This July, OpenAI hit it its first $1 billion revenue. However, even hitting revenue milestones isn’t helping the artificial intelligence startup tackle pressures from AI compute demands.
OpenAI finance chief Sarah Friar talks about these challenges.
“It is voracious right now for GPUs and for compute. The biggest thing we face is being constantly under compute. That’s why we launched Stargate. That’s why we’re doing the bigger builds.”
-Friar told CNBC’s Squawk Box
According to Friar, growing compute demands risk diversification and supply increase, which explains expanded builds with Oracle and Coreweave. She also mentioned that Microsoft is still, very much involved.
“Microsoft will be an important partner for years to come, and I think we are very intertwined because of our IP,” Firiar said. “Remember, Microsoft AI products are built on OpenAI technology.”
That said, OpenAI’s growth is accelerating at lightning pace, with CEO Sam Altman anticipating spending trillions on datacenters to meet demand.
“Our bet is, our demand is going to keep growing, our training needs are going to keep going, and we will spend maybe more aggressively than any company who’s ever spent on anything ahead of progress.”
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).
A team of professional financial investors in a modern office analyzing Investment opportunities.
10. Hewlett Packard Enterprise Company (NYSE:HPE)
Number of Hedge Fund Holders: 45
Hewlett-Packard Enterprise Company (NYSE:HPE) is one of the 10 Must-Watch AI Stocks for Investors. One of the biggest analyst calls on Wednesday, August 20, was for HPE. Evercore ISI added the stock to the “Tactical Outperform” list stating that it’s bullish ahead of earnings in early September.
The potential for upside is due to the recent uptick in networking spending.
“We believe HPE is well positioned to report upside to Jul-qtr expectations and guide the Oct-qtr above what current pro forma estimates reflect post Juniper close.”
The firm maintains an Outperform rating and $28 price target on the shares.
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.
9. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 77
Palantir Technologies Inc. (NASDAQ:PLTR) is one the 10 Must-Watch AI Stocks for Investors. On August 19, Fujitsu announced signing of a new licensing agreement with Palantir Technologies Japan for the Palantir Artificial Intelligence Platform (Palantir AIP).
The agreement will allow Fujitsu to offer Palantir AIP, Palantir’s software program designed to integrate generative AI into business operations, to its customers in Japan with global expansion expected in fiscal 2025.
Fujitsu will also be combining Palantir AIP with Fujitsu Uvance, its business model that strives to solve societal issues, to simplify and facilitate business transformation for its customers.
This integration ensures unified support for generative and agentic AI tasks such as scenario simulation, root cause analysis, and proposal generation and business processes optimization. It also supports integration with Fujitsu’s AI services, enhancing Japanese language capabilities and industry-specific functionalities.
The two companies collaborated first back in 2020, with a major focus on data integration and digital transformation support in the Japanese market. The two then went on to sign an agreement in 2023 whereby Fujitsu received the right the market and distribute Palantir Foundry, a software platform for integrated management of large-scale data.
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems.
8. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 83
Applied Materials, Inc. (NASDAQ:AMAT) is one of the 10 Must-Watch AI Stocks for Investors. On August 20, Daiwa Securities analyst Louis Miscioscia downgraded the stock from Outperform to Neutral with a price target of $170.00 (from $185.00).
The firm contended that AMAT’s quarterly results have been below its expectations due to weak trends in semiconductor equipment spending, problems at major customers Intel and Samsung, as well as slow semiconductor demand outside of AI applications. It believes that the rebound is going to take some time now.
“While downgrading on a miss is not good, and valuation is more modest, we do move to a 3/Neutral from 2/Outperform as we wait for the signs of rebound and these issues could take time to improve. The shares are in-line their 5-year average of 17x. We lower our TP to $170 from $185 reflecting lower expectations, but use 18x our lowered FY26E. EPS for our est. Our rating and target price assume the S&P 500 remains unchanged over the next 12 months.”
Applied Materials, Inc. (NASDAQ:AMAT) is a leader in materials engineering solutions engaged in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries.
7. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 91
Intel Corporation (NASDAQ:INTC) is one of the 10 Must-Watch AI Stocks for Investors. On August 19, UBS analyst Timothy Arcuri reiterated a Neutral rating on the stock with a $25.00 price target. The firm noted how investors have been asking questions about how high Intel’s stock could go.
