Many analysts are continuing to point out the concentration of gains problem in the stock market, where just a handful of companies account for most of the returns. However, Mohamed El-Erian, Allianz chief economic advisor, said in a recent interview on CNBC that this trend is “understandable” because of the sheer importance of AI.
“It’s understandable. As you know, I think AI is a major transformational general purpose technology. It’s like electricity. It’s going to change so much of what we do, and it will matter greatly whether you have electricity or not is a huge difference. So for me it makes total sense.”
Many AI Companies Could ‘End Up in Tears’
However, the analyst warned about a much bigger problem that could impact hundreds of companies in the future. He believes many AI companies would end up in “tears.”
“What I worry about is within AI there are some names that are at reasonable valuations but that has pulled other names that I think will end up in tears. This is what I call a rational bubble. It’s rational because everybody has an incentive to overinvest in AI because the payoff is so huge. But you’re going to have a relatively limited number of winners. So there’s going to be some losers in there.”
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
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10. Cipher Mining Inc (NASDAQ:CIFR)
Number of Hedge Funds Investors: 27
Daniel Newman from the Futurum Group said in a recent program on Bloomberg that he’s invested in Cipher Mining Inc (NASDAQ:CIFR) amid rising demand on the back of the AI boom. The company operates industrial-scale data centers in the United States.
“I think everybody sees the infrastructure boom and they’re piling into these energy names like Cipher Mining Inc (NASDAQ:CIFR) and Iris Energy, they’re the names that I’ve actually gotten involved in myself because I believe all the capacity that can be built will be sold. But at the same time, Out the other end, we need ServiceNows. We need Salesforces. We need these enterprise software companies where we only have about 1% penetration right now to start driving incremental revenue. So you’ve seen them pivot revenue to AI products, but they’re not growing faster than they were before AI, and we need to see them growing faster because of AI.”
9. Kraft Heinz Co (NASDAQ:KHC)
Number of Hedge Funds Investors: 45
In August 2024, Dave Sekera, Morningstar’s Chief U.S. Market Strategist, said during a program on CNBC that Kraft Heinz Co (NASDAQ:KHC) was attractive and gave the stock his highest rating. The analyst at the time also talked about the stock’s valuation:
“Kraft Heinz is one that I find especially attractive today. It’s a five-star rated stock, that’s our highest rating, and it trades at about a 37% discount to our fair value and provides a 4.5% dividend yield. We recently upgraded our economic moat rating on that stock. The economic moat rating to narrow means that we think that company can generate excess returns on invested capital for at least the next 10 years before they get competed away. The investment thesis coming from our team here is that the company has really switched its strategy. They’re really looking to drive more long-term profitable growth.”
Kraft Heinz Co (NASDAQ:KHC) is down about 28% over the past 12 months.
Hotchkis & Wiley Large Cap Disciplined Value Fund stated the following regarding The Kraft Heinz Company (NASDAQ:KHC) in its second quarter 2025 investor letter:
“The Kraft Heinz Company (NASDAQ:KHC) is the third largest U.S. food and beverage company. KHC shares declined following mixed earnings results in the quarter. While organic sales growth over the medium term is likely to be just 1-2%, we believe the company can also make bolt-on acquisitions and share repurchases to further ensure positive earnings per share (EPS) growth. Modest EPS growth combined with a dividend yield above 4% should result in a competitive total return.”
8. Starbucks Corp (NASDAQ:SBUX)
Number of Hedge Funds Investors: 66
Theotrade’s Don Kaufman said in a recent program on Schwab Network that he is bullish on Starbucks. Here is why:
“I’m bullish on this one, which is rare for me. I was bearish for a significant time on Starbucks Corp (NASDAQ:SBUX), but I finally feel like the expenditures are pretty much done. I think his (Brian Niccol’s) plan is starting to actually take hold over there. There’s been a pretty incredible run from 79 to 83, and there’s no reason to think that run isn’t going to continue. So I’m going out to the December 19th expiration on this one. I’m going to give myself the gift of time and let this thing take hold. Like everybody knows, it’s pumpkin spice latte season. I’m going to buy the 90 calls and sell the 95 calls—a $5-wide call spread done for an 85-cent debit. It’s a wonderful risk-reward. There’s no stop order needed. You throw 85 cents at risk, and let’s see if this plan actually plays out and the stock heads back to 95 to 100.”
