Last month, President Xi Jinping held a rare meeting with some of the biggest names in China’s technology sector, urging them to “show their talent” and believe in the power of China’s model and market.
Following this guidance, tech leaders in China are raising billions and betting on the AI race. In the latest news, Chinese artificial intelligence startup Zhipu AI has raised more than 1 billion yuan ($137.22 million) in fresh funding, only months after securing a 3 billion yuan investment.
READ NOW: 10 AI Stocks to Watch Now and 10 AI Stocks Gaining Momentum Right Now
According to Zhipu AI, state-backed Hangzhou City Investment Group Industrial Fund and Shangcheng Capital are among the investors in the round. The move comes amid intense competition in China’s AI sector, particularly after DeepSeek emerged with its AI models, claiming to match Western competitors’ capabilities at lower costs.
In another news article, Chinese smartphone maker Honor reported that it will spend $10 billion over the next five years on developing AI for its devices. This comes as the former Huawei unit prepares for a public listing, its CEO James Li has revealed.
The company no longer wants to be merely a smartphone company. Rather, Li said in a speech at the Mobile World Congress (MWC) trade show in Barcelona that it is now aiming to develop a system of AI-powered PCs, tablets and wearables.
Similar to Zhipu AI, Honor’s announcement comes amid a boom in Chinese AI investment after DeepSeek emerged with its acclaimed cheaper and efficient AI models. Back in August, Reuters had also reported how Honor has been receiving a high level of support from the Shenzhen local government in terms of research and development funding, tax breaks and support in expanding overseas.
President Xi has been stressing continuity in China’s economic development strategy. However, he believes that its private business had “broad prospects and great promise” to create wealth and opportunity. Sure enough, it seems as if his efforts and vision are rapidly coming to fruition.
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 person with a cell phone who is looking for new stocks
10. SoundHound AI (NASDAQ:SOUN)
Number of Hedge Fund Holders: 11
SoundHound AI (NASDAQ:SOUN) is a voice artificial intelligence company offering voice AI solutions to businesses. On February 28, Daniel Ives from Wedbush maintained a “Buy” rating on the stock with a price target of $22.00.
SoundHound AI, offering innovative voice and conversational AI solutions across various industries, recently reported its financial results for the fourth quarter and full year 2024. Its fourth-quarter revenue was $34.54 million, surpassing the consensus estimate of $33.69 million, whereas the adjusted loss of five cents per share beat analyst estimates for a loss of 10 cents per share.
The company is poised to capitalize on the growing demand for voice-enabled AI solutions, particularly focusing on Agentic AI and next-generation capabilities. Looking ahead, the company anticipates 2025 revenue to be between $157 million to $177 million, compared with previous guidance of $155 million to $175 million.
9. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 42
Bloom Energy Corporation (NYSE:BE) develops solid-oxide fuel cell systems for on-site power generation, helping meet the growing energy demands of AI data centers. On February 28, BMO Capital analyst Ameet Thakkar lowered the firm’s price target on the stock to $23 from $25 and kept a “Market Perform” rating on the shares.
According to the firm, the company’s earnings print has been mixed. It also noted how investor focus has been fixed on the stronger-than-consensus FY25 revenue and gross margin guidance, but the lack of backlog growth doesn’t align with Bloom Energy’s commentary on data center demand.
8. Elastic N.V. (NYSE:ESTC)
Number of Hedge Fund Holders: 64
Elastic N.V. (NYSE:ESTC) is a search AI company offering cloud-based solutions. On March 1st, Truist raised the firm’s price target on the stock to $145 from $135 and kept a “Buy” rating on the shares. According to the firm, Elastic’s Q3 results surpassed expectations, and it continues to see strong demand from its search and GenAI use cases along with upside in Cloud consumption from large customers.
7. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 84
Cisco Systems, Inc. (NASDAQ:CSCO) is an American technology company that provides information technology and networking services. On February 27, Citi analyst Atif Malik raised the firm’s price target on the stock to $73 from $71 and kept a “Buy” rating on the shares.
The analyst told investors in a research note how enterprise data center sales have grown two times year-over-year for Nvidia, based on accelerating demand for agentic artificial intelligence workflows and model fine tuning. It believes these comments from Nvidia support its recent partnership with Cisco.
Moreover, it also adds up to the $1 billion AI order outlook for Cisco on its earnings call. Cisco is Citi’s top communications equipment pick for 2025 backed by its growing AI opportunity and “relatively undemanding valuation.”
6. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 95
AppLovin Corporation (NASDAQ:APP) provides a leading marketing platform powered by AI technology. On February 27, Jefferies analyst James Heaney CFA reiterated a “Buy” rating on the stock with a price target of $600.00. The analyst has dismissed claims made in recent short reports about AppLovin misrepresenting the benefits of its AI advertising platform, citing them as weak and inaccurate.
He argued how these fraudulent clicks and downloads don’t align with the company’s ability to generate substantial revenue for its clients. AppLovin’s CEO also refuted the claims, highlighting how its e-commerce pilot program has reached a run rate of roughly $1 billion a year of gross advertiser spend in the e-commerce category alone in December. Further supporting the positive outlook is the company’s expansion into sectors beyond ecommerce, such as automotive and healthcare.
Heaney also explained how AppLovin couldn’t be misappropriating META’s advertising data, stating that it would need unauthorized intrusion to do so. The analyst remains optimistic about the company’s growth potential and considers the recent pullback as an opportunity for investment.
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 the launch of its AI-powered platform called Agentforce.
On February 27, Stifel lowered the firm’s price target on the stock to $375 from $425 and kept a “Buy” rating on the shares. The analyst told investors that Salesforce has reported quarter-over-quarter CRPO acceleration in Q4, a “bevy of AI disclosures that underscore the early momentum of Agentforce,” and “healthy” Q1 CRPO and FY26 subscription revenue outlooks.
It further discussed that despite management setting “modest expectations” for Agentforce revenue in FY26, there has been an after-hours pressure on the shares. The firm deems this pressure as an “overreaction” to the quarter since the results and outlook match the positive view of the company’s positioning around Agentic AI.
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology company. On March 3rd, Jefferies analysts led by Edison Lee noted about Apple Inc. that China’s smartphone growth momentum is stalling and Apple’s new iPhone 16e is likely underwhelming. Industry checks have revealed how Chinese yuan, or CNY, posted negative growth for four weeks in a row, leading to deteriorated sales growth for smartphones and rising discounts last week for both iPhone (mainly 16 series) and Android flagship models.
Discussing the iPhone 16e, the analysts stated that even though sales data isn’t out yet, specifications and price comparison with iPhone 14/15 show that the former is unattractive, and that AI has no traction. The firm remains cautious about the demand for iPhone 16e. It also anticipates iPhone 14 and 15 base models to cost less than 16e.
However, the 14/15 offer two cameras (16e has only one) and largely similar hardware specifications, except for the application processor, or AP, and artificial intelligence, or AI. Regardless, the firm stated that consumers generally care less for AI, which is why it does not expect strong demand for the 16e. It maintains its “Underperform” rating on the stock with a $202.33 price target.
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 February 27, Morgan Stanley raised the firm’s price target on the stock to $162 from $152 and kept an “Overweight” rating on the shares. The rating, issued after the company’s Q4 earnings report, highlighted how Nvidia’s revenues were slightly better than the firm previewed. However, gross margins were slightly worse.
Gross margin pressures are largely attributed to the GB200 challenges, but firm checks reveal that the situation is improving. The analyst reiterated Nvidia as a “Top Pick”, stating how export controls remain an idiosyncratic risk, but “otherwise everything improves from here”. Guidance has also been positive for the company, with positive discussions about the high demand for Blackwell products. All in all, the firm believes that Nvidia is highly capable of navigating the semiconductor landscape effectively.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 262
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On February 27, Bloomberg News reported that Apollo Global Management is leading discussions for a roughly $35 billion financing package for Meta Platforms to help develop data centers in the U.S. According to the report, Apollo has discussed providing a major part of the financing. However, since the funding conversations are at an early stage, there’s no guarantee a deal will be completed. Earlier in January, Meta CEO Mark Zuckerberg had announced that his company would be spending as much as $65 billion this year to expand AI infrastructure.
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 March 3rd, Reuters reported that Amazon will be using artificial intelligence to reduce flood risks in Spain’s northeastern region of Aragon where it is building data centers.
Amazon’s cloud computing unit AWS announced that it will invest 17.2 million euros ($17.9 million). The investment will be used to reduce flood risks in the region by modernizing infrastructure and using AI to optimize agricultural water use. Amazon’s advanced cloud computing technologies will deploy an early warning system, combining real-time data collection with advanced sensor networks and AI-powered analysis. This will help Aragon’s capital city Zaragoza monitor flood risks.
While we acknowledge the potential of AMZN 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. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stock To Buy Now and Complete List of All AI Companies Under $2 Billion Market Cap.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below
Hedge Fund Resource Center