According to Goldman Sachs, artificial intelligence spending is anticipated to go higher this year. However, investors are likely to become more selective about AI stocks.
The firm’s research has noted how the consensus estimate among Wall Street analysts for the tech hyperscaler’s 2026 capital spending is now $527 billion, up from $465 billion at the start of the third-quarter earnings season.
While investment has indeed surged, investors are becoming selective about the stocks they are investing in, shifting away from infrastructure heavy companies whose operating earnings growth is under pressure and capex is being funded via debt.
Instead, companies that are now being favored are ones that can clearly translate AI spending into revenue growth.
“The combination of continued corporate AI adoption and growing concerns about the AI infrastructure complex has increased recent investor focus on the next beneficiaries of the ever-expanding AI trade.”
-Goldman Sachs Research analyst Ryan Hammond.
While AI investment is anticipated to expand in the year ahead, the market is entering a more selective phase. It seems that companies that can demonstrate clearer revenue and productivity gains will be favored more than pure infrastructure plays.
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 Q3 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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
10. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 33
Baidu, Inc. (NASDAQ:BIDU) is one of the 10 Must-Watch AI Stocks on Wall Street. On January 12, Benchmark analyst Fawne Jiang raised the price target on the stock to $215.00 (from $158.00) while maintaining a “Buy” rating. Firm analysts view the Kunlun spinoff and Robotaxi valuation reset as key catalysts for SoTP re-rating.
Baidu recently announced a proposed spinoff and separate listing of Kunlunxin (Beijing) Technology Co., Ltd., a non-wholly owned subsidiary of the Company, on the Main Board of the Hong Kong Stock Exchange. Kunlunxin is Baidu’s artificial intelligence chip subsidiary that Baidu plans to spin off as more domestic chipmakers are seeking funding amid Beijing’s drive for semiconductor self-sufficiency.
According to Benchmark, their price target raise for Baidu is reflection of clearer catalysts that will allow unlocking value from Baidu’s underappreciated assets, leading to a SoTP re-rating. The AI chip subsidiary Kunlun spin-off is particularly seen as a significant catalyst by the firm.
“In particular, we view the upcoming Kunlun spin-off as a major catalyst and have updated our SoTP to incorporate Kunlun’s value, which was not previously reflected in our valuation. We have also revised our Robotaxi valuation following recent capital raising.”
Baidu, Inc. (NASDAQ:BIDU) is a Chinese internet giant and AI pioneer, known for its noteworthy investments in artificial intelligence technology and its position as the dominant search engine within the country.
9. Rivian Automotive, Inc. (NASDAQ:RIVN)
Number of Hedge Fund Holders: 36
Rivian Automotive, Inc. (NASDAQ:RIVN) is one of the 10 Must-Watch AI Stocks on Wall Street. On January 12, Wolfe Research analyst Emmanuel Rosner downgraded the stock from Peerperform to Underperform, setting a price target of $16.00. Firm analysts see higher cash burn, rising losses, and limited near-term catalysts for the stock.
Rosner noted how the near-term and long-term fundamental setup for the stock has deteriorated, but that there is excitement around RIVN’s Autonomy platform which has led to a surge in shares.
However, the firm estimates an EBITDA loss of $2.1 billion, wider than Street estimates. Free cash flow burn is also seen exceeding $4 billion, as capital/operating and working capital headwinds intensify. Analysts further flagged demand for its R2 model, with volumes likely skewed to Q426.
“Meanwhile, and unlike TSLA, we do not expect many Autonomy / AI-related potential catalysts, with key launches set for late-2026.”
Rivian Automotive, Inc. (NASDAQ:RIVN) is an automaker that creates and manufactures electric vehicles, as well as software and services.
8. Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders: 72
Datadog, Inc. (NASDAQ:DDOG) is one of the 10 Must-Watch AI Stocks on Wall Street. On January 12, Goldman Sachs analyst Gabriela Borges assumed coverage on the stock with a Sell rating and a price target of $113.00. Firm analysts see 2026 as a pressure year for DDOG as competition intensifies and weighs on fundamentals.
