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.
8. Arista Networks Inc (NYSE:ANET)
Number of Hedge Fund Holders: 75
Arista Networks Inc. (NYSE:ANET) is one of the 10 Must-Watch AI Stocks on Wall Street. On July 11, Citigroup analyst Atif Malik maintained a “Buy” rating on the stock and raised the price target from $112.00 to $123.00.
The firm added a positive catalyst watch on Arista Networks, stating that the stock has more room to run. It believes that Arista Networks will outperform as the company’s second-half outlook receives positive revisions.
The company is anticipated to provide September quarter guidance along with an updated fiscal year 2025 outlook with its June quarter results. The firm expects the company to raise its forecast to 17% yearly sales growth. This could drive upward revisions to current consensus estimates of 15% revenue growth for the second half of the year.
Two factors highlighted by the firm behind Arista Networks’ growth are robust hyperscale data center capital expenditure spending and a booming data center switch market.
“We are opening a positive catalyst watch on Arista as we believe shares will outperform with positive revisions to the company’s 2H outlook.”
Arista Networks Inc (NYSE:ANET) develops, markets, and sells cloud networking solutions.
7. Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Holders: 90
Vertiv Holdings Co (NYSE:VRT) is one of the 10 Must-Watch AI Stocks on Wall Street. On July 11, UBS analyst Amit Mehrotra reiterated a “Buy” rating on the stock with a $135.00 price target.
The firm noted that Vertiv shares dropped on Thursday after Amazon Web Services announced that they have launched a liquid cooling system for data centers. Even though liquid cooling systems are a small part of Vertiv, the analysts noted how they represent a disproportionate share of growth. This is why the stock underperformance is understandable.
The firm, however, maintains that these fears are misguided. Firm checks reveal that Amazon does not seem to be competing with Vertiv’s liquid cooling offering. This is because such competition would require manufacturing several components like coolant distribution units, radiators, manifolds, pumps, and more. The stock reaction is a mere reflection of how sensitive investors are to competitive threats in the data center cooling space.
Vertiv Holdings Co (NYSE:VRT) is a global provider of digital infrastructure technology and services for data centers, communication networks, and commercial and industrial facilities.
6. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 104
Tesla, Inc. (NASDAQ:TSLA) is one of the 10 Must-Watch AI Stocks on Wall Street. On July 11, Goldman Sachs analyst Mark Delaney lowered the price target on the stock to $285.00 from $315 while maintaining a “Neutral” rating. The rating comes as part of a broader research note on the U.S. Autos and Industrial Tech industry.
In a research note, the analyst told investors that they are raising their US auto forecast to reflect more measured tariff levels than what had been proposed originally. This is despite that it still anticipates auto sales in the US to slow down in the second half after people bought early to avoid tariffs.
The firm anticipates US auto sales at 15.75M and 15.50M units in 2025 and 2026, respectively, whereas its prior forecast was 15.40M and 15.25M.
“However, we lower our expectation for EV (BEV) mix in the US to better reflect company-specific datapoints (in particular weaker sales at Tesla, which has accounted for roughly half of the US BEV market historically, but also more flexible EV targets and/or slower EV sales from Ford, GM, and Rivian).”
In other news, Elon Musk said on Monday, July 14, that he does not support a merger between xAI and Tesla. X account @BullStreetBets_ asked Tesla investors on the site if they support a merger between Tesla and xAI. Musk responded with “No.”
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives.
5. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 140
Salesforce, Inc. (NYSE:CRM) is one of the 10 Must-Watch AI Stocks on Wall Street. On July 11, JMP Securities analyst Patrick Walravens reiterated a “Market Outperform” rating for the stock with a steady price target at $430.00.
The rating affirmation comes after the firm reviewed details of Salesforce’s merger with Informatica. The firm based its decision on the information from Informatica’s preliminary proxy statement filed with the SEC on July 3. The filing revealed that there are six other potential acquirers in the process.
