In this article, we will take a detailed look at the 10 Stocks to Watch Ahead of Q3 Earnings Season.
AI investors are turning jittery as warnings mount over high valuations of tech stocks and their renewed comparisons to the dot-com bubble. However, some notable Wall Street analysts believe companies have already started to see the positive impact of AI spending on their numbers.
Venu Krishna, head of U.S. equity strategy at Barclays, said in a recent program on CNBC that AI CapEX spending “remains intact” for the next 12 to 18 months.
“They (companies) are already monetizing it. So, in their core businesses which ranges from e-commerce to cloud services to a whole bunch of advertising and things like that, they’re already deploying and monetizing it. For example, the software stack itself where their core businesses reside, productivity improvement over there is about 30-40%. Right? So that’s the reason why I think if you look at big tech, which is obviously bigger than just the hyperscalers but a small group, you saw their net margins actually improve almost 200 basis points in the last quarter compared to now at this point in time,” Krishna said.
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For this article, we picked 10 stocks that Wall Street analysts are discussing these days. 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).
10.Starbucks Corp (NASDAQ:SBUX)
Number of Hedge Fund Investors: 66
Andrew Charles of TD Cowen said in a recent program on CNBC commented on Starbucks Corp (NASDAQ:SBUX) latest $1 billion restructuring plan. The analyst believes the company is taking the “necessary steps” and its turnaround is “ongoing.” He has a Neutral rating on the stock.
“You know, I think it didn’t really change anybody’s mind. If you were bullish going into this, they had hinted at this before and this just puts more numbers around the number of store closures as well as some of the restructuring charges as well. If you’re bearish, you’re looking at saying, hey, this is a little bit more more of a larger magnitude than we expected, ourselves included. You know, we’re seeing that 900 jobs unfortunately lost around 500 store closures in the United States. You know, this turnaround obviously is these are necessary actions to take, but the turnaround obviously is ongoing.”
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.”
9. Exxon Mobil Corp (NYSE:XOM)
Number of Hedge Fund Investors: 88
In the ‘Final Trades’ segment on CNBC, Jim Lebenthal, a partner at Cerity Partners, said that he likes Exxon Mobil Corp (NYSE:XOM). Here is what the analyst said:
“Exxon Mobil Corp (NYSE:XOM), I know I spoke about it earlier earlier. There’s a stealth trade going on in energy.”
ClearBridge Dividend Strategy stated the following regarding Exxon Mobil Corporation (NYSE:XOM) in its second quarter 2025 investor letter:
“We also significantly increased our position in Exxon Mobil Corporation (NYSE:XOM), as commodity weakness weighed on the shares, providing a compelling opportunity. Commodity prices are cyclical but the change underway at Exxon Mobil is secular. The company is simultaneously lowering its cost per barrel and reducing its emissions intensity while growing its production. This is a powerful combination that puts the company in its best position in decades. Exxon Mobil is positioned to deliver double-digit returns, even without any improvement in oil prices. If stagflation occurs, Exxon Mobil’s returns should be even higher, while most other stocks will come under pressure, providing a sturdy portfolio hedge.”
8. Boeing Co (NYSE:BA)
Number of Hedge Fund Investors: 101
Tim Seymour, the founder and Chief Investment Officer of Seymour Asset Management, named Boeing Co (NYSE:BA) as his stock pick during a recent program on CNBC.
“Boeing. I tell you what, let’s get more deliveries. Let’s get more cash flow,” he said.
Boeing Co (NYSE:BA) shares are up 28% so far this year.
7. Alibaba Group Holding (NYSE:BABA)
Number of Hedge Fund Investors: 101
Cory Johnson from Epistrophy Capital said in a recent program on Schwab Network that Alibaba Group Holding Ltd – ADR (NYSE:BABA) stock surge following its latest announcement to boost AI spending was “amazing.” However, the analyst believes competing with US companies in the AI race won’t be easy for the Chinese tech giant.
