In this article, we will take a detailed look at the 10 Stocks to Watch as Investors Scramble to Pour Money into AI Trade.
AI stocks continue to dominate market headlines as companies and investors pour money into major companies working on technologies that are impacting millions of lives worldwide. Steve Sosnick, Interactive Brokers’ chief strategist, said in a recent interview with CNBC that AI stocks are still capturing investors’ “imagination” amid strong growth.
“I think there is a little bit of what I’m going to call the broadening out. You know, I’ve been sort of asserting all along that Broadcom either belongs in the MA mag 7 or maybe we can call it the great n great eight. I’m wondering now at this point if Oracle, if they can put up numbers like this and considering their size and Larry Ellison being the second richest guy in the world, maybe we I can’t come up with anything for nine right now but maybe that acronym needs to be expanded. But I think all things cloud all things AI are still capturing investors imaginations.”
However, market nervousness about AI stock valuations and ROI is also growing. Stuart Kaiser, Citi Head of Equity Trading Strategy, said in a recent program on CNBC that AI stock valuations look stretched and the AI trade has become “aggressive.” However, he’s still bullish on specific themes in the industry.
“I think AI power gen and that trade is probably thing we have the most confidence in, frankly, from a sharpe ratio perspective,” Kaiser said. “To be fair though, yeah, I mean there there is a lot priced in right now. People are I don’t want to say over their skis, but it’s a pretty aggressive trade and I think I would last time I was on was when Oracle reported, right? And the conversation there was great revenue forecast, they’re not going to be able to find the chips and the energy to actually get there. So, it’s tough. I mean, the tactical valuation might look high, but if you believe that narrative, then you’re probably earlier innings in that trade than than you previously.”
Photo by Sable Flow on Unsplash
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For this article, we picked 10 stocks making moves on latest news and analyst ratings. 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. Baker Hughes Co (NASDAQ:BKR)
Number of Hedge Fund Investors: 47
Josh Brown, CEO of Ritholtz Wealth Management, recently shared his best energy stocks list. The analyst said even though he does not “like” the overall sector, there are still some names he’d like to buy. Baker Hughes Co (NASDAQ:BKR) is one of the stocks in Brown’s list.
“I have Baker Hughes Co (NASDAQ:BKR) as a B+ (BKR). We’ve talked about this stock before; it was on the best stocks list prior to Liberation Day. Look at that selloff in April—it scratched and clawed all the way back. This is the best of the oilfield service names. The stock is breaking out, with RSI in the 60s, not yet overbought. The August lows at $42 serve as your stop, so that’s your risk-reward here.”
Carillon Eagle Mid Cap Growth Fund stated the following regarding Baker Hughes Company (NASDAQ:BKR) in its second quarter 2025 investor letter:
“Baker Hughes Company (NASDAQ:BKR) is a diversified energy technology and equipment company. Shares declined on concerns about what the recent downturn in oil prices would mean for global upstream activity going forward. Despite this, Baker Hughes continues to see healthy order trends within its Industrial & Energy Technology segment, as the company is experiencing a notable uptick in demand for its power-generation solutions. The company also remains well-positioned to capitalize on the continued buildout of liquefied natural gas (LNG) infrastructure across the globe.”
9. Micron Technology Inc (NASDAQ:MU)
Number of Hedge Fund Investors: 94
William Kerwin, Morningstar analyst, said in a latest program on CNBC that Micron Technology Inc (NASDAQ:MU) guidance blew market expectations “out of the water.” However, the analyst, who has a neutral rating on the stock, said most of the upside for Micron Technology Inc (NASDAQ:MU) is already reflected in its stock price. He believes in the long term, cyclicality in the memory industry will continue to impact the company
“Well, we think buying in at these levels is assuming even more upside from here. And we think a lot of that upside is already baked in. As I said earlier, this outlook for the first fiscal quarter is really exceptional and well above estimates coming in. But the relatively modest stock pop shows that a lot of that upside was already being baked into investors, and this really met maybe some of those buy side expectations even if it exceeded the sell side consensus estimates.”
