Chris Toomey, Morgan Stanley managing director of private wealth, said in a latest program on CNBC that he is not bullish on stocks yet and plans to “stay defensive” until a few key issues are resolved. The analyst wants to see more clarity on US-China tariff dispute and 10-year Treasury yields below 4% “without a recession” as well as a dovish Federal Reserve.
Asked what investors should do in this situation, Toomey pointed out some safe alternatives to stocks in the current environment:
“We were underweight equities. We continue to remain underweight. I think you want to stay in the largest kind of highest quality area. think there’s also opportunity in other areas of the market. You know, we saw a situation where equities were selling off, bonds were selling off at the same time. Speaks to the benefit with regards to alternatives, whether it’s hedge funds, whether it’s looking at things like private credit, or just looking into opportunities within the private equity market. If you look at, you know, the fixed income market right now, MUN’s on a tax equivalent basis, you’re looking at sometimes 7 to 10% tax equivalent yields. You know, that’s pretty attractive right now while you’re waiting for this uncertainty to pay off.”
For this article, we picked 10 stocks making moves currently. With each stock, we have mentioned the number of hedge fund investors. 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).
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
10. IBM Common Stock (NYSE:IBM)
Number of Hedge Funds Investors: 56
Wamsi Mohan, Bank of America Global Research senior IT hardware analyst, said in a latest program on CNBC that he believes IBM Common Stock (NYSE:IBM) has the ability to meet its targets and called the pullback the company faced “transitory.”
“They’ve divested a lot of assets that were not growing, they’ve invested in assets that are progrowth, and they’re changing the growth profile of this company—and we think for the better. Now when you look at the quarter itself, the quarter was 2% constant currency growth, and the company has guided to about 5% plus constant currency growth for the year. So there’s some skepticism on their ability to meet those targets. When we dig into the numbers, we actually think there is a way for them to meet or beat these kinds of numbers, and that’s really driven by the fact that they’re in a mainframe launch year, and the mainframe still is very relevant, contrary to maybe popular belief, and can be a big driver for numbers.”
Mohan said he is “very bullish” on IBM Common Stock (NYSE:IBM).
IBM Common Stock (NYSE:IBM) is indeed making a comeback. As of the end of Q4, IBM’s AI products and services surpassed $5 billion in total bookings, with $2 billion added just since last quarter. Last year, IBM Common Stock (NYSE:IBM) updated its Granite family of AI models for enterprise use, making them about 90% more cost-efficient than large models. RedHat is also key in IBM Common Stock (NYSE:IBM) open-source GenAI strategy. Management highlighted that RHEL AI and OpenShift AI platforms are gaining traction, along with IBM Common Stock (NYSE:IBM) watsonx AI solutions.
9. Lam Research Corp (NASDAQ:LRCX)
Number of Hedge Funds Investors: 58
Jim Cramer in a recent program on CNBC praised Lam Research Corp (NASDAQ:LRCX) and the company’s management.
“Lam Research is probably the greatest semiconductor capital equipment company other than Taiwan Semi, and they reported a monster quarter. And Tim Archer, the CEO, came on Mad Money—he’s fantastic. This was an amazing quarter. I know it’s up three, it’s going to go up more. They are just a remarkable company.”
Sands Capital Select Growth Fund stated the following regarding Lam Research Corporation (NASDAQ:LRCX) in its Q4 2024 investor letter:
“We exited Lam Research Corporation (NASDAQ:LRCX) on valuation concerns. The stock’s 12-month forward earnings multiple more than doubled from its 2022 low to the end of 2024’s third quarter. This valuation reflected lofty expectations for artificial intelligence (AI)-driven dynamic random access memory (DRAM) demand and NAND flash memory capital expenditure. While both DRAM and NAND stand to benefit from AI use cases, we believe this is likely to be overwhelmed by a muted recovery in consumer categories and potential deterioration in Chinese semiconductor capital expenditure. The latter concern became more acute following ASML Holding’s third-quarter 2024 earnings results, in which the business guided for its China revenue to fall by nearly 50 percent in 2025.
Looking past the valuation concerns, we maintain conviction in Lam’s long-term earnings power, given its leadership position in etch and deposition wafer fabrication equipment and the longer-term demand and technology trends. DRAM and NAND growth can inflect with improvements and scaling in AI (e.g., more memory use in inferencing, new packaging technology to improve input and output between memory and logic chips), and etch and deposition will become more important with new gate-all-around transistor architecture. We also expect the business to be a primary beneficiary of the next PC and smartphone replacement cycle, though we have little visibility into the cycle’s timing.”
