According to Jefferies, the race for “sovereign AI” is gearing up as nations race to control artificial intelligence capabilities across data, infrastructure and algorithms.
“Sovereign AI refers to a nation’s ability to independently develop, deploy, and govern AI technologies,” the firm explained, emphasising that the model “ensures strategic control over AI capabilities” without necessarily requiring full government ownership.
The firm told investors how the AI arms race is heating up by the minute.
“China has narrowed its gap with the U.S. to 12 months,” aided by civil-military integration and partnerships with companies like Alibaba and Huawei, according to Jefferies.
Jefferies also noted how the EU’s GAIA-X project aims to reduce reliance on U.S. hyperscalers. However, “fragmented regulations” and slower innovation hurdles persist.
Middle powers, such as Saudi Arabia and the Middle East, are known to be emerging as “strategic players.”
Noting on its benefits and risks, the firm said sovereign AI offers stronger national security, economic growth, and innovation, but also comes with “high infrastructure costs, fragmented innovation,” data bias from localized datasets, and limited talent diversity.
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.
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10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 57
International Business Machines Corporation (NYSE:IBM) is one of the 10 Buzzing AI Stocks on Wall Street. On August 14, Erste Group analyst Hans Engel downgraded the stock from Buy to Hold, reflecting the challenges IBM is facing in accelerating its revenue growth to contest broader technology sector performance.
According to the analysts, IBM’s sales growth is “well below” the sector average which isn’t expected to change this year. They believe that current valuation is “high in view of the below-average growth prospects.”
“IBM’s sales growth is well below the sector average. This is not expected to change this year either. The Group’s latest forecast for 2025 assumes moderate revenue growth of at least +5% (y/y). The free cash flow forecast has been left at USD 13.5 bn. The current P/E ratio of the stock is high in view of the below-average growth prospects.”
International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products.
9. Coherent Corp. (NYSE:COHR)
Number of Hedge Fund Holders: 61
Coherent Corp. (NYSE:COHR) is one of the 10 Buzzing AI Stocks on Wall Street. On August 14, Northland raised the firm’s price target on the stock to $105 from $95 and kept an Outperform rating on the shares. The rating affirmation follows “slightly better” than expected fiscal Q4 results.
According to the analysts, Coherent headed into earnings trading at a 35% discount to peers Lumentum and Fabrinet (FN).
However, it noted that “the kind of revelry” seen from Lumentum this earnings season “was not in evidence.” The firm further said that it “would look to take advantage of sharp after market weakness in the shares.”
Coherent Corp. (NYSE:COHR) is an American manufacturer of optical materials and semiconductors.
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