“It’s pretty amazing that a company announces they’re going to spend $53 billion and a stock goes up. Costs go up and the stock goes up. I think it shows the excitement of the notion of Alibaba joining in the AI parade here. But it will do so with significant constraints. Alibaba Group Holding Ltd – ADR (NYSE:BABA) does not have the same tools available to it that the big companies in the US that are going into AI and such with such great guns and with even bigger guns, Microsoft, Amazon.com, uh Google, also with with much bigger spending plans around AI and building out AI data centers. But you know to think about what Alibaba is, it’s an interesting combination of lots of different kind of US companies. I think we have to think of here as kind of the Amazon Web Services model that is part of Alibaba now and the notion that they’ll be building out data centers all over the world. But it’s going to be tough for them because they don’t have the chips that everyone else has access to.”
Conventum – Alluvium Global Fund stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its second quarter 2025 investor letter:
“Alibaba Group Holding Limited (NYSE:BABA) was down 12.8%. Bear in mind, this comes off a stunning 55.3% March quarter return. Alibaba reported full year results, and by all accounts they were pretty good. Market chatter suggests some were disappointed by the Cloud revenue, but with 18% growth over the last year, we are not complaining. We liked the continuation of share buybacks, noting that for the year ended 31 March 2025, it bought back over 5% of its shares. Our Alibaba holding accounts for 3.3% of the Fund. We wrote last quarter that we were closely monitoring the position (hinting toward selling). We chose not to act, largely because we see it as one of the cheaper and most direct ways for the Fund to benefit from AI initiatives and Cloud infrastructure growth, and at the same time it provides geographic and economic diversity.”
6. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 115
Steve Westly, The Westly Group founder, said in a recent program on CNBC that Tesla Inc (NASDAQ:TSLA) Q3 delivery numbers might be solid, but the “big question” is about its Q4 performance. The analyst said Tesla Inc (NASDAQ:TSLA) is facing competition as other companies roll out electric vehicles.
“I think it’s a tale of two cities. Look, I think they’re going to post a solid Q3, 465,000 vehicles, about 25 billion for the year. They’re going to be a little up in China, down in Europe, and the US is going to be solid. Why? because everybody’s rushing to get a car before the September 30th deadline when the tax rebates go away. So the big question is how does Q4 look like when those rebates are gone. And the big picture is this. Every automaker in the world is going all electric. Why? The cost of batteries keep going down. But Tesla Inc (NASDAQ:TSLA) got to get new product into market. They’ve got to get lower cost product into market. They’ve got to open new markets. And they’ve got to prove they’re a technology company. They need more regulatory approvals to get that full self-driving going.”
Baron Focused Growth Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its second quarter 2025 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) designs, manufactures, and sells electric vehicles (EVs), solar products, and energy storage solutions, while also developing advanced real-world AI technologies. Despite ongoing macroeconomic challenges and regulatory complexities, shares climbed after Tesla completed a limited commercial rollout of its highly anticipated robotaxi business in Austin—following more than a decade of development and billions of dollars in investment. This milestone signals a potentially transformative shift in the automotive industry and opens up a sizable new market beyond the company’s core operations. Investor sentiment also improved after Elon Musk stepped back from government-related engagements, boosting confidence in Tesla’s near-term execution. Tesla introduced a refreshed Model Y globally, featuring design and performance upgrades, and outlined plans to unveil new mass-market models starting next quarter. Meanwhile, the company is progressing toward scaling production of its humanoid robot, adding another dimension to its long-term growth story.”
5. Eli Lilly And Co (NYSE:LLY)
Number of Hedge Fund Investors: 119
Don Kaufman of TheoTrade said in a recent program on Schwab Network that Eli Lilly And Co (NYSE:LLY) edge in the GLP-1 drugs is thinning as “every” pharma company has the capacity to make drugs like GLP-1 treatments.