8. Chevron Corp (NYSE:CVX)
Number of Hedge Funds Investors: 63
Jim Cramer in a latest program on CNBC said that he likes Chevron Corp (NYSE:CVX) but cannot recommend the stock because of a downward trend in oil prices.
“It’s oil related and we can’t tell where oil’s going to go so I decided I couldn’t include that even though I know Mike Wirth has done a remarkable job we got a 5% yield but I just feel like the principle could go down so much that it doesn’t matter so I got to tell you I like Chevron very much but in the end what is it an oil company and the president seems to want oil much lower can’t make money in any market when you have a president says he wants that one lower.”
TCW Relative Value Large Cap Fund stated the following regarding Chevron Corporation (NYSE:CVX) in its Q3 2024 investor letter:
“Chevron Corporation (NYSE:CVX), headquartered in San Ramon, CA, is an integrated energy company. At elimination, the stock had a $273 billion market capitalization and met all five valuation factors, including a robust 4.4% dividend yield. Chevron’s planned acquisition of Hess† would yield a strong restructuring catalyst through elimination of duplicate corporate costs and a new markets catalyst through Hess’ 30% interest in the Stabroek oilfield off Guyana; these blocks have a very low cost of supply and decades of reserves that would support strong free cash flow. While Chevron recently received Hart[1]Scott-Rodino (HSR) clearance to acquire the company, the closure timing has extended from Q4 2024 to possibly to Q2 2025 as Chevron is engaged in arbitration with peers ExxonMobil (XOM; 2.47%**) and Chinese state-owned CNOON over rights of first refusal (ROFR) for Hess’ interest in Stabroek. As Chevron’s expected arbitration resolution timeline has slipped, we believe that ExxonMobil and CNOOC’s ROFR case may have more merit than expected, thus putting the entire Hess acquisition at risk. Given an increasingly reasonable outcome that Chevron might abandon the Hess acquisition altogether, we eliminated the position in the stock.”
7. Intel Corp (NASDAQ:INTC)
Number of Hedge Funds Investors: 68
Christopher Rolland, Susquehanna senior analyst, said in a recent program on CNBC that Intel Corp (NASDAQ:INTC) is “dead money” in its current strategic form.
“I do think it’s dead money in its current strategic form. I would love to see this company broken up into manufacturing on one side and product on the other. I think particularly with Trump’s pro-USA stance, manufacturing might even have a chance here. There’s also rumors out today of increased interest in their 18A foundry operation, and I would love to see large hyperscalers building out in America using Intel.”
The analyst also explained why the stock fell despite decent quarterly results. His analysis shows that Intel Corp (NASDAQ:INTC) is not seeing a broader turnaround as of yet, and it would take a long time for the investors to see some positive developments.
“The 2Q guide was light, and even though 1Q beat, there’s a couple of things here to note in the presentation. So number one, they said better volumes on PC — we think that’s PC-related pull-in because of tariffs. Secondly, they called out more competition. We think AMD is taking share here, even in the first quarter. And then lastly, data center, which also beat in 1Q — they noted that this was related to AI head nodes. What that means is, for every four GPUs that Nvidia sells, Intel sells one CPU for DGX. And so this was really where data center beat, which really isn’t a standalone Intel product.”
Intel Corp (NASDAQ:INTC) turnaround plan has many moving parts, and the stock is a hold only for those who can wait. The company is reportedly mulling a 20% reduction in workforce and a partnership with TSMC. It has already postponed its $28 billion factory project in Ohio to 2030. If the company reduces its foundry operations, it could focus on more promising areas of its business.
Tariffs and trade wars are key headwinds for Intel. China imports $10 billion worth of chips from the U.S. annually, with Intel Corp (NASDAQ:INTC) U.S.-assembled CPUs accounting for $8 billion of that total.
The EPS estimate for the fiscal year ending December 2026 stands at $0.86, giving the stock a forward price-to-earnings (PE) ratio of 23.44. For the fiscal year ending December 2027, the forward PE ratio drops to 13.50. This valuation is modest and attractive only if Intel Corp (NASDAQ:INTC) is able to successfully execute its turnaround plan.