Polen Global Growth Strategy stated the following regarding Starbucks Corporation (NASDAQ:SBUX) in its second quarter 2025 investor letter:
“We have reestablished our position in Starbucks Corporation (NASDAQ:SBUX), now under the leadership of newly appointed CEO Brian Niccol, formerly of Chipotle. Niccol has articulated a clear, multi-pronged turnaround plan that we view as both practical and achievable. We believe Starbucks’ store operations became overly complex, resulting in over-tasked baristas and a poor customer experience. Having successfully revitalized Chipotle, we view Niccol as the right leader for Starbucks. He has already identified fixes for in-store operations, marketing, and customer service that we believe can potentially result in meaningful impact in the not-too-distant future, provided they are effectively scaled across 17,000 U.S. stores. We believe Starbucks retains an aspirational brand and a loyal customer base. As such, we see solid growth ahead through store productivity, new-store growth, and significant margin expansion. After a few years of mismanagement and a languishing stock, we expect considerable upside for this iconic brand.”
7. Salesforce Inc (NYSE:CRM)
Number of Hedge Funds Investors: 121
Karen Firestone, executive chairman at Aureus Asset Management, said in a recent program on CNBC that she’s selling Salesforce shares. Here is why:
“We know the company well. The benefits from AI and all the spending they’re doing, we believe, are more focused on client support and not the whole sales effort, which is what the clients need. They need software for that; they need benefits from AI, and we’re not seeing that yet. We’ve had a lot of promise. We’ve had a lot of discussion from the company about where it’s going and what they’re going to do and when they’re going to see revenue and profit enhancement, and it’s been slow. So we just decided to step away, and we’ll watch it. We’ll watch and see when there’s an opportunity.”
Vulcan Value Partners stated the following regarding Salesforce, Inc. (NYSE:CRM) in its third quarter 2025 investor letter:
“Salesforce, Inc. (NYSE:CRM) is the world’s leading SaaS vendor for customer relationship management (CRM) and salesforce automation (SFA) software, including AI agents. Salesforce offers many other products including software for marketing automation, customer service automation, analytics, application integration, and enterprise collaboration among others. Growth guidance for the upcoming quarter was slightly lower than anticipated leading some investors to question whether Salesforce’s growth was slowing and AI investments were not bearing fruit. These questions have been amplified by a bearish industry narrative that AI will take market share from enterprise software companies like Salesforce. We believe the company is poised for sustained growth and will actually benefit from AI. Salesforce’s software is deeply embedded in the enterprise. The company is expanding its product suite with multiple cloud offerings, proprietary data, and an emphasis on being an AI innovation leader. In addition, its customers would rather focus on running their businesses instead of designing, testing, maintaining, and securing internal AI products in an ever-evolving landscape. Salesforce is deeply entrenched within its customer base, has high retention, high recurring revenue, and is a very scalable business with high margin potential. Salesforce is dominant across its offerings and is constantly innovating with new products like Agentforce to deepen customer relationships and grow the business.
6. Oracle Corp (NYSE:ORCL)
Number of Hedge Funds Investors: 124
Malcolm Ethridge, managing partner at Capital Area Planning Group, said in a recent program on CNBC that he’s trimming his position in Oracle Corp (NYSE:ORCL). The analyst said the company’s Cloud margins are not strong when compared with AWS or Google Cloud. He also shared his concerns about Oracle Corp (NYSE:ORCL) dependence on OpenAI.