“We assume coverage on Datadog with a Sell (from Buy) and 14% downside to our 12-month price target of $113.”
While Goldman Sachs views DDOG as a complete platform in Observability, the Total Addressable Market for Observability appears fragmented which can allow many companies to win.
Year 2026 may see competition intensifying for Datadog, with customers more focused on observability budget optimization. In particular, rising AI adoption is increasing data volumes and complexity, prompting customers to revisit their observability strategies.
Moreover, there is growing competition from names such as Grafana, Clickhouse, and Chronosphere, as well as Crowdstrike and Snowflake.
“Specifically: 1) AI adoption drives an increase in data volume and cardinality (unique dimensions per signal), likely prompting customers to revisit their observability strategy; 2) competitors such as Grafana, Clickhouse and Chronosphere (pending acquisition by Palo Alto Networks) are increasingly focused on capturing share in observability by optimizing customer observability budgets, including via driving lower Datadog bills; we think CrowdStrike and Snowflake (announced plans to acquire Observe on 1/8) could also choose to compete more intensely; 3) our industry conversations at AWS Reinvent in December 2025 suggest a heightened focus from Amazon to capture share of cloud observability budgets.”
Overall, the firm anticipates the industry to move towards a deflationary architecture where DDOG will either innovate toward more efficient technology or risk losing market share.
“While we do not take a view on any particular quarter, we expect these dynamics to drive slowing revenue growth and increased opex or M&A intensity, and weigh on the stock’s multiple.”
Datadog, Inc. (NASDAQ:DDOG) offers a cloud-based SaaS platform for monitoring and analytics, specializing in cloud computing and AI-powered cybersecurity products.
7. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 102
Snowflake Inc. (NYSE:SNOW) is one of the 10 Must-Watch AI Stocks on Wall Street. On January 12, Barclays analyst Raimo Lenschow downgraded the stock from Overweight to Equalweight with a price target of $250.00 (from $290.00). Firm analysts are constructive on the stock owing to strong fundamentals, but see limited upside after strong run.
While Snowflake has been a “best-in-class-software” stock, the firm believes that much of the strength is now priced into valuation. The AI stock has had one of the strongest top-line growth rates in the firm’s coverage universe and above-average free cash flow margins at scale.
For context, this rating downgrade marks Barclays’ third rating change for SNOW over the past three years. Analysts noted how execution has improved for the company under CEO Sridhar Ramaswamy, helping boost momentum for the stock.
“Importantly, for context, this move marks our third rating change for SNOW over the last three years, following our upgrade of the company to Overweight (from EW) in our 2025 Outlook (see 2025 Outlook: Recovery And AI To Drive Software Outperformance, 1/10/25) and our downgrade of the company to Equal Weight (from OW) with our 2024 Outlook (see U.S. Software: 2024 Outlook: Putting Both AI and SMID Cap Hype to the Test, 1/12/24). During this time last year, we saw improved execution for Snowflake on both the product and GTM fronts under its new CEO Sridhar Ramaswamy that was driving better momentum at the company that underpinned our upgrade.”
Snowflake Inc. (NYSE:SNOW) is a cloud-based data storage company providing a data analysis, storage, and sharing platform.
6. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 112
Vistra Corp. (NYSE:VST) is one of the 10 Must-Watch AI Stocks on Wall Street. On January 12, UBS analyst William Appicelli raised the price target on the stock to $233.00 (from $230.00) while maintaining a “Buy” rating. Firm analysts see robust cash accretion from nuclear PPAs with META, citing 20-year cash flow visibility and record-high capacity prices.
Vistra recently announced that it has entered into 20-year power purchase agreement with Meta Platforms Inc. to supply a total of 2,609 megawatts (MW) of carbon-free electricity and capacity through its nuclear plants located in the PJM Interconnection region. UBS’s rating affirmation follows this Friday announcement, supporting their bullish thesis on the stock.
“Friday’s announcement supports our Buy thesis on VST, highlighting upside potential from contracting nuclear assets and hyperscalers’ willingness to underwrite additionality.”