Invesco Growth and Income Fund stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter:
“Intel Corporation (NASDAQ:INTC): The chipmaker reported weaker-than-expected quarterly results as revenues declined and earnings were below expectations. Management also provided weaker guidance going forward; the stock fell on the news. We sold the position during the quarter.
The chipmaker’s quarterly earnings report was weaker than anticipated as revenues declined and earnings were below expectations. Management also provided weaker guidance going forward. Given that a potential recovery appears to be further in the future than we originally anticipated, we sold the position.”
6. Merck & Co Inc (NYSE:MRK)
Number of Hedge Funds Investors: 86
Jim Cramer in a recent program on CNBC commented on Merck & Co Inc (NYSE:MRK) earnings results and said the pharma giant’s report was among a series of statements from major companies that were “disappointing.”
“This is an earning season so far where a lot of the big ones that look like they’re just shockingly bad or disappointing—everyone knew. I mean, Merck reported a quarter, I think we all kind of knew that Keytruda had slowed down a little bit. We knew that there were some Gardasil problems.Winrevair, drug that they bought—pulmonary arterial hypertension—I thought it was terrific, 280 million. So I think that this is an example where you can just say, oh my god, damn, Merck down almost 40%. I got to—I, I, I got to take a hard look at it.”
GreensKeeper Asset Management stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its Q3 2024 investor letter:
“Merck & Co., Inc. (NYSE:MRK) was our second-largest detractor this quarter, declining -8.3%. MRK’s leading HPV vaccine, GARDASIL 9, faced challenges internationally due to inventory buildup within its Chinese distributor, which is expected to reduce shipments for the remainder of 2024. Despite this short-term impact, the long-term outlook for GARDASIL 9 remains promising. Meanwhile, the company’s $27 billion Keytruda cancer juggernaut continues to grow at a healthy clip, powering earnings growth.”
5. Walmart Inc (NYSE:WMT)
Number of Hedge Funds Investors: 88
Robert William Flay, celebrity chef, restaurateur, TV personality, and best-selling author, explained in a recent program on CNBC why Walmart Inc (NYSE:WMT) is his top pick. The chef said he’s keeping a keen eye on retailers and believes Walmart has more room to run amid the current environment.
“I think that there’s a lot of uncertainty. We don’t know which direction we’re going in from minute to minute, not even from day to day anymore. And so, you know, a place like Walmart is trusted. I think people could continue, will need to continue to spend, but I think that they’ll be looking for the right prices and trusted places like a place like Walmart. I pay a lot of attention to the retail business. You guys mentioned Nacho—I actually have a CPG company called Made by Nacho, which is a, it’s actually a cat food company. And so I pay a lot of attention to big box retailers and specialty retailers, etc., across the board, and they seem to have so far weathered the storm this year. And I just think that their upside is going to continue.”
4. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Funds Investors: 99
Jim Cramer in a recent program on CNBC explained why Tesla Inc (NASDAQ:TSLA) shares remained steady after a weak quarterly report, which he called “terrible.”
“Tesla reported one of the worst quarters of the year—I mean, it’s really terrible, it’s just dismal. But the stock soars more than 5%. Why? Because CEO Elon Musk is getting out of Doge. He’s spending more time with Tesla. That’s enough.”
Tesla Inc (NASDAQ:TSLA) EV sales are falling all over the world as the company faces challenges from competitors. Even if Elon Musk increases his focus to fix the company’s problems, it would take a lot of effort to come out of the demand crisis. For example, in California, the largest U.S. market for electric vehicle adoption and sales, Tesla Inc (NASDAQ:TSLA) sales fell about 12% year over year in 2024, causing its market share to drop from 60.1% in 2023 to 52.5% in 2024. Was it because Californians are buying fewer EVs? No. Californians purchased more than 2 million electric cars during the year, almost double when compared to the past two years.
Things aren’t looking good for Tesla in Europe, either. For example, in Germany, Tesla Inc (NASDAQ:TSLA) delivered just 1,429 new cars in February, down 76% from the same month last year. In contrast, battery-electric vehicle (BEV) registrations surged 30.8% during the month.