Arcuri believes that the downside risk is likely protected by its Tangible Book Value (TBV), which it estimates at $17-18 per share after the sale of Altera stake. This is, however, in the case that Intel can cut costs enough to reach sustainable cash flow breakeven.
The firm remains Neutral due to limited upside potential. However, an upside case may exist if the market puts a more material ‘valuation’ on all pieces of the business.
” We have remained Neutral though because we have seen upside limited by a lack of EPS power at the combined company level to sufficiently push the stock much higher than the mid $20 range – in part because INTC is going to have to give away (as non controlling interest) a significant portion of incremental OP dollars to Brookfield and Apollo for SCIP agreements in Ireland and Arizona. If, however, the market started to put a more material “valuation” on all of the piece of the business – including an independent valuation for Intel’s manufacturing assets based on how other global foundry comps are valued per installed wafer of capacity – we could see a case for an upside valuation of ~$40/share.”
Intel Corporation (NASDAQ:INTC) designs and sells computing hardware, semiconductor products, and AI-driven solutions for various industries.
6. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 96
Micron Technology, Inc. (NASDAQ:MU) is one of the 10 Must-Watch AI Stocks for Investors. One of the biggest analyst calls on Wednesday, August 20, was for Micron. Citi reiterated the stock as “Buy” with a $150 price target. The firm said that it’s standing by the semis company.
The optimism on Micron stems from anticipated rise in profits with stronger margins due to favorable high-bandwidth memory (HBM) and improved pricing in the DRAM sector, which is in turn backed by rising demand from the AI industry.
The demand for NAND is also anticipated to grow, particularly in the data center market, which will further boost revenue growth. The sustained quarter-over-quarter growth in HBM sales will also help achieve a 50% gross margin.
“We spent time in investor meetings with Micron management this week and dug into sources of upside and came away more confident that its gross margins can break through 50%, which would easily exceed the prior cycle peak of 47.4% in 2021 driven by increasing HBM [high bandwidth memory] mix and better pricing in DRAM due to increasing AI demand.”
Micron Technology, Inc. (NASDAQ:MU) develops and sells memory and storage products for data centers, mobile devices, and various industries worldwide.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 104
Tesla, Inc. (NASDAQ:TSLA) is one of the 10 Must-Watch AI Stocks for Investors. On August 19, William Blair analyst Jed Dorsheimer reiterated a Market Perform rating on Tesla (NASDAQ: TSLA). The rating affirmation follows the demo of Tesla’s robotaxi service in Austin prior to the September public launch.
“Our main takeaway was that we experienced a glimpse of the future, and it is exciting. The comparisons are immediate and stark—multiple times we drove past Waymo and Zoox vehicles outfitted with their complex sensor suite that stick out like a sore thumb. In contrast, the robotaxis blended in with all the other Teslas on the road; we felt inconspicuous flowing with the traffic.”
The firm stated that Tesla’s autonomous vehicles have been blending in with all the other Teslas on the road, unlike Waymo and Zoox who sport complex sensor suites that “stick out like a sore thumb.”
“Confirming our thesis, robotaxi was half the price of Uber (UBER $93.98; Outperform), demonstrating its ability to win market share by weaponizing price. Despite our enthusiasm for robotaxi, we acknowledge there is a period of margin headwinds that investors must endure from pending regulatory cuts as part of the OBBB, and thus, we maintain our Market Perform rating.”
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives.
4. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 140
Salesforce, Inc. (NYSE:CRM) is one of the 10 Must-Watch AI Stocks for Investors. On August 20, Citizens JMP analyst Patrick Walravens reiterated a Market Outperform rating on the stock with a $430.00 price target. The rating affirmation comes ahead of the company’s fiscal second-quarter earnings report.
The firm’s research note stated how it collected 29 data points on Salesforce’s business. 62% of those data points were positive compared to 47% positive in the previous quarter.
“We maintain our Market Outperform rating and $430 price target on Salesforce after collecting 29 data points on the business (62% positive vs. 47% positive last quarter), ahead of the company reporting F2Q results after the close on Wednesday, Sept. 3, and after the stock has fallen 26% year to date (versus a 9% increase for the S&P 500 and an 8% increase for the Russell 3000)..”