The company’s 8-K filing confirms a 13-17% cash accretion versus 2026 guidance. The firm estimates roughly $400 million EBITDA growth from existing nuclear assets and approximately $400 million from uprates. It also noted how 48% of Vistra’s nuclear fleet remains un-contracted, leaving room for further deals.
Pushing back on margin concerns, the firm also argued how investors are underestimating the value of Vistra’s long-term cash-flow visibility and premium priced contracts.
“Investor concerns about margin uplift at $22–23/MWh (vs. ~$25–30/MWh consensus) overlook VST’s visible 20-year cash flow and long-term EBITDA contracts, including the Comanche Peak deal, covering over 25% of total EBITDA. This reflects premium pricing above wholesale levels that are supported by record-high capacity prices of ~$330/MW-Day.”
5. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 119
Salesforce, Inc. (NYSE:CRM) is one of the 10 Must-Watch AI Stocks on Wall Street. On January 12, Goldman Sachs analyst Gabriela Borges assumed coverage on the stock with a “Buy” rating and a price target of $330.00. Firm analysts believe Agentforce’s success will be the main driver of stock outperformance over the medium term.
Salesforce’s AI-powered Agentforce, a platform that allows building and managing proactive, autonomous agents, positions the company well for broader adoption of agentic AI in sales and services functions.
Since the firm believes that Agentforce will drive outperformance over the medium term, it has shifted its focus on this, and also pointed to industry feedback that reflect customer adoption and progress on the limiting factors of Agentforce’s adoption.
The firm doesn’t view Agentforce as a binary case where it either works or doesn’t. Rather, it anticipates a roughly 4% tailwind to Platform and Other revenue over the next 12 to 18 months. This could drive a revenue inflection as early as 2026.
“Over the FY26-FY30 time frame, we expect that Agentforce will represent a 2% tailwind for the business in aggregate. Our view also takes into account ongoing share loss in Commerce and Marketing Cloud and evolving approaches to data architecture that impact Data 360 (formerly known as Data Cloud). Taken together, we see a positive risk/reward, and expect more consistent signs of momentum across the customer base through FY27 to catalyze stock outperformance.”
Salesforce, Inc. (NYSE:CRM) is a cloud-based CRM company that has gained popularity after it unveiled its AI-powered platform called Agentforce.
4. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 122
Oracle Corporation (NYSE:ORCL) is one of the 10 Must-Watch AI Stocks on Wall Street. On January 12, Goldman Sachs analyst Gabriela Borges assumed coverage on the stock with a “Buy” rating and a set a price target of $240. Firm analysts are bullish on Oracle’s compute advantage, anticipating gross profit acceleration.
Borges noted how the firm is positive on Oracle’s technology advantage in AI compute workloads and its potential to increase share of new cloud revenue from less than 10% today to an estimated 25% within three years.
Analysts question when Oracle’s heavy spending will translate into profits, anticipating improved visibility over the next 12 months. In particular, they believe revenue will reaccelerate this year as additional phases of the 1.2GW Abilene data center comes online.
Moreover, gross profit will be seen bottoming out before meaningful acceleration. The firm also believes that Oracle is close to peak debt raises, noting that the company should execute its data center build with less than $80 billion in debt raised, broadly in line with guidance.
“For Oracle to be an investment rather than a trade, we look to better gauge the sustainability of growth and pricing beyond 2030, as well as its database and apps business (~30% of sales). At $190, we believe the market is already discounting Oracle Street forecasts of $20 in FY30 in EPS, and we see a scenario where gross margin is below the Street this year ahead of revenue acceleration. As such, we approach risk/reward for the stock by considering bear/base/bull scenarios that discount OpenAI commitments by 100%/30%/0% to arrive at $10/$15/$25 of EPS or a 4:1 upside/downside skew when applying a 10x–25x range of P/E multiples.”
Oracle Corporation (NYSE:ORCL) is a database management and cloud service provider.
