While the United States is busy forging alliances and striking high-profile artificial intelligence deals, China is quietly making calculated progress of its own. In latest news, DeepSeek, the AI startup from China that wreaked havoc in the tech world not too long ago, has released an upgraded version of its artificial intelligence reasoning model.

While there wasn’t an official announcement made by the startup, the DeepSeek R1 upgrade was released on the AI model repository Hugging Face. The new upgraded version of the DeepSeek R1 model is closely trailing behind OpenAI’s o4-mini and o3 reasoning models on LiveCodeBench, which is a site that benchmarks models against different metrics.

“DeepSeek’s latest upgrade is sharper on reasoning, stronger on math and code, and closing in on top-tier models like Gemini and O3.”

-Adina Yakefu, AI researcher at Hugging Face, told CNBC.

READ ALSO: 12 AI Stocks on Latest News and Ratings and 10 AI Stocks on Wall Street’s Radar.

Yakefu further stated that the new model has “major improvements in inference and hallucination reduction,” and that “this version shows DeepSeek is not just catching up, it’s competing.”

All of these developments from China reveal that the restrictions the United States has been imposing are proving futile. Even Nvidia CEO Jensen Huang criticised the US export controls, stating that the US policy is based on the clearly wrong assumption that China cannot make AI chips.

“The question is not whether China will have AI. It already does.”

-Jensen Huang

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).

10. C3.ai, Inc. (NYSE:AI)

Number of Hedge Fund Holders: 24

On May 29, Morgan Stanley analyst Sanjit Singh raised the price target on C3.ai, Inc. (NYSE:AI) to $22.00 from $20 while keeping an “Underweight” rating.  C3.ai, Inc. (NYSE:AI) is an enterprise artificial intelligence (AI) software company involved in building and operating enterprise-scale AI applications and accelerating digital transformation.

The rating reiteration follows C3.ai’s recent partnership extension with Baker Hughes for an additional three years, along with the company’s reported revenue growth of over 26% in the fourth quarter.

On May 28, C3 and Baker Hughes announced a multi-year renewal and expansion of their joint venture agreement, where the two companies will continue to provide Enterprise AI solutions to the oil and gas and chemical sectors.

Discussing these positive developments, Morgan Stanley noted that

” a 3-year extension of the Baker Hughes partnership and sustained +26% rev growth in Q4 likely qualifies as a better than feared outcome.”

At the same time, the firm also pointed out some concerns regarding the stock. It stated how the company’s long-term growth prospects are questionable since its revenue missed expectations slightly. Moreover, the revenue mix included a high proportion of demonstration licenses and services revenue.

Overall, the firm is cautiously optimistic due to the company’s performance indicators.

“However, a sub rev miss along with a high mix of demonstration licenses and services rev keeps the debate open on the durability of LT growth.”

9. Hewlett Packard Enterprise Company (NYSE:HPE)

Number of Hedge Fund Holders: 45

On May 28, Hewlett-Packard Enterprise Company (NYSE:HPE) announced expansions to its HPE Aruba Networking wired and wireless portfolio, as well as the new HPE Aruba Networking CX 10K distributed services switches. Hewlett Packard Enterprise Company (NYSE:HPE), an American multinational technology company, provides high-performance computing systems, AI software, and data storage solutions for running complex AI workloads.

The HPE Aruba Networking doubles the performance capabilities of widely-deployed data center distributed services switches. These innovations are designed to improve performance, cut costs, and support the growing needs of different types of high-performance computing.

According to Phil Mottram, EVP and general manager of HPE Aruba Networking, the innovations announced by HPE tend to “simplify data center and overall server connectivity at ten times the scale and performance and one-third the cost of traditional enterprise solutions.”

Some of the latest advances announced by the company include the HPE Aruba Networking CX 10040 smart switch, the HPE Aruba Networking CX 6300 series campus switches, new Wi-Fi 7 access points, Application-aware networking across campus switches, and more.

“Data-fueled AI, IoT, and other high-performance applications are driving unprecedented demands for enterprises to provide cost-effective connectivity, no matter where devices and users are or how they access the network. HPE is again raising the bar with innovations that simplify data center and overall server connectivity at ten times the scale and performance and one-third the cost of traditional enterprise solutions.”

-Phil Mottram, EVP and general manager, HPE Aruba Networking.