Analysts at Morgan Stanley have a fresh perspective on the potential of generative AI, particularly for the entertainment industry. Ever since the technology has grown ubiquitous, artists have been striving to protect their work integrity, and studios have been pushing efforts to harness it to lower their expenses.

The most recent development in this arena has been video game voice and motion capture actors signing new contracts with studios to secure AI consent and disclosure requirements. The new protection aims to allow performers to provide permission before studios can use an AI digital replica.

Nevertheless, analysts at Morgan Stanley are of the view that artificial intelligence could still have potentially “irreversible” effects on the entertainment business.

“Gen AI tools are coming to the entertainment industry” said the analysts, flagging that these have “the potential to be more than just another innovation, but rather fundamentally disrupt and transform the production and distribution of content.”

The analysts are of the view that AI could help businesses such as Netflix and Spotify reach their “longer-term growth ambitions.”

Similar to the entertainment industry, the growth potential of artificial intelligence is driving renewed interest in AI-related stocks across the market. Investor excitement has been obvious, with Nvidia recently becoming the first company in the world to briefly hit $4 trillion valuation driven by AI demand.

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. Super Micro Computer, Inc. (NASDAQ:SMCI)

Number of Hedge Fund Holders: 40

Super Micro Computer, Inc. (NASDAQ:SMCI) is one of the 10 Must-Watch AI Stocks on Wall Street. On July 11, Citi analyst Asiya Merchant raised the price target on the stock to $52.00 (from $37.00) while maintaining a “Neutral” rating.

The firm quoted improving demand for AI servers and the ramp of Nvidia’s GB200/300 platforms, which started shipping in May, behind the price target adjustment. The company’s management is optimistic about turning current deals into real orders over the next two quarters. With Blackwell GPU supply improving, Merchant believes SMCI will find it easier to deliver products and grow its sales.

“Management sounds constructive on materialization of current commitments over the next two quarters as Blackwell GPU supply constraints ease.”

 However, she has also cautioned on accelerating competition coming from Dell and HPE.

 “We remain concerned on margins given increased momentum and competitive efforts by DELL and HPE, which we believe will temper margin expansion expectations.”

This pressure can make it difficult for SMCI to grow its margins regardless of rising sales.

The firm also pinpointed focus zones for investors:

“1) Global manufacturing footprint amidst tariff implications; 2) Hopper to Blackwell GPU platforms transition; 3) Ability (OTC: ABILF) to deliver on their first-to-market advantage for new GPU platforms amidst increased competitive environment; and 4) DCBBS and DLC 2 emergence and ramp into 2H.”

Super Micro Computer, Inc. (NASDAQ:SMCI) designs and manufactures high-performance server and storage solutions for data centers, cloud computing, AI, and edge computing worldwide.

9. 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 on Wall Street. On July 11, BofA Securities analyst Wamsi Mohan raised the price target on the stock to $24.00 (from $23.00) while maintaining a “Buy” rating.

The reason behind the price target adjustment is that the firm now expects increased cost synergy from the Juniper acquisition. HPE now anticipates at least $600 million in cost synergies over the next three years. This is up from its previous estimate of $450 million.

“Hewlett-Packard Enterprise (HPE) now expects at least $600M (up from $450M) in cost synergies over the next 3 years, with 1/3 of savings realized by end of year 1 and the rest spready evenly across the ensuing years. This benefit will be accretive to non-GAAP EPS in the first full year and accretive to FCF in year 2 and 3. Full, detailed guidance will be provided later during the company’s Analyst Day in October. HPE CEO Antonio Neri attributed the incremental $150M to largely two reasons. First, management is confident on incremental opportunities from synergy for its networking business. Second, HPE’s global supply chain should accrue COGS benefits as JNPR’s procurement process improves. Reiterate Buy as we see upside from Juniper synergies, structurally higher margins and upside from AI. Our PO moves to $24 (from $23) on 10x CY26E pro- forma EPS of $2.30.”

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.