US stocks plummeted on Monday following the news of a new artificial intelligence app from a Chinese startup, DeepSeek. Major chip firms were amongst the hardest hit in the AI frenzy, erasing more than a trillion dollars in market cap. The AI model by DeepSeek, developed with fewer chips and lower costs, has sparked fear on Wall Street after it was known to outperform OpenAI’s ChatGPT on several benchmarks.
This frenzy was further fueled by the news that DeepSeek’s AI assistant app has become the most downloaded free app on the Apple store in the United States. Powered by DeepSeek-V3, DeepSeek’s AI assistant has overtaken rival ChatGPT, the innovation by OpenAI that started the AI arms race in the first place.
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Following the news of DeepSeek topping the charts, the Chinese startup said it will limit its registrations due to a cyber-attack. Before the attack, the company was also hit by a major outage on its website. According to the company’s status page, it had resolved issues relating to its application programming interface and users’ inability to log in to the website. This outage was known to be its longest in 90 days.
While the AI world remains in a state of panic, analysts have been having differing views on the innovation. Some are worried about its impact, while others are taking it on a positive note. Wedbush, for one, isn’t worried about DeepSeek disrupting the planned $2 trillion in capital expenditures anticipated on AI in the coming years. They say that they “view the DeepSeek fear across the tech world as in essence a ‘tech AI head fake’ that will be short-lived.
“DeepSeek created an awesome LLM model (and credit to its software developers) however this Chinese AI small lab/LLM model is not bringing down the entire US tech ecosystem with it”.
– The analysts wrote.
Raymond James believes that these AI innovations can reshape the tech world, lowering costs significantly and reducing the need for massive GPU/XPU clusters at US hyperscalers.
“If DeepSeek’s innovations are adopted broadly, an argument can be made that model training costs could come down significantly even at U.S. hyperscalers, potentially raising questions about the need for 1-million XPU/GPU clusters as projected by some”.
-Raymond James analyst Srini Pajjuri wrote in a note to clients over the weekend.
In turn, Web3 entrepreneur Jeffrey Emanuel is saying that DeepSeek’s success “suggests the entire industry has been massively over-provisioning compute resources”.
Then there are also some experts, such as one Oxford professor, who is advising against putting private data on the DeepSeek platform in case it could be shared with the Chinese state.
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.
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10. Aurora Mobile Limited (NASDAQ:JG)
Aurora Mobile Limited (NASDAQ:JG) is a leading mobile big data solutions platform. On January 27, the company announced that its leading enterprise AI agent platform, GPTBots.ai, has successfully integrated the popular DeepSeek R1 large language model (LLM). GPTBots.ai already boasts several AI capabilities including OpenAI, Azure, Meta Llama, Mistral AI, and more. The addition of the r1 language model will further add to their robust ecosystem and offer businesses cutting-edge AI solutions. Boasting a range of advanced LLMs, GPTBots.ai will allow enterprises to choose from its extensive line-up based on their enterprise needs.
“The integration of DeepSeek R1 aligns perfectly with our mission to empower enterprises with advanced AI solutions and unmatched flexibility. With this addition, we’re enabling businesses to tackle complex challenges with greater efficiency and flexibility, while maintaining the highest standards of enterprise performance”.
-Jerry Yin, VP of GPTBots.ai.
9. Hut 8 Corp. (NASDAQ:HUT)
Number of Hedge Fund Holders: 22
Hut 8 Corp. (NASDAQ:HUT) operates as a Bitcoin miner and a vertically integrated operator of energy infrastructure. According to Piper Sandler, the selloff yesterday in shares of bitcoin miners was overdone, with the artificial intelligence tradeoff driving a 16% average decline for mining names that the firm covers. The firm contended that the miners’ AI-related value lies in their immediate access to power and also in the opportunity to sell that power to AI companies. In light of this, the DeepSeek frenzy should have, in turn, catalyzed the “arms race” among U.S. AI companies, rather than triggering the surprising stock fallout. Piper Sandler further stated that DeepSeek’s reportedly low training costs may imply a reevaluation of the spending required for data center buildouts, but it does not believe this will significantly impact AI’s short-term power needs. The firm maintains a “Buy” rating on Hut 8 with a price target of $33.00.
8. Astera Labs, Inc. (NASDAQ:ALAB)
Number of Hedge Fund Holders: 39
Astera Labs, Inc. (NASDAQ:ALAB) is engaged in designing, manufacturing, and selling semiconductor-based connectivity solutions for cloud and AI infrastructure. On January 28, Northland upgraded Astera Labs (ALAB) to “Outperform” from Market Perform with a $120 price target. According to analysts at Northland, shares of Astera Labs, like most other stocks, fell on Monday because of concerns that big US companies may have invested too much in Artificial Intelligence. DeepSeek had revealed a stunning Chat GPT-like AI model with the company claiming that it had spent just $5.6 million on computing power for its base model. However, the firm believes that demand in the sector will remain robust considering tech giants are most likely not going to cut their capital expenditures, which will in turn act as a catalyst for Astera Labs.
“ALAB shares have declined 38% since our downgrade based on the valuation on 1/2/25. Most of that decline occurred yesterday.” They further stated that “We do not expect AMZN, GOOG, META, and MSFT to cut capex when they report earnings over the next few weeks, acting as a catalyst for the shares.”