Micron Technology Inc (NASDAQ:MU) recently posted strong fiscal Q4 results and issued an upbeat fiscal Q1 guidance. The company expects its Q1 EPS to be in the range of $3.60 to $3.90, while revenue is expected to come in between $12.2B to $12.8B. Both metrics came in ahead of Wall Street expectations.
Here is what they have to say about Micron Technology Inc. (NASDAQ:MU) in their investor letter:
“Micron Technology Inc. (NASDAQ:MU) shares advanced due to the company’s strong position in the AI-driven memory market. Management noted robust demand in its latest quarter.”
8. EQT Corp (NYSE:EQT)
Number of Hedge Fund Investors: 96
James West, Melius Research managing director, said in a recent program on CNBC that EQT Corp (NYSE:EQT) is one of the stocks that is positioned to benefit from the rising energy demand due to AI and data centers. West said EQT Corp (NYSE:EQT) can “definitely” benefit from the rising demand because they are the biggest gas producer in the US.
“I think we’re going to be seeing fencing starts here on power generation. We didn’t have power growth in this country for 20 years, and now we’re having this dramatic surge in growth. Power is the table stakes, as I mentioned in the note, to AI. If you don’t have electricity, you can’t turn that electricity into intelligence. We’re going to build out fast, but there are long lead times for many of the critical items.”
Carillon Scout Mid Cap Fund stated the following regarding EQT Corporation (NYSE:EQT) in its Q1 2025 investor letter:
“EQT Corporation (NYSE:EQT) is an integrated energy company with an emphasis on upstream and midstream natural gas operations in Pennsylvania. The company’s natural gas production costs are among the lowest in the country. Natural gas producers benefitted from a colder than anticipated winter, draining natural gas storage to levels well below the 5-year average. Demand is expected to grow rapidly in the coming years, but suppliers like EQT are not adding rigs and storage is starting from a low point.”
7. Walt Disney Co (NYSE:DIS)
Number of Hedge Fund Investors: 111
Laura Martin, Needham managing director, said in a latest program on CNBC that Walt Disney Co (NYSE:DIS) should shut down ABC because the broadcast TV network has been a drag on the entertainment giant’s growth.
“The ABC network is structurally shrinking every year, with between 5% and 11% of its revenue disappearing annually, which slows the reported growth rate of Walt Disney Co (NYSE:DIS). Disney would grow its revenue 5% this year if it didn’t own ABC, and about 4.5% because it does. Higher revenue growth rates lead to multiple expansion from Wall Street. When calculating the value lost by keeping ABC versus the higher multiple Walt Disney Co (NYSE:DIS) could get from faster structural revenue growth over the next 10 years, there’s about $20 billion of value creation, roughly 10% of the company’s market cap. Nothing else in the Disney empire is regulable in the same way, so if ABC were shut down, the government couldn’t stop Walt Disney Co (NYSE:DIS)from taking actions, which is increasingly valuable in a generative AI world. You don’t want to be restricted in reacting to the marketplace and consumers as AI continues to disrupt markets.”
Ariel Global Fund stated the following regarding The Walt Disney Company (NYSE:DIS) in its second quarter 2025 investor letter:
“We also bought The Walt Disney Company (NYSE:DIS), the storied entertainment conglomerate whose businesses span media networks, film studios, theme parks, cruise ships and consumer products. A recent pullback in the stock provided an attractive entry point. In our view, growth in Disney+ subscribers, higher average revenue per user (APRU), margin expansion in the streaming segment and greater license sales amid successful releases will result in substantial operating income growth, bolstering the company’s overall margins and free cash flow generation.”
6. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 115
Garrett Nelson from CFRA recently said in a latest program on Schwab Network that he downgraded Tesla Inc (NASDAQ:TSLA) stock to Sell due to Wall Street’s earnings expectations from the company and stock valuation:
“It’s a mix of expectations being too high and then valuation. The stock is now trading well north of 200 times our EPS estimate for next year following this rally of over 100% since the stock bottomed in early April. I think what other analysts are missing are the impact of the one big beautiful bill, specifically some of the measures in there related to EVs. The big one for Tesla Inc (NASDAQ:TSLA) though is the emissions tax credit. They have auto regulatory credit revenue which has been a very high margin fast growing revenue stream. It was about 2.8 billion in revenue for Tesla Inc (NASDAQ:TSLA). But with the signing of that bill in early July basically that revenue went away overnight, most of which dropped right down to the bottom line. So we think the earnings impact of that isn’t fully understood by analysts and for that reason we think the Q3 estimates are too high and then looking out over the next four to six quarters estimates appear too high as well.”
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. Netflix Inc (NASDAQ:NFLX)
Number of Hedge Fund Investors: 133
Mark Mahaney, Evercore ISI head of internet research, said in a recent program on CNBC that he’s bullish on Netflix Inc (NASDAQ:NFLX) for the long term because of the company’s expanding content slate and its ads business. The analyst said investors should take “big positions” in the stock on pullbacks.
“I think the next move in the stock is going to be based on them ramping up advertising revenue. I think they’re going to do it, but this is going to be a long slog. And then also getting more and more into live events, including sports. And I think we’re going to see that. I think Netflix Inc (NASDAQ:NFLX) has just become more crucial, more essential to households around the world over the next two to three years. It’s a really good asset. You want to be long it. This is not an aggressive entry point, but if you don’t own any, you should buy some and look for those big pullbacks to step in and take big positions. I like Netflix Inc (NASDAQ:NFLX) as a core franchise.”
Macquarie Core Equity Fund stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its second quarter 2025 investor letter:
“Netflix, Inc. (NASDAQ:NFLX) offers a subscription-based streaming service. We expect the company’s growth momentum will continue while investments in content and licensing grow at a slower rate, allowing for higher margins over the coming two to three years.”
4. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 156
Tom Hancock, GMO portfolio manager, said in a recent program on CNBC that Broadcom Inc (NASDAQ:AVGO) is a relatively safer AI play because of the company’s diversification. However, he said he does not hold “more” AVGO shares because of valuation.
“Broadcom Inc (NASDAQ:AVGO) is more diversified and a safer play. AI is not its only business—it does a lot of other things, including software and semiconductors—but within their AI business, it’s much more targeted with custom chips for companies like Alphabet and Meta, focused on proven use cases such as ad targeting or content delivery. We also think their custom silicon, A6, will gain share over more generic GPUs over time. Broadcom Inc (NASDAQ:AVGO) is relatively well positioned. Our only hesitation around them, and why we don’t hold more, is valuation.”
For the fiscal fourth quarter, AVGO expects $6.2 billion in AI revenue, up 66% from a year earlier. The company said it secured $10 billion in AI infrastructure orders from a new customer. Many analysts believe this customer is OpenAI. Some media reports said the two companies co-designed a chip that will be launched next year.
What’s Broadcom’s moat? It makes ASIC, chips designed for specific applications and tasks. As major companies look for custom chips to break Nvidia monopoly and lower costs, Broadcom is positioned well to thrive. Many top AI spenders are teaming up with Broadcom to develop these chips, which are expected to be high-margin, high-volume products, potentially driving substantial growth in both revenue and profits.
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.”
3. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 235
Tom Hancock, GMO portfolio manager, recently talked about Nvidia’s $100 billion deal with OpenAI. He believes the company is “losing” on the deal.
“I think vendor financing has a pretty spotty history, frankly. It’s been a feature of past bubbles that we’ve seen. NVIDIA Corp (NASDAQ:NVDA) is basically giving hundreds of millions here. Roughly 35 million will go back into NVIDIA Corp (NASDAQ:NVDA) revenue down the road. It’ll look like revenue for NVIDIA Corp (NASDAQ:NVDA), but it’s not real cash they’re getting—they’re losing on the deal. Nvidia has also underwritten some of Coreweave’s investment. This is not to say it’s a bubble or anything fraudulent, but it demonstrates how much capital intensity there is in building out AI infrastructure at a time when monetization outside some in-house applications at companies like Meta or Alphabet is very unclear, given the scale of investment required.”
