In this article, we will take a detailed look at the 10 Trending Stocks This Week.
The massive AI deals and capital spending plans announced by some of the top technology companies have stunned many on Wall Street, fueling concerns that we may be living through an AI bubble or caught up in AI hype. However, some analysts say that while the level of capital spending may seem astounding and hard to believe, AI-related investments are likely to keep growing.
Paul Meeks from Freedom Capital Markets said in a recent interview with CNBC that AI capital spending will continue for years because top technology companies have a lot of money to spend and they cannot miss out on the first-mover advantage.
“I lived through the internet bubble, so I know how it works out on the other end. But I will tell you this that the spending, even though it’s very aggressive, I do expect that it’ll continue for several years because the folks that are spending the money have the balance sheets and the cash flows to mostly fund it. They see the first-mover advantage in this AI nuclear arms race to be absolutely critical. So they will continue to do it,” Meeks said.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
Photo by EmbedSocial on Unsplash
10. SPDR S&P Biotech ETF (NYSEARCA:XBI)
Number of Hedge Fund Investors: 33
Joseph Terranova, Senior Managing Director, Virtus Investment Partners, said in a recent program on CNBC that he likes biotech ETF SPDR S&P Biotech ETF (NYSEARCA:XBI) and sees a “breakout.” Here is what the analyst said:
I am now going to tell you that I am going to go back to the well once again. I’m going to try it once again and buy the SPDR S&P Biotech ETF (NYSEARCA:XBI) on the close today. I will buy the XBI. I will have a very wide stop on this, which means you have to size it accordingly. I’m probably going to risk here all the way down to about 92. The stock is 103. So, I’m not going to buy a lot of this because I want to make sure I leave myself the room for the opportunity. I think over the next six to nine months, you’re in the midst of a multi-year breakout here in the SPDR S&P Biotech ETF (NYSEARCA:XBI). That’s a trade I’m going to be putting on.”
9. Kimberly-Clark Corp (NASDAQ:KMB)
Number of Hedge Fund Investors: 42
Jenny Harrington, CEO at Gilman Hill Asset Management, said in a recent program on CNBC that she likes Kimberly-Clark amid the company’s dividend yield and strong business. She believes the stock could be a good buy for investors who are looking for stocks outside of the AI trade, where she sees “froth.”
“The most consumer staple of all consumer staples names. It’s trading at 16 and a half times earnings, with a 4.2% yield. They really got rid of their international family care and professional business, and I think analysts haven’t fully accounted for that. So JP Morgan put out a report about a month and change ago where they said like, look, once we really figure out what the new numbers will look like once that business is off the books, there’s some decent earnings growth ahead. And decent earnings growth for Kimberly means like 3 to 6%, not 15 or 20%. But they’ve got a price target of $144 on it. Stock’s at about $122 right now. And I think in this environment, if there is wind that comes out of the overall market sails, if there is wind that comes out of the AI froth-driven area, this is where I want to be. A 4.2% yield, 16 and a half times earnings, steady earnings growth ahead, maybe some upside as analyst earnings revisions are revised up. Maybe there could be a little bit of multiple expansion. If the market does crack up a bit, this would be an obvious flight-to-safety recipient.”
8. DR Horton Inc (NYSE:DHI)
Number of Hedge Fund Investors: 64
Stephanie Link, Hightower Advisors’ chief investment strategist and portfolio manager, said in a latest program on CNBC that she expects a bullish housing cycle amid declining interest rates and a shortage of homes in the US. According to CNBC, DR Horton Inc (NYSE:DHI) is one of the housing stocks Link has in her portfolio.
“We haven’t had a housing cycle. That’s the other interesting thing, Andrew. We haven’t had a housing cycle and we’re still growing 3.8%. Can you imagine when we do? Because housing there’s a multiplier effect. If you have a house, you have to furnish the house inside. Outside. You have to have a car to get from outside to wherever you’re going to go. So there is so we’re rooting for housing. And I think if interest rates continue to come down, I think you will get a housing cycle because we are short homes in this country.”
7. IBM Common Stock (NYSE:IBM)
Number of Hedge Fund Investors: 63
Jessica Inskip from StockBrokers said in a program on Schwab Network that she “really” likes IBM Common Stock (NYSE:IBM) stock amid the company’s multiple revenue streams and its exposure to AI and tokenization. Inskip also explained what makes IBM Common Stock (NYSE:IBM) a “defensive” play.
“IBM in 2020 actually went through a management change. They’ve shifted a lot of focus and some of that focus was in AI. Now when we think about IBM Common Stock (NYSE:IBM), they are very deeply embedded in enterprise architecture and they have a consulting arm. And when I think about how AI is coming to life and that enterprise architecture, it requires governance and it requires regulatory compliance processes because of the way that the stacks are built and IBM Common Stock (NYSE:IBM) partnerships and they have other ones as well. They don’t compete with those other AI models. They really have, I wouldn’t call it a moat, but they are in the room because when decisions are made because of that consulting arm that they have and they’re already deeply integrated with financial institutions and places that require that really that governance framework. Now on top of that, what I really like about IBM Common Stock (NYSE:IBM) is we are seeing a shift in really market structure with tokenization and IBM has a solution since their 2020 changes where we’re seeing into fruition and I think tokenization and market access is going to be a bigger theme now outside of AI. I like to call it the efficiency rally and IBM Common Stock (NYSE:IBM) is a key component of that. So they have multiple revenue streams that are inclusive of AI, tokenization, and efficiency. And it’s more of a play that can really even take out macro uncertainty because of their recurring enterprise workloads. It makes them a defensive play, yet they have exposure to AI which requires and gives them some room for upside as well. So I really like IBM Common Stock (NYSE:IBM) in this environment.”
