Sam Altman, CEO of the artificial intelligence startup OpenAI, recently expressed his surprise at the level of trust people have in ChatGPT.
“People have a very high degree of trust in ChatGPT, which is interesting because AI hallucinates. It should be the tech that you don’t trust that much.”
-Altman on OpenAI podcast
Billions of people use ChatGPT and similar large language models (LLMs), but like Altman says, it’s not completely reliable. These models are known to “hallucinate,” or generate information that may seem credible but is not always so.
A recent article from The New York Times has shed light on the matter, stating how reasoning systems from companies like OpenAI, Google, and the Chinese start-up DeepSeek are generating more errors, instead of fewer. Math skills are improving, but the models aren’t handling facts any better, and it’s simply not clear why.
“Despite our best efforts, they will always hallucinate. That will never go away.”
-Amr Awadallah, the chief executive of Vectara, a start-up that builds A.I. tools for businesses, and a former Google executive.
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 Q1 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Skyworks Solutions, Inc. (NASDAQ:SWKS)
Number of Hedge Fund Holders: 31
Skyworks Solutions, Inc. (NASDAQ:SWKS) is one of the 10 Trending AI Stocks on News and Ratings. On July 2, Mizuho analyst Vijay Rakesh raised the price target on the stock to $75.00 from the previous target of $72.00, maintaining a “Neutral” rating.
According to the firm, the growing demand for artificial intelligence may drive phone memory content growth, with DRAM and SSD storage likely expanding from 12GB/512GB to 24GB/1TB configurations.
It also believes that the company may benefit from growth in the non-handset Broad Markets segment. In particular, WiFi 7 technology adoption and automotive market expansion may even help counterbalance increasing competition from Chinese manufacturers.
Skyworks (NASDAQ:SWKS) develops and manufactures semiconductor products used across industries such as aerospace, automotive, telecommunications, and consumer electronics.
9. Jabil Inc. (NYSE:JBL)
Number of Hedge Fund Holders: 55
Jabil Inc. (NYSE:JBL) is one of the 10 Trending AI Stocks on News and Ratings. On July 2, Stifel analyst Ruben Roy resumed coverage on the stock with a “Buy” rating and a price target of $245.00. The coverage resumes following Jabil’s growing exposure to artificial intelligence infrastructure.
We are resuming coverage of Jabil, Inc (JBL) with a Buy rating and $245 Target Price. While the majority of Electronic Manufacturing Services (EMS) companies have significantly outperformed YTD (+28%) vs. S&P (+4%), we believe that multiple expansion can be attributed to ongoing improvement in end-market mix, margin expansion, and increasing exposure to AI-related data center infrastructure investment. On this last trend, JBL’s Intelligent Infrastructure business has seen significant upside in recent quarters driven by AI-related revenue. With its recently reported F3Q25 financial results, JBL increased its outlook for AI-related revenue to $8.5bn, up 50% y/y, from $7.5bn previously, and up from an original forecast for 2025 that called for $5bn – $6bn. We believe that we remain in the early innings of a long-tailed AI infrastructure investment cycle, and we believe that JBL is well-positioned to benefit.”
Jabil (NYSE:JBL) delivers comprehensive manufacturing and design services, including electronics and electro-mechanical product development, prototyping, validation, and assembly.
8. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 56
Baidu, Inc. (NASDAQ:BIDU) is one of the 10 Trending AI Stocks on News and Ratings. On July 2, China’s Baidu launched an AI-driven video generator for businesses and also had a major upgrade to its search engine. The image-to-video model, known as the MuseSteamer, can generate videos up to 10 seconds long and comes in three versions – Turbo, Pro, and Lite.
The MuseSteamer is available only for business users at the moment. Meanwhile, Baidu’s search engine now includes a redesigned search box that can accept longer queries and also supports voice and image-based searches. Through Baidu’s AI technology, the platform can also display more targeted content.
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.