The firm noted that the stock has fallen “due to concerns about growth slowing into the single digits, increasing competition, an M&A overhead from the pending Informatica acquisition, and diminishing relevance in an AI-first world.”
Salesforce, Inc. (NYSE:CRM) is a cloud-based CRM company that has gained popularity after it unveiled its AI-powered platform called Agentforce.
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 212
NVIDIA Corporation (NASDAQ:NVDA) is one of the 10 Must-Watch AI Stocks for Investors. On August 19, TD Cowen analyst Joshua Buchalter raised the price target on the stock to $235.00 (from $175.00) while maintaining a Buy rating.
According to the analysts, Nvidia shares trade at a discount to Broadcom even though they have a “cleaner set-up. They also believe that the stock remains the “best and cleanest way” to gain exposure to artificial intelligence and demonstrate the potential to beat high expectations into earnings.
“Into the Print: We See NVDA Best Positioned to Clear A High Bar; More Balanced On AVGO, MRVL, CRDO.
Positive on NVIDIA (Buy), as we see strong fundamentals and a clean narrative (despite the chaos and distraction surrounding H20 and China) as the Blackwell-Blackwell Ultra handoff is transitioning rapidly and smoothly. We note NVIDIA is trading at a discount to Broadcom despite what we see as a cleaner set-up, and we believe remains the best and cleanest way to play AI… still. We leave our well-above Street $55B OctQ estimate unchanged, which we note does not include H20 revenue given timing/magnitude uncertainty. We also see upside to our above-Street 2026 estimates, well beyond adding back datacenter sales to China.”
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services.
2. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 227
Alphabet Inc. (NASDAQ:GOOGL) is one of the 10 Must-Watch AI Stocks for Investors. On August 19, Bernstein SocGen Group analyst Mark Shmulik reiterated a Market Perform rating on the stock with a $185.00 price target.
Drawing parallels between the current artificial intelligence landscape and the mobile platform wars of the early 2010s, the firm noted that they key to dominance is not attracting users, but developers who are convinced to build on your platform.
Apple and Google understood early on that attracting developers will help them win the next big platform. Keeping this in mind, Bernstein wonders what Google will be showcasing to its developers at the annual I/O event to win the artificial intelligence race.
“In the fall of 2010, we attended a meeting with a large global telecom operator. As Apple’s (not covered) iPhone and the App Store began to scale, the telco was busy launching their own app shop, confident in winning smartphones given their hundreds of millions of users – why would developers build anywhere else? By 2013, Android + iOS surpassed a billion users and never looked back. Google and Apple knew that winning over developers meant winning the next platform. What can Google show developers at their annual I/O event to win AI?”
Alphabet Inc. (NASDAQ:GOOGL) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 328
Amazon.com, Inc. (NASDAQ:AMZN) is one of the 10 Must-Watch AI Stocks for Investors. On August 20, Cantor Fitzgerald analyst Deepak Mathivanan reiterated an Overweight rating on the stock with a $280.00 price target. The rating affirmation reflects the growing momentum in Amazon’s Project Kuiper satellite initiative.
Using both United Launch Alliance and SpaceX rockets, Amazon has completed four launches to date. The firm noted how Amazon has revealed plans to launch commercial beta later this year or in early 2026.
Provided that Amazon achieves a similar satellite launch trajectory as Starlink (between 2020-2023) over the next 2-3 years, the firm estimates Project Kuiper to generate between $2.5 billion and $5 billion in incremental revenues by the year 2028-2029.
“AMZN’s Project Kuiper has historically faced setbacks due to delays from launch providers, but recent activity indicates growing momentum. The company has now completed four launches (2 ULA, 2 SpaceX), bringing the total constellation to 102 satellites in low Earth orbit (LEO). On AMZN’s 2Q25 earnings call, the company indicated plans to launch commercial beta later this year / early FY26E. 3P data we monitor indicates that AMZN has plans to send another 350 satellites (bringing the total to 450) in upcoming launches throughout 2025.”
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.
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 have limited downside risk. If you are looking for an AI stock that is more promising than AMZN and that has 100x upside potential, check out our report about this cheapest AI stock.
READ NEXT: 10 AI Stocks Analysts Are Watching Closely and 10 Trending AI Stocks in Focus This Week
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