“You know, one of the things I think people have to recognize about GLP1 and some of the drugs in the pipeline right now is that they are not all that complex. When you look at the marketplace for these drugs, they are being copied left and right. Every pharmaceutical company out there has the capacity to make something like GLP1, and they are doing exactly that. It is incredibly difficult to actually protect patents these days. I would look at Eli Lilly And Co (NYSE:LLY) and say that this is exactly why GLP1’s initial success is leading to sellside activity—because everybody is getting a piece of it.”
PGIM Jennison Health Sciences Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its second quarter 2025 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a diversified biopharmaceutical company with core franchises in Diabetes, Obesity, Immunology, Neurodegeneration, and Oncology. The Company is one of the two global leaders in diabetes with tirzepatide now the strongest ever launch in diabetes and obesity under the Mounjaro and Zepbound brand names. LLY also has exciting franchises in neurology, immunology, and oncology that are starting to add meaningfully to growth. With a proven history of strong commercial execution and one of the highest Research and Development (R&D) success rates in the industry, we see opportunity for continued success. With a lack of meaningful patent expirations for the rest of the decade, LLY is uniquely positioned amongst its larger-cap peers. Eli Lilly’s recent quarter was largely as expected, with a minor U.S. Mounjaro sales miss offset by strong Zepbound performance and robust international Mounjaro growth, resulting in an overall small beat for the tirzepatide franchise. Prescription trends are increasingly predictive of Lilly’s results, which should reduce the quarter-to-quarter volatility seen last year. The company did not raise guidance, reflecting caution after prior guidance missteps and ongoing uncertainties this year, but quarterly margins and Earnings Per Share (EPS) exceeded expectations and a modest reduction in full year EPS guidance was purely driven by the accounting treatment of acquired in-process R&D (acquisitions of small pipeline-stage biotechs). Lilly also maintained its year-end 2024 foreign exchange assumptions in guidance, not factoring in any benefit from recent dollar weakness, setting them up for a guidance raise at midyear on both these fundamental and technical points. May stock weakness was an overreaction to the announcement of a closed formulary favoring Wegovy for a small part of CVS Caremark’s book of Pharmacy Benefit Management (PBM) business, triggering investor fears of a price war in GLP-1s. It is now clear that fear was misplaced, CVS is truly a one-off, and with continued strong growth in volumes, we expect LLY to continue recovering from this sell-off.”
4. Oracle Corp (NYSE:ORCL)
Number of Hedge Fund Investors: 124
Alex Haissl, Rothschild and Redburn analyst, recently explained the rationale behind his Sell rating and $175 price target on Oracle Corp (NYSE:ORCL). As of ORCL stock price on September 29, the analyst’s price target represents about 38% downside. The analyst believes the market is overestimating the company’s OpenAI deal and ignores the risks involved.
“The basis is really we see like big headline figures in terms of like order wins and also revenues but our work really shows that the value subscribed to this is relatively low. Because the business model is fundamentally different. If you think about these deals we’re talking about single-tenant deals for dedicated clusters where you know the price and also the costs are pretty much fixed over the contract period. This is a sharp contrast what we know from you know the cloud 1.0 Oh, that we know it and investors really price it where you have basically sweat the asset that over time you have extended server lifetime the hyperscalers then layered software on top and all of a sudden you know in the cloud you had a business model with operating leverage and software like margins. This is not what we are seeing here in terms of like these large scale strategic deals where we where we have like big big headline figures but actually the value is significantly lower.”
The analyst said Oracle Corp (NYSE:ORCL) is facing a “risky blue sky” scenario.
“It’s a risky blue skies scenario. So, we think, you know, the five-year guidance is worth around like 60 billion. And then the question really is how often do you have like renewal cycle of of these five years? So the market is pricing in already very optimistic scenario and completely overlooks the risks.”
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Oracle Corporation (NYSE:ORCL) in its second quarter 2025 investor letter:
Software database company Oracle Corporation’s (NYSE:ORCL) quarterly results surprised to the upside, and the company ended the quarter by announcing a massive cloud deal that could generate up to $30 billion in annual revenue over the next few years. All in, shares re rated over 50% during the quarter. The company remains early in its accelerating growth inflection and is benefitting from a number of tailwinds across cloud, database and applications.
3. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 156
Saira Malik, chief investment officer at Nuveen, said in a latest program on CNBC that the AI trade is “alive and well” and companies like Broadcom Inc (NASDAQ:AVGO) continue to be the leaders in the space. Here is why the analyst likes Broadcom:
“With AVGO, they have huge demand from hyperscalers for their ASIC chips, very strong management team, ability to earn very strong earnings growth going forward. The stock actually is not as expensive as one might think given its earnings growth trajectory.”
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its second quarter 2025 investor letter:
“Shares of fellow semiconductor giant Broadcom Inc. (NASDAQ:AVGO) also outperformed during the quarter, as customer demand for the company’s custom accelerator chips remained insatiable despite the uncertain economic environment. The company is on pace for 10 consecutive quarters of AI-related semiconductor growth and expects continued strong demand persist, due to the sizable AI opportunity. In addition to its dominant market position, the company’s history of strong capital returns to shareholders results in a favorable outlook for a sizable investor base.”
2. Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 178
Saira Malik, chief investment officer at Nuveen, said in a latest program on CNBC that Alphabet Inc (NASDAQ:GOOG) continues to be a leader in the AI space. She explained why she likes the stock:
“Looking at Alphabet, people are worried about what will the impact of OpenAI be on Google’s advertising business and genesis. I think the impact is not going to be as great as people think and you have the upside from Waymo and their YouTube business.”
Lakehouse Global Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its second quarter 2025 investor letter:
“We’ll wrap things up with Alphabet Inc. (NASDAQ:GOOG) , which in similar fashion to Hemnet, only experienced a marginal share price decline over the year. That said, Alphabet did meaningfully underperform our average portfolio return as concerns that it’s near monopolistic position in Search (which generates the majority of their advertising revenue) could be eroded by new Artificial Intelligence (AI) alternatives like ChatGPT and Perplexity. When it comes to the potential risks AI poses to the dominance of search, our view is a balanced one. No doubt uncertainty has increased but we believe Alphabet remains well positioned through its massive user distribution (9 products with over 1 billion users each) and long-standing investments and leadership in AI (DeepMind and Google Brain).
Alphabet is innovating fast and has already successfully rolled out their own AI powered search function, AI Overviews. To date, engagement has been encouraging with consumers searching more frequently, with more detailed queries and clicking through at higher rates. Management has noted that AI Overviews are monetising at the same rate as regular Search ads and, that as of April, AI Overviews had already reached 1.5 billion monthly users. This is a much larger base than ChatGPT and highlights the inherent distribution advantage Alphabet has by being able to directly integrate AI Overviews into the widely used Google Search engine.
Looking at current fundamentals, business momentum continues to be strong with revenue growing 12% year-over-year (14% constant currency) in the most recent quarter. This was driven by double-digit growth across Search, YouTube advertising, subscription platforms, and Google Cloud. Cost discipline efforts are also improving profitability, and operating margins have expanded steadily to 32.6%, up from 25.6% two years ago. With a relatively undemanding valuation of less than 20x forward earnings, we still believe the risk/reward for Alphabet is attractive. That said, it would be remiss not to acknowledge that the future dominance of Search is less certain today than it was a few years ago as the range of potential outcomes has widened. As such, we rightsized our position on strength earlier this year.”
1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 335
Jason Snipe, the Founder and Chief Investment Officer of Odyssey Capital Advisors, said in a recent program on CNBC that he likes Amazon.com Inc (NASDAQ:AMZN) because of its Cloud business.
“Amazon. I think AWS will reacelerate this quarter.”
Mairs & Power Balanced Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its second quarter 2025 investor letter:
“The Fund also started a new position in Amazon.com, Inc. (NASDAQ:AMZN) in the second quarter, where the company is well positioned to continue capturing market share in retail while also growing its market leading cloud business. The Fund took advantage of weakness in the stock during April to start the position as tariff news and a precipitous market decline provided an opportunity to build a position.”
While we acknowledge the potential of AMZN to grow, 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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