the beneficiaries, having generated $1.56 billion in revenue over the past 12 months and exhibiting robust revenue growth of 12%.
7. Lumen Technologies, Inc. (NYSE:LUMN)
Number of Hedge Fund Holders: 44
Lumen Technologies, Inc. (NYSE:LUMN) is a communication services company that offers integrated products and services to businesses and residential customers. The company also helps businesses leverage artificial intelligence by providing networking edge cloud security and other services that support AI processing. On February 21, Erick Luebchow of Wells Fargo upgraded the stock from an “Underweight” rating to an “Equal Weight” with a $5 price target.
Wells Fargo upgraded the stock, citing several positives for the telecom giant, including private connectivity fabric-related sales and potential for its quantum fibre unit. Growth in the fibre unit comes as the company strives to enhance network connectivity and utilization to meet the growing demand for artificial intelligence. Lumen Technologies, Inc. (NYSE:LUMN) has already inked deals worth $8.5 billion with tech giants, including Microsoft, Amazon Web Services, Meta Platforms and Google, for providing long-haul fibre to connect data centers.
6. Carrier Global Corporation (NYSE:CARR)
Number of Hedge Fund Holders: 48
Carrier Global Corporation (NYSE:CARR) is a global leader in climate and energy solutions, including heating, ventilation, air conditioning (HVAC) and refrigeration. By diversifying its cutting-edge, energy-efficient cooling solutions line, Carrier is setting itself up for substantial growth in the global data centre cooling market, which is expected to reach $20 billion by 2029. The company has already unveiled Carrier QuantumLeap, a purpose-built solution designed to support the rapidly expanding data centre industry amid the AI boom.
Similarly, Wolfe Research upgraded the stock from ‘Peer Perform’ to ‘Outperform’ on February 24, with an $80 price target. Analysts believe Carrier Global Corporation (NYSE:CARR) is on track for growth as management aims to achieve key goals, including earnings per share of $2.95 to $3.05 in FY25. Nevertheless, the research firm has warned that acquiring the German manufacturer of boilers and heat pumps, Viessmann Climate Solutions, poses significant risks, especially on potential tariffs on European imports under the Trump administration.
“Changes to heat pump subsidy frameworks in Europe, and Germany in particular, could weigh on VCS growth potential (even after sales declined 22% during full-year 2024,” according to Wolfe. “Uncertainty regarding the German election has been an overhang. However, we view the likely next chancellor, Friedrich Merz, as a rational, pro-business and EU-centric politician.”
Carrier Global has invested in ZutaCore, a company specializing in liquid cooling technology for data centers, to meet the cooling demands of high-density computing. This collaboration aims to provide sustainable and energy-efficient cooling solutions for next-generation AI and data processing workloads.
5. Leidos Holdings, Inc. (NYSE:LDOS)
Number of Hedge Fund Holders: 51
Leidos Holdings, Inc. (NYSE:LDOS) is an Information Technology services company that provides digital and mission innovations to government and commercial customers. It uses artificial intelligence (AI) to create advanced systems for government clients, primarily in the defence and intelligence sectors, emphasising security, reliability, and ethical implementation. On February 25, the company entered into a strategic partnership with SeeTrue, an AI software company, to improve the efficiency of airport security and customs screening while leveraging AI-enabled algorithms.
The strategic collaboration underlines Leido’s focus on delivering AI-powered innovative solutions that provide advanced levels of threat detection. Leidos Holdings, Inc. (NYSE:LDOS) aims to speed up algorithm development to satisfy its clients’ changing needs by incorporating third-party threat detection algorithms. Leidos’ ClearScan CT scanner will soon be introduced to the market, focusing on algorithms for currency and drugs.
4. EPAM Systems, Inc. (NYSE:EPAM)
Number of Hedge Fund Holders: 56
EPAM Systems, Inc. (NYSE:EPAM) is a leading digital platform engineering and software development services provider. It also provides artificial intelligence services, including developing custom AI solutions, consulting on AI strategy and implementing AI models into existing systems. On February 24, Mizuho Securities reiterated an Outperform rating on the stock but cut the price target to $267 from $282.
The research firm reiterated the outperform rating amid expectations that the company will continue navigating the challenging IT services spending environment. The firm is also bullish about EPAM System’s strategic “Great Relocation” of its delivery professionals, which is expected to accelerate organic revenue growth in 2025. EPAM Systems, Inc. (NYSE:EPAM) is increasingly integrating AI and machine learning into its service offerings. The move strengthens its competitive edge in the quickly changing IT services market and creates new revenue streams.
3. Juniper Networks, Inc. (NYSE:JNPR)
Number of Hedge Fund Holders: 56
Juniper Networks, Inc. (NYSE:JNPR) is a communication equipment company that develops and sells a range of networking products, including routers and network management software. It also integrates AI into its networking infrastructure to enable automated network management. The company announced on February 24 that it has started leveraging Mist AI technology to enhance its routing technology.
The integration of Mist AI technology should allow Juniper Networks to accord its customers improved WAN routing performance and automation. By offering thorough visibility and control over routing, identifying problems, and recommending preventative measures, Juniper Networks, Inc.’s (NYSE:JNPR) routing solutions seek to reduce operating costs by up to 85% in certain situations. In addition to adding AI-native routing observability, proactive troubleshooting capabilities, and intent-based network optimization to its Paragon portfolio, the company unveiled the new ACX7020 Access Edge Router.
2. Axon Enterprise, Inc. (NASDAQ:AXON)
Number of Hedge Fund Holders: 64
Axon Enterprise, Inc. (NASDAQ:AXON) develops and manufactures technology solutions and weapons for law enforcement, the military, and civilians. Its products include body cameras, dashcams, and Tasers. It has already started integrating AI technology into its existing camera networks, making searching for video evidence and conducting in-depth analysis possible. On February 21, Tim Long of Barclays reiterated an Overweight rating on the stock with a $585 price target.
According to Long, the Trump administration’s policies won’t significantly impact Axon Enterprise, Inc.’s (NASDAQ:AXON) federal business, which is currently valued at less than 10% of total revenue. It is anticipated that the company’s emphasis on next-generation products powered by AI will bolster its federal revenue share in 2025. TASER devices and various AI solutions are expected to draw investor attention to the stock. Long expressed confidence in the development of DraftOne and the AI ERA Plan, assessing their compatibility with internal standards and their potential to play a major role in the future expansion of Axon’s software business.
1. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 85
Snowflake Inc. (NYSE:SNOW) is a technology company that offers a cloud data warehouse platform for storing, analyzing, and sharing data securely. Its cloud-based data platform allows organizations to leverage artificial intelligence and extract insights from structured and unstructured data with features like Snowflake Cortex. On February 20, Gray Powell of research firm BTIG reiterated that the company’s recent outperformance is poised to continue on acceleration in AI workloads and as more artificial intelligence projects come to life.
The analyst upgraded the stock to a Buy with a $220 price target, reiterating that Snowflake Inc. (NYSE:SNOW) is well poised to benefit from improving demand amid growth in the broader cloud data analytics market. The impressive run in the market is also poised to continue amid solid underlying fundamentals characterized by strong earnings results, strengthening of generative AI product portfolio and inking of strategic partnerships with tech and AI companies.
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Disclosure: None. This article was originally published at Insider Monkey.
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