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q1 2025 investor letter:
“The underweight in Tesla, Inc. (NASDAQ:TSLA) contributed to performance in the first quarter of 2025. Tesla’s automobile sales declined in the quarter, in part due to factory changeovers that were required for updates to the company’s best-selling vehicle, the Model Y. This resulted in slower sales volume in the quarter. Competition from China’s BYD is causing market share losses for Tesla in several non-U.S. markets. The CEO’s position as an advisor to President Trump has damaged Tesla’s brand image among a cohort of traditional electric vehicle buyers.”
3. Apple Inc (NASDAQ:AAPL)
Number of Hedge Funds Investors: 158
Jim Cramer in a recent program on CNBC said that he had to recommend that his investing club members trim their positions in Apple Inc (NASDAQ:AAPL). However, he defended the company:
“This administration believes that Apple’s selfish, that Apple wants to have its cake and eat it too. The White House app to the White House, Apple should either make its products here or not at all. Now, here’s what’s really important: it seems like there’s no one in the administration who says, “Look, Apple’s one of the best companies in the world, and we don’t want to hobble it. We want to promote it. We want the government of China to know that we make the best phones, not the Chinese, and the Chinese people want ours, not theirs.” But that’s so off message for Trump’s trade team that I sound like a rube for even floating the idea. I am not a rube. I just don’t think there’s anything particularly selfish about Apple’s approach to China.”
Columbia Seligman Global Technology Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:
“The fund maintained a position in Apple Inc. (NASDAQ:AAPL) throughout the quarter through the release of the company’s new iPhone 16 in September. Company leaders were excited about the release of the new model, as this is the first model that will feature enhanced AI capabilities through the Apple Intelligence features. Sales for the first few weeks in October and November trailed behind year over year sales from the iPhone 15, as availability of Apple Intelligence was not compatible with all iPhone models. Apple announced a partnership with OpenAI that has allowed the integration of ChatGPT into the Apple ecosystem, separate from the core Apple Intelligence features. This partnership highlights continued progress from Apple to introduce AI capabilities into its products and we expect the iPhone 17 to have even more expansive AI capabilities, increasing potential demand for the new model that is on track to be released in 2025.”
2. Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Funds Investors: 160
OptionsPlay’s Tony Zhang said in a recent program on Schwab Network that Alphabet remains undervalued. Asked about the threats the company is facing due to AI, Zhang said Alphabet can “catch up” to ChatGPT and pointed out its YouTube business strengths.
“Search is definitely something that investors should be concerned about long term. But YouTube has been a pretty strong business in conjunction with that. But as you said, you know, the AI ambitions that Google has—I think they’ve done a really good job recently catching up to ChatGPT with regards to the integration of their AI models into the G Suite and their entire product range. You know, we’re starting to see just the very early days of what Google can do with regards to AI, and I think this is really where, at some point, this will be far more ubiquitous within your Google suite of products—is the introduction of Google Gemini into that. And I think that’s really where the long-term ambitions for Alphabet stands. And, you know, when it’s trading at about 17 times forward earnings, this is by far one of the cheapest ways to get exposure to AI for the future. You know, especially when the industry is trading at around 20 times forward earnings, you’re trading at a pretty heavy discount here. Net margins of 28% is well north of the industry average.”
Alphabet Inc (NASDAQ:GOOG) posted strong quarterly results, but the market remains reluctant about the stock amid threats to its search business due to the onslaught of AI tools like ChatGPT. However, Alphabet Inc (NASDAQ:GOOG) bulls believe these concerns are overstated.
Google has an edge over competitors because it’s easier for the billions of users of its search engine to switch to Gemini instead of opting for a completely new model. Google has over 1.5 billion monthly users interacting with its AI-powered Search overviews. OpenAI has less than 5% of its users paying, and its business model is still developing. Google’s first-quarter results showed continued strength in its cloud unit, with revenue up 28% year over year and solid operating income growth. This supports Google’s broader AI strategy and underscores the scale advantages of its cloud business.
Alphabet Inc (NASDAQ:GOOG) has also affirmed its $75 billion capital expenditure plan for 2025, which threw water on skeptics’ claims about a slowdown in demand trends.
Middle Coast Investing stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q1 2025 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) – We bought Alphabet (i.e. Google) in a few accounts. I’ve owned it before, but not for very long. I usually don’t focus on buying the biggest tech companies, even as we have the one portfolio with the large AMZN / AAPL positions.