7. Arista Networks Inc (NYSE:ANET)
Number of Hedge Fund Holders: 75
Arista Networks Inc (NYSE:ANET) is one of the 10 Trending AI Stocks on News and Ratings. On July 1, Goldman Sachs analyst Hendi Susanto reiterated a “Buy” rating on the stock with a $115.00 price target. The rating affirmation followed Arista’s new enterprise networking products.
The company has recently introduced new enterprise campus and branch networking offerings, which include switches, indoor and outdoor Wi-Fi 7 access points, and a new enterprise router. Moreover, it also announced acquiring VeloCloud, a cloud-managed SD-WAN provider, from Broadcom.
The firm believes that these announcements and acquisitions are positive catalysts for Arista, offering its customers additional choices and features that support network security and data traffic processing.
Arista Networks Inc (NYSE:ANET) develops, markets, and sells cloud networking solutions.
6. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 104
Tesla, Inc. (NASDAQ:TSLA) is one of the 10 Trending AI Stocks on News and Ratings. On July 2, Canaccord Genuity analyst George Gianarikas reiterated a Buy rating on the stock with a $303.00 price target. The rating affirmation follows Tesla’s second-quarter delivery results, which exceeded Canaccord’s recently lowered estimates by approximately 24,000 units.
In particular, strong performance was witnessed in China, Norway, France, Spain, and Turkey, which led to the better-than-feared results. Regardless of this positivity, Tesla suffered its largest decline in year-over-year deliveries, falling 14% compared to Q2 2024. This is, the firm believes, largely due to Musk’s political endeavors.
Nevertheless, catalysts such as new models, traction from the revamped Model Y, and the expectations surrounding the Robotaxi announcement are likely to work for Tesla for the remainder of the year.
Energy storage deployments also witnessed a slowdown, with the firm concerned about energy structure development for artificial intelligence. It stated that “EVs drive the P&L, now and for the foreseeable future” and also stressed the need to see growth in Tesla’s core business.
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives.
5. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 111
Adobe Inc. (NASDAQ:ADBE) is one of the 10 Trending AI Stocks on News and Ratings. On July 2, the stock was downgraded by Redburn Atlantic analyst Omar Sheikh from ‘Neutral’ to ‘Sell’ with a price target lowered from $420.00 to $280.00. The firm cited increasing risks to its competitive position as generative AI modifies the creative software industry.
“Adobe’s moat is being eroded by tools including Sora, Veo, Imagen, Runway and Midjourney, which now dominate the ideation phase of the content creation process.”
– Omar Sheikh, equity analyst at Rothschild & Co Redburn.
Sheikh further noted that editing and workflow are also likely to face disruption, which may further disrupt Adobe’s ability to sustain its pricing power.
“In this context, we think that to say Adobe faces significant AI disruption is not a controversial statement.”
The firm expects Adobe’s free cash flow (FCF) growth to slow to low single digits by 2030. It now values the stock at 12x 2026 EV/FCF, compared to the current 17x.
“We now model FCF growth slowing from 8% pa in 2026 to 3% pa by 2030.”
Analyst Omar Sheikh has also highlighted that Firefly is behind competitive alternatives in terms of output quality. The so-called “performance gap” may further widen, pushing customers to superior tools from rivals like OpenAI and Google.
Since the company faces a difficult transition period, Sheikh believes “the multiple deserves to contract further.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 159
Apple Inc. (NASDAQ:AAPL) is one of the 10 Trending AI Stocks on News and Ratings. On July 2, Jefferies upgraded the stock to “Hold” from underperform and raised the price target to roughly $188 per share from $171.
Analyst Edison Lee highlighted Apple’s 15% annual growth in sales volume in April and May as a catalyst behind the upgrade. Lee also estimated that iPhone sales grew 19% year over year during the June 18 Chinese shopping holiday.
“This is a strong sign that AAPL is determined to defend market share in China, and Chinese consumers are still willing to buy iPhone at lower prices. We believe 40m units is likely the minimum AAPL is looking to maintain in China,” the analyst wrote. “Given the special situation in the last 3 months, we see potential upside surprise for AAPL’s 3QFY25 results.” A good June quarter “could keep the stock stable near term.”