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is one of the 10 Must-Watch AI Stocks on Wall Street. On January 12, BofA Securities analyst Wamsi Mohan reiterated a Buy rating on the stock with a $325.00 price target. Firm analysts anticipate upside surprises as the tech giant heads into F1Q26 earnings on January 29 after markets close, particularly driven by foldable iPhone and AI-enhanced Siri.
Upcoming catalysts highlighted by the firm include the launch of a foldable iPhone and an enhanced Siri with integration with Gemini AI which can lead to higher upgrades. While the start of 2026 saw Apple shares lagging behind, sentiment appears to be overly cautious.
The firm noted that it sees robust iPhone demand ahead, with services revenue continuing double-digit revenue growth despite weaker App store sales in China.
” Our F1Q rev/EPS are $140bn/$2.69 vs. Street $138bn/$2.67 (we model rev +13% y/y vs guidance 10-12% y/y). We model GM of 47.5% (at mid-pt of guide) but see sequentially higher margins in F2Q (Mar Q) on higher mix of Services. We expect Apple to guide F2Q rev growth of 10% y/y and GM range of 47.5-48.5%. We model F2Q rev/EPS of $105bn/$1.82 vs. Street $105bn/$1.85. Apple remains underweight in investor portfolios which we see reversing this year. Reit Buy.”
Apple is a technology company known for its consumer electronics, software, and services.
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 234
NVIDIA Corporation (NASDAQ:NVDA) is one of the 10 Must-Watch AI Stocks on Wall Street. On January 12, Baird analyst Tristan Gerra reiterated an Outperform rating on the stock with a $275.00 price target. Firm analysts believe Nvidia’s AI platform dominance remains underappreciated.
Analyst Tristan Gerra noted how Nvidia has been building world AI ecosystems. The complexity of AI tools and ecosystems strengthens the chip giant’s customer adoption, creating a “tremendous barrier of entry which is under appreciated by investors.”
Even as inferencing grows substantially beginning in 2028, the firm noted how industry perspectives suggest will maintain its market leadership. Nvidia’s platforms are being used by millions of developers, even today.
“There are views in the industry that Nvidia will retain a far-leading market share in AI even as inferencing becomes much larger starting in 2028. Today, the world is building on Nvidia’s platforms, used by seven million developers. This research note includes the details and implications of Nvidia’s CES address/Q&A along industry checks. Outperform-rated.”
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services.
1. 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 January 12, BofA Securities analyst Justin Post reiterated a Buy rating on the stock with an $810.00 price target. Firm analysts view recent energy deals for Meta as strategic, anticipating no significant impact on 2026 expenses.
BofA noted how Meta announced long-term partnerships with three nuclear energy companies, namely Vistra, TerraPower, and Oklo. All three partnerships are anticipated to support up to 6.6GW of energy capacity by 2035.
With power availability remaining a constraint for AI infrastructure growth, agreements with Oklo and TerraPower are anticipated to speed up nuclear innovation, while the one with Vistra will allow Meta to purchase more than 2.1GW of power and offer financial support to maintain plant operations.
“Our take: Power availability is a key constraint for data center expansion, likely prompting Meta to secure long-term energy partnerships to lock in capacity and pricing certainty. For those that view AI capacity as a key strategic asset, these deals should help support Meta’s AI capacity growth for the next decade.”
The firm further highlighted how Meta hasn’t provided disclosure on financing or capex investment related to the projects. However, these are multi-year agreements with capacity expected to come online after 2030.
There isn’t a material impact anticipated on Meta’s near-term capital or operating expenses throughout 2026 for these deals.
“Meta has not provided any disclosures on the financing or capex investment associated with these projects, but we note that agreements are multiyear with capacity primarily coming online after 2030, suggesting more near-term capitalization investment than opex. While Meta is “providing financial support to maintain and extend the operating life” of certain assets, we don’t expect a material uptick to 2026 expense growth related to these deals. Still, with AI investments (capacity and power) continuing across the sector in 2026, we do not expect any pullback in Meta’s AI investment posture relative to the 3Q earnings call.”
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 have limited downside risk. If you are looking for an AI stock that is more promising than META and that has 100x upside potential, check out our report about this cheapest AI stock.
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