One reason to do this is to give the portfolios with Alphabet exposure to large cap technology, a huge part of the market. But also, of the so-called Magnificent Seven or any other trend of huge tech stocks you want to name, Alphabet is the most attractive. At $170/share, where we bought it, it traded at 19x 2025 earnings estimates and 21x 2024 earnings results before crediting its balance sheet for its huge cash position. That is less than the S&P 500.
Alphabet is supposedly threatened by the advent of ChatGPT and generational AI. It seems as likely to me that Alphabet wins or at least ties Microsoft and OpenAI in these battles as anything else. It also seems as likely to me that the generative AI trend slows down, and the incumbent, Google search, becomes the business winner…” (Click here to read the full text)
1. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Jim Cramer in a program last month said that he advised his investing club members to sell “some” NVIDIA Corp (NASDAQ:NVDA) shares amid losses. Cramer mentioned how he felt for recommending selling shares of a company he’s long supported and admired:
“This morning, my colleague David Faber asked me how I felt about two stocks in particular that I’ve long championed, Apple and Nvidia. He heard that I had violated my own long-standing discipline to own them, not trade them, something I have said repeatedly to members of the CNBC Investing Club, and that I told people to do some selling. I told him that indeed, at the beginning of last week, I did advise people to sell some Nvidia and Apple. Every Sunday, see, I do this think piece for investing club members. The Sunday before last, I did this gut-wrenching piece. I said that I could no longer stand by and have these two fantastic stocks be eviscerated, so people had to sell some of them. In retrospect, it was a great time to sell. I mean, hindsight, I know, but these stocks have been crushed in the interim. Then, last Wednesday, in a heartfelt emotional talk with investing club members, I reiterated that Apple and Nvidia had to be parted with because I couldn’t see a path to avoid big declines. Fortunately, if you listened to me, you just avoided the latest declines. Unfortunately, there’s been some serious damage to these stocks.”
Cramer is right to change his view. The market will keep punishing NVIDIA Corp (NASDAQ:NVDA) for not coming up to its gigantic (and sometimes unrealistic) growth expectations. About 50% of the company’s revenue comes from large cloud providers, which are rethinking their plans amid the DeepSeek launch and looking for low-cost chips. NVIDIA Corp (NASDAQ:NVDA) Q1 guidance shows a 9.4% QoQ revenue growth, down from the previous 12% QoQ growth. Its adjusted margin is expected to be down substantially as well to 71%. The market does not like it when NVIDIA Corp (NASDAQ:NVDA) fails to post a strong quarterly beat. The stock will remain under pressure in the coming quarters when the company will report unimpressive growth.
NVIDIA Corp (NASDAQ:NVDA) is facing challenges at several levels. Competition is one of them. Major competitors like Apple, Qualcomm, and AMD are vying for TSMC’s 3nm capacity, which could limit NVIDIA Corp (NASDAQ:NVDA) access to these chips. Why? Because Nvidia also uses TSMC’s 3nm process nodes. NVIDIA Corp (NASDAQ:NVDA) is also facing direct competition from other giants that are deciding to make their own chips. Amazon, with its Trainium2 AI chips, offers alternatives. Trainium2 chips could provide cost savings and superior computational power, which could shift AI workloads away from NVIDIA Corp (NASDAQ:NVDA) offerings. Apple is reportedly working with Broadcom to develop an AI server processor. Intel is also trying hard to get back into the game with Jaguar Shores GPU, set to be produced on its 18A or 14A node.
Ithaka US Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2025 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is the undisputed leader in accelerated computing, with dominant market share in Graphics Processing Units (GPUs) powering AI workloads across data centers, edge devices, and emerging platforms. Its end-to-end ecosystem—from silicon to software (CUDA, networking, and AI frameworks)—creates high switching costs and a widening competitive moat. With secular demand for AI infrastructure still in its early innings, Nvidia stands to benefit from sustained topline growth and strong operating leverage. In early January, a little known Chinese AI company, DeepSeek, released its large language model (LLM), DeepSeek-R1, to an unexpecting world. This model was purportedly trained on very few high-end Nvidia chips and was highly efficient when compared to other leading models. This release set off a chain reaction where investors have had to grapple with the idea that the world may not need as many GPUs as previously thought, which hampered the Nvidia buy case and sent the P/E multiple down to its cheapest level in the past 5 years.”
While we acknowledge the potential of NVDA 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 NVDA and that has 100x upside potential, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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