Due diligence conducted revealed six positive factors and four negative factors influencing the transaction analysis. JMP stated that Salesforce has fallen 20% YTD, underperforming both the S&P and the Russell 3000.
The rating is maintained considering Salesforce continues to pursue its acquisition of Informatica.
Salesforce, Inc. (NYSE:CRM) is a cloud-based CRM company that has gained popularity after it unveiled its AI-powered platform called Agentforce.
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 159
Apple Inc. (NASDAQ:AAPL) is one of the 10 Must-Watch AI Stocks on Wall Street. On July 11, Citi analyst Atif Malik reiterated the stock as “Buy” with a $240.00 price target. The firm said it sees some uncertainty for Apple but that it’s sticking with its buy rating.
Adjusting its iPhone unit sales forecast, the investment bank now anticipates 45 million units in the June quarter, up from its previous estimate of 43 million. Moreover, it expects 50 million units in the September quarter, down from the previous 52 million.
The firm attributes June quarter upside largely to tariff pauses and huge discounts in China. However, it remains cautious on full-year iPhone demand based on AI feature delays and Section 232 decisions.
“While we acknowledge upside from the pulled forward demand in the Jun-Q driven by tariffs pause and aggressive promotions in China, we remain cautious on the full year iPhone demand given AI delay and pending Section 232 decisions.”
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 223
NVIDIA Corporation (NASDAQ:NVDA) is one of the 10 Must-Watch AI Stocks on Wall Street. On July 11, Wedbush reiterated the stock as “Outperform”. The firm said its checks show high demand for Nvidia products.
“We saw demand for both NVDA GPUs [graphics processing unit] and AI accelerators lifting.”
In other news, Nvidia CEO Jensen Huang will be holding a media briefing in Beijing on July 16. The meeting marks his second visit to the country after his trip in April, where he highlighted the importance of the Chinese market.
Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $175 implies a 6% upside; however, the Street-high target of $250 implies an upside of 52%.
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, providing high-performance GPUs and platforms that power data centers, autonomous vehicles, robotics, and cloud services.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 273
Meta Platforms, Inc. (NASDAQ:META) is one of the 10 Must-Watch AI Stocks on Wall Street. On July 11, Citizens JMP analyst Andrew Boone reiterated a Market Outperform rating on the stock with a $750.00 price target.
The firm is optimistic about Meta following information that Instagram’s global time spent growth accelerated in June, growing 11.9% year-over-year. This implies a 100 basis point improvement from May.
The research note highlighted that this growth acceleration comes despite tougher one-year and two-year comparisons for the social media platform.
Instagram’s growth was even more phenomenal in the United States, accelerating to 17.4% year-over-year in June. It seems that it is also successfully consolidating short-form video engagement, which is why the firm noted that the platform’s comparison metrics will ease meaningfully from July through the end of the year.
In other news, Bloomberg reported that Meta has completed a deal to acquire PlayAI, an artificial intelligence startup focused on voice technology. The PlayAI team will be joining Meta this week and will be reporting to Johan Schalkwyk. Schalkwyk recently joined Meta from a voice AI startup called Sesame AI Inc.
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 on Wall Street. On July 11, Morgan Stanley reiterated the stock as “Buy” and raised its price target on the stock to $300 per share from $250. Amazon was reiterated as a top pick, with the firm stating that it sees a “more manageable tariff and geopolitical backdrop.” It also lifted its 2026 and 2027 EPS forecasts by 9% and 6%.
Analysts stated that they view Amazon Web Services as gaining speed again, owing to the growing contribution from AI startup Anthropic. This could bring in revenue of about $10 billion to $19 billion by 2027. Despite supply constraints, core cloud demand also remains strong.
A CIO survey also revealed that AWS is gaining share from rivals. The firm now projects AWS revenue growth of 17% to 18% annually through 2026, with margins near 37%.
“Today, we are re-raising our estimates as we adjust for the more constructive macro landscape with lower tariffs.”
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.
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