However, he further cautioned that strong June quarter sales could imply slow demand in the September quarter.
“Jun Q results could be a positive surprise, but Sep Q guidance would likely still be subdued.”
“We believe the sales could be at risk since there remains a lack of new features, and AI is not yet a game changer. We are worried about the attractiveness of 17 Slim, since 1) it has only one camera, 2) its battery capacity is likely at only 2,800 mAh, and 3) a higher selling price than 16 Plus.”
Apple may also be facing long-term risks, such as a downside in revenue from the App Store, the firm noted.
Apple is a technology company known for its consumer electronics, particularly the iPhones and MacBooks.
3. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 227
Alphabet Inc. (NASDAQ:GOOGL) is one of the 10 Trending AI Stocks on News and Ratings. On July 2, Truist Securities analyst Youssef Squali reiterated a Buy rating on the stock with a $200.00 price target. The firm is optimistic about Alphabet’s upcoming quarterly results as well as its long-term prospects in artificial intelligence.
Squali anticipates continued growth across Alphabet’s business units, which include search. This is despite investor concerns over Alphabet’s search future as new artificial intelligence tools like Perplexity AI and OpenAI’s ChatGPT have taken up web traffic that used to go through traditional search engines.
Squali expects year-over-year search revenue growth of 8% for the second quarter, which is down from 10% growth in the previous quarter. However, this isn’t a significant downfall.
“We believe Google’s Search remains one of the most important customer acquisition and growth channels for most advertisers.”
A similar growth deceleration is anticipated for Alphabet’s YouTube advertising and cloud services segments, which isn’t something to be extremely worried about.
The real cause of concern is whether Google can sustain its dominance in search. Squali quoted a May report from enterprise SEO company BrightEdge, stating that Google still accounts for more than 90% of the internet search market. Moreover, Google’s own AI tool Gemini, is growing strong, which should help the company as AI search expands.
“AI Search remains Google’s war to lose.”
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 273
Meta Platforms, Inc. (NASDAQ:META) is one of the 10 Trending AI Stocks on News and Ratings. On July 2, Cantor Fitzgerald analyst Deepak Mathivanan reiterated an “Overweight” rating on the stock with a $807.00 price target.
The rating affirmation comes despite Meta facing the risk of daily fines of up to 5% of its daily revenue from the European Commission in the case that its revised payor-consent ad model remains non-compliant with the Digital Markets Act.
The firm is optimistic that Meta will be able to deal with changes to its EU advertising model with “relatively minimal disruption.” However, it is monitoring the EU’s guidance on Meta’s current low-targeting model to assess sensitivity.
In other news, Baird raised the firm’s price target on the stock to $740 from $635 and kept an “Outperform” rating on the shares. The firm had updated its model following its Advertiser AI survey.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 284
Microsoft Corporation (NASDAQ:MSFT) is one of the 10 Trending AI Stocks on News and Ratings. On July 2, DA Davidson analyst Gil Luria raised the price target on the stock to $600 from $500, maintaining a “Buy” rating. The firm reiterated the stock as its top mega-cap pick, quoting how Microsoft is doing a great job extending Azure and helping it stay ahead in artificial intelligence.
According to the firm, Azure can continue gaining market share while improving margins by balancing data center expansion with offloading compute capacity. It further highlighted through evidence how Azure is performing better than competitors AWS and Google Cloud in the cloud computing arena.
Overall, Microsoft’s cloud business has been a major growth driver for the company, with its Azure business being particularly important in its overall business strategy.
“Microsoft remains our top mega cap pick as it executes Azure growth to extend its lead in AI,” wrote analyst Gil Luria, adding that by “balancing its data center buildout with offloading compute capacity,” Azure is well-positioned to continue gaining share while preserving margins.
Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements.
While we acknowledge the potential of MSFT 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 MSFT and that has 100x upside potential, check out our report about this cheapest AI stock.
READ NEXT: 10 AI Stocks Getting Wall Street’s Attention and 10 Buzzing AI Stocks on Wall Street Right Now.
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