Nvidia’s Hopper Infrastructure and now Blackwell form the core of AI infrastructure for LLM training and inference. But Nvidia’s growth is slowing compared to previous quarters amid competition and capex spending limitations from major companies. In the recently reported quarter, Nvidia’s annual revenue growth came in at 56%, compared with nearly 100% YoY growth in the past.
With its strong position in the data center market and rising demand, Nvidia is likely to keep growing, though not at the same pace it has in the past. Increasing competition from major companies like Broadcom is also expected to impact Nvidia’s margins in the long term.
Nvidia recently impressed the market by signing an AI infrastructure deal with Intel. Nvidia will invest $5 billion in Intel. Jensen Huang said the deal would open up $50B in TAM for both companies in the data center and PC business.
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its second quarter 2025 investor letter:
“Shares of core holding NVIDIA Corporation (NASDAQ:NVDA) surged during the quarter, after the company reported strong quarterly results driven by very strong demand for the company’s next-generation Blackwell architecture. The new Blackwell chips deliver compelling performance improvements, with up to 30x faster inference capabilities as compared with prior generations and, importantly, are much more energy efficient. The company also proved resilient against a backdrop of increasing geopolitical tension, as sovereign deals announced in parts of the world such as the Middle East and Taiwan helped to offset headwinds that resulted from U.S. export restrictions on China sales.”
2. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 260
Mark Mahaney, Evercore ISI head of internet research, said in a latest program on CNBC that contrary to some reports, several major companies are starting to see real benefits of their AI spending. To prove his point, the analyst gave the example of Meta Platforms Inc (NASDAQ:META).
“Take Meta, for example. They dramatically improved the user and advertiser experience, which pushed revenue per employee up nearly 70% for them. If you do AI right, if you invest aggressively, you can materially improve monetization. And I’m not talking about cutting costs — I mean boosting productivity and revenue per employee. You don’t normally see that.”
Alger Spectra Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its second quarter 2025 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) is the world’s largest social-media company, spanning Facebook, Instagram, WhatsApp and Messenger, and its Reality Labs arm pursues next-generation augmented- and virtual-reality hardware. Its Family of Apps averaged 3.4 billion daily active users in March 2025, highlighting the unrivalled scale that underpins its advertising franchise. The company’s AI powered ad-delivery tools are driving higher pricing and better campaign performance, while new initiatives—such as the rollout of ads in WhatsApp—have the potential to unlock fresh revenue streams and are supported by a cash-rich balance-sheet that now includes a quarterly dividend. Shares rose during the quarter after fiscal first-quarter results came in better-than-expected due to strong revenue growth and operating margin expansion. Additionally, management guided fiscal second-quarter revenue above consensus and trimmed full-year expense guidance even as it lifted capital-expenditure plans to accelerate AI-infrastructure build-out.”
1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 335
Andrew Arons from Synergy Advisory said in a recent program on Schwab Network that Amazon.com Inc (NASDAQ:AMZN) shares have not performed well compared to its peers, but they can move higher soon.
“Amazon.com Inc (NASDAQ:AMZN), you know, they do some cost cutting when they have to and if they have to do that, it usually reflects in the earnings moving forward. And there’s just so many areas logistically they’re doing very very well with the consumer. They’re trying to be really really close to where everyone lives and being able to get goods to people right away, which is what people want. And I just think that they’re going to continue to outperform. I mean, you could see Amazon.com Inc (NASDAQ:AMZN) not doing as well as some of these other companies so far this year, but all of a sudden we see a quarter and Amazon does really well and the stock then moves up quite a bit higher, which I think we’re going to probably see here as we go and approach the fourth quarter this year.”
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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