Market uncertainty aside, the AI race is tighter than ever. A report by Stanford University’s Institute for Human-Centered AI (HAI) states that not only has the battlefield become tighter, but also more crowded than previously. The report notes that Google and OpenAI are neck to neck in the race to build cutting-edge AI, and that other companies are fiercely closing in. Meta, Anthropic, and Elon Musk’s xAI are a few of these names. Chinese competitors are also closing in on the AI race. In particular, DeepSeek’s R1 model is very close to the top-performing models of two of the leading AI companies.
“It creates an exciting space. It’s good that these models are not all developed by five guys in Silicon Valley. Chinese models are catching up as far as performance to the US models..but across the globe, there are new players emerging in the space.”
– Vanessa Parli, director of research at HAI.
In recent news, OpenAI has launched its new AI model GPT-4.1, along with smaller versions GPT-4.1 mini and GPT-4.1 nano. These models boast major improvements in coding, instruction following, and long context comprehension.
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According to OpenAI, the models outperform the company’s most advanced GPT-4o model across the board and are available only on OpenAI’s application programming interface (API). In particular, the GPT-4.1 brags a 21% improvement over GPT-4o and 27% over GPT-4.5 on coding. Moreover, there are improvements in instruction following and long context comprehension, which make these models a better choice for powering AI agents.
“Benchmarks are strong, but we focused on real-world utility, and developers seem very happy.”
-OpenAI
OpenAI also noted that these models operate at a “much lower cost” compared to GPT-4.5, and that the company would turn off the GPT-4.5 preview that is available in the API in July because the new models offer “improved or similar performance.”
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).
A close-up of a stock market ticker displaying the company’s stocks.
10. 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 April 14, Wedbush reiterated its “Outperform” rating on the stock with a 12-month price target of $120. The firm believes that NATO’s acquisition of Palantir’s AI-powered military system places it in a key position for more contract wins in the future.
“While the terms of the deal were not disclosed and is set to be operational within the next 30 days, this was another win for Karp & Co. as more federal customers turn to PLTR for improved AI capabilities on the military front which is starting to heat up.”
-Wedbush analysts, led by Daniel Ives, in a Monday note.
“We believe this deal represents an additional tailwind for PLTR with AI initiatives across both the US and European governments accelerating as AI remains a strategic focus on the federal front with Palantir in essence in the sweet spot to benefit from a tidal wave of federal spending on AI across North America and Europe.” Ives added.
9. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Holders: 63
Dell Technologies Inc. (NYSE:DELL) provides IT solutions, including servers, storage, networking, and personal computing devices, to businesses and consumers worldwide. On April 14, Citi lowered the firm’s price target on the stock to $105 from $145 and kept a “Buy” rating on the shares. The firm expects North America communications equipment group stocks to rise following the Trump administration’s reciprocal tariff exemptions on PCs, smartphones, and 20 other products.
It lowered its forecasts for spending on data centers and PCs due to weak overall demand and prefers artificial intelligence server-exposed stocks to enterprise. This is because it said many enterprises maintain a fixed IT budget and will be hesitant to raise capex due to price increases. Consumer segment is expected to get “hit the worst” on inflation and lower demand.
8. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 83
Intel Corporation (NASDAQ:INTC) designs and sells computing hardware, semiconductor products, and AI-driven solutions for various industries. On April 14, Reuters reported that Intel has agreed to sell a 51% stake in its Altera programmable chip business to buyout firm Silver Lake for $4.46 billion. This move marks the first by new CEO Lip-Bu Tan to revive Intel. While the deal values Altera at just $8.75 billion compared to the nearly $17 billion Intel paid in 2015, it will offer the much-needed cash to the company after its predecessors strained its finances.
Previous leadership mistakes have had Intel struggling to gain a foothold in the AI industry, with the recent move marking an effort to rectify these mistakes. The deal is anticipated to close in the second half of 2025, after which Altera’s financial results will be deconsolidated from Intel.
7. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 85
Snowflake Inc. (NYSE:SNOW) is a cloud-based data storage company providing a data analysis, storage, and sharing platform. On April 14, DA Davidson reduced its price target on the stock from $225 to $200 while maintaining a Buy rating. The rating was issued as part of the firm’s broader analysis of the Software sector, driven by updated economic assumptions. According to the firm, even though the macroeconomic environment is shaky and there is a possible deceleration in both consumer activity and corporate investment, Snowflake continues to be a recommended stock.
6. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 85
Constellation Energy Corporation (NASDAQ:CEG) is an energy provider specializing in clean, carbon-free energy solutions. On April 12, UBS analyst William Appicelli maintained a “Buy” rating on the stock and set a price target of $283.00. The firm previously upgraded the stock to buy on April 9, citing an attractive risk/reward dynamic amid the current market volatility caused by President Trump’s global trade tariffs. The firm also believes that Constellation will grow significantly as demand for clean energy grows alongside artificial intelligence (AI) data centers.
5. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 162
Salesforce, Inc. (NYSE:CRM) is a cloud-based CRM company that has gained popularity after it unveiled its AI-powered platform called Agentforce. On April 14, DA Davidson analyst Gil Luria lowered the firm’s price target on the stock to $250 from $275 and kept a “Neutral” rating on the shares. The rating was issued as part of a broader software sector review, anticipating reduced corporate investment and consumer activity based on economic slowdown and tariff policies. While Salesforce is a robust AI play with a diverse product suite, these headwinds could slow down the stock. Nevertheless, its strong enterprise foothold makes it prepared to tackle the shifting economic landscape.
4. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures and sells advanced chips used in artificial intelligence applications. The company is set to report a 54% leap in first-quarter profit on April 17. According to a LSEG SmartEstimate drawn from 17 analysts, it is set to report net profit of T$347.8 billion ($10.74 billion) for the three months through March 31. However, it is also likely to flag risk from the trade policies of U.S. President Donald Trump.
The Trump administration has recently threatened TSMC that it would have to pay a tax of up to 100% if it did not build factories in the U.S. This is despite the company having announced a $100 billion investment with Trump at the White House last month, along with the $65 billion pledged for plants in Arizona.
“The company will likely double down on overseas fab investments to mitigate the geopolitical risk, despite two to three percentage points of gross margin dilution for the next five years. This will likely ensure TSMC gets favourable treatment from the U.S. government and minimise the tariff burden.”
-SemiAnalysis analyst Sravan Kundojjala.
3. 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 April 14, Reuters reported that the company is planning to build AI servers worth as much as $500 billion in the U.S. over the next four years. Seeking help from partners such as TSMC, the announcement includes production of its Blackwell AI chips at TSMC’s factory in Phoenix, Arizona, and supercomputer manufacturing plants in Texas by Foxconn and Wistron. Analysts believe that the move aligns with those of tech firms who have pledged to bring manufacturing back to the US.
“It is unlikely Nvidia would have moved any production to the U.S. if it was not for pressure from the Trump administration. The half a trillion number is likely hyperbole, in the same way Apple made a half a trillion promise.”
-D.A. Davidson analyst Gil Luria.
CEO Jensen Huang said that his company sees little short-term impact from higher U.S. tariffs. Nevertheless, they would move production to the U.S. in the longer term.
“Adding American manufacturing helps us better meet the incredible and growing demand for AI chips and supercomputers, strengthens our supply chain and boosts our resiliency.”
-Nvidia CEO Jensen Huang.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On April 14, the company announced that it will be using interactions that users have with its AI, as well as public posts and comments shared by adults across its platforms, in order to train its artificial intelligence models in the European Union. Last month, the company launched its AI technology in Europe after facing initial delays due to regulatory concerns on data protection and privacy.
The company further revealed that Facebook and Instagram users in the EU will begin receiving notifications explaining what kind of data the company will harness. They will also receive a form link where they can object to their data being used for training purposes. Private messages and public data from under-18 user accounts will not be used in the training.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 317
Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements. On April 14, UBS lowered the firm’s price target on the stock to $480 from $510 and kept a “Buy” rating on the shares. The firm’s price target revision comes after Microsoft’s formal acknowledgement that it is slowing or pausing some data center projects. The firm’s evaluation reveals that Microsoft’s adjustments are most likely not AI demand-related, and that the pausing activity isn’t a materially negative AI demand signal. The analyst further told investors in a research note that any capacity changes related to OpenAI can be absorbed by Oracle and others.
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 doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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