“This had a lot more to do with how fast the share price has moved in relation to our clients’ basis in the stock versus the company itself. So I think to Josh’s point, Oracle Corp (NYSE:ORCL) doing a great job of improving the margins of its customers, its core clients. However, the margins Oracle is seeing itself as it leans further and further into this multicloud strategy are significantly lesser, or at least reportedly significantly lesser, than that of an Amazon Web Services or a Google Cloud. And that’s a little bit concerning if you consider how much the share price has moved up from about 150 back in April all the way up past 300 recently on all of these announcements really based on one core client, which is OpenAI. And so OpenAI happens to be $300 billion dollars worth of business for the next five years for Oracle Corp (NYSE:ORCL), and if they happen to miss on any of those metrics, that’s significant. Plus, you have Sam Altman who’s come back to the well multiple times with Microsoft, who is their initial partner in this, and renegotiated terms in one way or another. So if they’re likely to do that to Oracle, those margins that Oracle Corp (NYSE:ORCL) has to play with aren’t very good there.”
Headwaters Capital Management stated the following regarding Oracle Corporation (NYSE:ORCL) in its third quarter 2025 investor letter:
“The catalyst for the September AI trade was Oracle Corporation’s (NYSE:ORCL) announcement of a 5-year contract with OpenAI for $300B (implying annual contract value of $60B) to host the company’s LLMs at Oracle data centers beginning in 2027. While the market has grown desensitized to these large headline numbers, it’s useful to step back and put these figures into context from the perspective of both the magnitude of spending and return on investment. It’s easiest to start with the amount of investment that five companies are collectively spending on AI. The table below outlines CAPEX spending by the five hyperscalers and compares it with the other 495 companies in the S&P 500. In 2026, these five hyperscaler companies are expected to spend $405B of CAPEX, nearly all of this related to AI infrastructure build.
In terms of the economics around this investment, details have emerged from the Oracle-OpenAI announcement that can help investors begin to untangle the economics of these contracts. It’s easiest to unpack this from the perspective of each of the players involved.
Committed to spending $60B annually with Oracle to host the Company’s LLMs. This annual expense represents the Company’s cost of goods sold for running LLMs. OpenAI is on track to generate $13B of revenue in 2025 (Source: Reuters and the Information). So just to cover the cost of operating their LLMs on this single contract, OpenAI needs revenue to grow 4.6x in 2 years, or a +115% CAGR over the next 2 years. This is a single contract for hosting services. OpenAI has numerous other hosting contracts, implying that the company needs revenue to significantly exceed $60B just to cover the company’s total cost of goods sold…” (Click here to read the full text)
5. Apple Inc (NASDAQ:AAPL)
Number of Hedge Funds Investors: 156
Stephanie Link, the Chief Investment Strategist, Head of Investment Solutions and Portfolio Manager at Hightower Advisors, said in a recent program on CNBC that she believes iPhone 17 will not spur a “super cycle” for Apple Inc (NASDAQ:AAPL). The analyst also believes the stock’s valuation is not justified. Here is what she said:
“And I don’t think the (iPhone) 17 is going to be a super cycle. I really don’t. I think 18 could be, because they don’t even have AI in yet. I still don’t think it’s going to lift the growth rate—it’s not going to lift the 8% growth rate.”
The analyst said Apple Inc (NASDAQ:AAPL) does not deserve a premium multiple with its current growth rate.
Mar Vista U.S. Quality Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its third quarter 2025 investor letter:
“Apple Inc. (NASDAQ:AAPL) shares rebounded in Q3 2025 as investor concerns over both tariffs and the early adoption of its generative AI product, Apple Intelligence, eased. Attention shifted instead to the favorable resolution of Alphabet’s DOJ trial, seen as a positive for both Apple and Alphabet, and to healthy initial demand for the fall launch of the iPhone 17.
- We continue to view Apple as a competitively advantaged business, anchored by the strength of its ecosystem. With over 2 billion active devices and more than 1 billion paying subscribers, Apple benefits from a loyal customer base and a growing stream of high-margin, recurring services revenue. This stable cash flow enables continued investment in innovation, even during periods of cyclical softness. We believe Apple remains well positioned to lead in the emerging category of AI-enabled edge devices.”