7. Digital Realty Trust, Inc. (NYSE:DLR)
Number of Hedge Fund Holders: 52
Digital Realty Trust, Inc. (NYSE:DLR) is a real estate investment trust engaged in the provision of data center, colocation, and interconnection solutions. On January 27, JMP Securities analyst Greg Miller initiated coverage of Digital Realty with an “Outperform” rating and a $220 price target. According to the firm, “We are in the midst of the largest digital infrastructure spend since the creation of the internet”. The firm expects well over $1.0 trillion in digital infrastructure spending over the next five years. This spending is anticipated to become the backbone of artificial intelligence, cloud, and edge compute, as well as other applications.
Despite this bullish outlook from JMP Securities, another firm Mizuho asserted that DeepSeek’s new artificial intelligence model is going to raise several questions for data center stakeholders. In particular, questions surrounding the need for massive spending by hyperscalers and how far are the use cases for AI monetization. The analyst told investors in a research note that there may be a “knee-jerk negative reaction” to data center stocks, particularly for Digital Realty. This is likely going to be in response to the given fears of a likely rethink of big AI spending.
6. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 70
Marvell Technology, Inc. (NASDAQ:MRVL) engages in the development and production of semiconductors, focusing heavily on data centers. On January 28, Morgan Stanley lowered the firm’s price target on the stock to $113 from $120 and kept an “Equal Weight” rating on the shares. The firm remains positive on the semiconductor group but has been trimming its price targets following the stock market reaction to a powerful new large language model (LLM) from China called DeepSeek. Following the stock market reaction, the firm believes there may be a reduced spending interest or there could even be tighter export controls.
“The DeepSeek release highlights evolutionary innovations in AI, some of which may be deflationary. That said, the stock market reaction is probably more important than the cause, and could bring further export controls or reduce spending enthusiasm; trimming PTs but remain positive.”
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 99
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives. On January 27, Piper Sandler analyst Alexander Potter stated that their firm doesn’t believe that DeepSeek “represents a threat to the thesis”. The firm has been receiving several emails regarding the implications of the Chinese models on Tesla, hence the response. The lesson to be learned here is that it is possible for AI models to be trained using smaller-than-expected capex outlays. That being said, Tesla “may actually benefit from this trend,” considering how it is a GPU consumer and a capital spender. Tesla’s real advantage stems from its fleet of vehicles that have been purpose-built to collect self-driving data rather than its capex budget. The firm maintained its Overweight rating and $500 price target on Tesla shares.
4. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 128
Broadcom Inc. (NASDAQ:AVGO) is a technology company uniquely positioned in the AI revolution owing to its custom chip offerings and networking assets. On January 28, Morgan Stanley lowered the firm’s price target on the stock to $246 from $265 and kept an “Overweight” rating on the shares. The analyst told investors that the DeepSeek release reflects evolutionary innovations in artificial intelligence, “some of which may be deflationary”. The firm has been surprised by the magnitude of the response to the DeepSeek trend, stating how the stock market reaction is “probably more important than the cause”. The firm anticipates that the innovations could bring further export controls or even reduce spending enthusiasm. The firm is trimming price targets among semiconductor suppliers exposed to AI. However, it remains positive for the group.
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a technology company that has strengthened its mark in the AI realm with the launch of Apple Intelligence, its personal intelligence system. On January 28, Analyst Krish Sankar from TD Cowen maintained a “Buy” rating on Apple and kept the price target at $250.00. The firm is optimistic about Apple’s revenue growth and also believes that the tech giant will be advancing its offerings. It also expects Apple to report a year-over-year increase in revenue for the December quarter and projected a mid-single-digit percentage growth for March 2025. Moreover, while DeepSeek’s entry into the market has sparked fear and panic in Silicon Valley, Sankar believes that its introduction, and similar advancements in AI technology, are going to prove beneficial. This is because it could drive mobile device upgrades and accelerate innovation in AI applications. The analyst also highlighted regulatory risks in the Service business but stated that changes in the US administration may influence them. To conclude, TD Cowen is optimistic that Apple’s results will align with market expectations for the December quarter and also deliver guidance consistent with consensus for March 2025.
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 193
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services. On January 28, Gil Luria from D.A. Davidson maintained a “Neutral” rating on Nvidia with a price target of $135.00. Amid the DeepSeek frenzy, the firm isn’t convinced that Nvidia will be able to sustain the edge that it has had. Analyst Gil Luria Luria, discussing the competitive landscape involving NVIDIA’s partner, OpenAI, highlighted the challenges faced by OpenAI. There is intense pressure on OpenAI to innovate to maintain its competitive advantage or risk losing out to competitors like DeepSeek. These changing industry dynamics are also going to impact Nvidia, which is in a partnership with OpenAI.
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On January 28, Citi reiterated its Buy rating on Meta Platforms Inc. with a price target of $753.00. Even though DeepSeek’s entry has shaken Wall Street, Citi analysts argued that it could mean good things for Meta. The analysts, led by Ronald Josey, assert that the DeepSeek model should lead to faster AI product development and yield a quicker return on investment. It said that since the r1 model from DeepSeek is open-source, it can be a lesson for the tech giants to learn from it and make their own tools more efficient.
“Given R1 is open source, our key takeaway here is that Meta (and others) can learn from R1 which should make its AI tools more efficient,” analysts wrote. “And while Meta has committed to $60-65BN of CapEx in ’25E, model efficiencies could suggest we are nearing peak CapEx spend as product cadence ramps.”
While we acknowledge the potential of META 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 timeframe. If you are looking for an AI stock that is more promising than META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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