6. PayPal Holdings Inc (NASDAQ:PYPL)
Number of Hedge Fund Investors: 89
Jessica Inskip from StockBrokers said in a latest program on Schwab Network that she is bullish on PayPal in the long term amid the company’s diverse revenue streams and its digital currency exposure.
“Diverse revenue streams is extremely important. So, that certainly plays into it. But this is more of a longer term play on the exposure with stable coins. We’re talking a lot about what’s happening with the fiscal deficit. I think stable coins is an interesting solution because we have a really welcoming regulatory environment for that type of structure and a stable coin is going to be backed or at least within some of the acts that are there one to one with US treasury. So I’m I’m wondering where the demand is going to come from if we’re issuing more treasuries and if stable coins is something that moves forward. Well, there’s a solution to demand and that’s where I’m looking for towards PayPal Holdings Inc (NASDAQ:PYPL) for really in a longer term view that is going to take some time to play out, but it’s the digital currency footprint that’s expanding and PayPal Holdings Inc (NASDAQ:PYPL) had a stable coin. They launched in 2023. They’re not necessarily the biggest player, but to your point, a diverse revenue stream is extremely important to me. They have this reward system. I was in the airport in Chicago a while ago and I see these reward systems now paying you in Bitcoin as well and they’ve got partnership momentum with Coinbase, Fiserve all helping integrate their version of a stable coin. So I think it’s going to be interesting to see how that plays out. Now I’m interested to see Rick’s technicals. The way that I would play PayPal Holdings Inc (NASDAQ:PYPL) at this moment is I’m short-term neutral, long-term bullish. This is where when I want to add it to my portfolio, I like to utilize a cash secured put.”
RGA Investment Advisors stated the following regarding PayPal Holdings, Inc. (NASDAQ:PYPL) in its second quarter 2025 investor letter:
“Looking purely at the fundamentals of PayPal Holdings, Inc. (NASDAQ:PYPL) between the reported financials and context on earnings calls, we would be buyers rather than sellers here. Unfortunately, someone in our orbit was the victim of a cutting-edge financial hack that used AI voice mimicry in order to compromise several personal accounts, despite two-factor authentication enabled on each.
At the core of our thesis on PayPal was the notion that security is a moat. The systems Max Levchin first built at PayPal and invested in mightily over the years made PayPal one of the safest, most secure ways to shop online. We had believed in the single point of failure thesis and trusted that even if bad things happened, PayPal will use those lessons to learn and evolve.
Unfortunately, what we learned about PayPal security was concerning and left us wavering in the ability of the company to adapt and grow as the safest place to transact online. Given the centricity of security to our qualitative thesis, we could no longer stay convicted in the name.”
5. Merck & Co Inc (NYSE:MRK)
Number of Hedge Fund Investors: 92
Joseph Terranova, Senior Managing Director, Virtus Investment Partners, said in a recent program on CNBC that he recently bought Merck & Co Inc (NYSE:MRK).
“I think at some point the market turns towards quality. When you look at factors, this year has been about momentum. I think it’s going to turn to quality. I think that’s going to take the market directly towards healthcare, so I am looking to build exposure. I did that by buying Merck & Co Inc (NYSE:MRK).”
Impax US Sustainable Economy Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its second quarter 2025 investor letter:
“Merck & Co., Inc. (NYSE:MRK) (Health Care, Pharmaceuticals) has a high Corporate Resilience score, and is contributing to a more robust and sustainable health care system through its leading drug and vaccine discovery. The stock’s weakness in Q2 was driven by a combination of concerns about its drug pipeline, particularly the competition from generic versions of Keytruda, and weaker market sentiment around Health Care stocks.”
4. Advanced Micro Devices Inc (NASDAQ:AMD)
Number of Hedge Fund Investors: 113
Vivek Arya, senior semiconductor analyst at Bank of America Securities, said in a recent program on CNBC that he is bullish on AMD and other semiconductor companies amid rising demand for compute. Arya also said he is not “worried” about the apparent “circularity” of deals in the AI industry.
“OpenAI is eating computing power like Pac-Man. You know, they have 800 million weekly active users, probably getting to a billion users by the end of the year. And this is within 3 years of them forming. It took Facebook 8 years to get to a billion users. And every one of the users that OpenAI has on their network is consuming a tremendous amount of tokens and computing capacity. So the company has to build out a lot of infrastructure, which it is doing with the help of cloud service providers, and for that it needs to partner with these leading semiconductor companies. Today, Nvidia is the incumbent. OpenAI has signed deals with Broadcom and now it has signed this deal with Advanced Micro Devices Inc (NASDAQ:AMD). But you know, it’s also important to realize the second point that OpenAI is going to be one of the many ecosystems that develops in this AI industry. You know, there’s going to be an ecosystem developed around Meta or Amazon or Google, right? The many different neoclouds that are forming. So this is going to be a broad, diversified industry with chip makers participating, which is why we are not as worried about the circularity of this. Because if you look at the total of the deals that OpenAI has signed with Nvidia and Advanced Micro Devices Inc (NASDAQ:AMD), they will probably end up being less than 5 or 10% of the overall deployment. So no, we are incredibly bullish about this buildout and I think companies like Nvidia, Broadcom, Advanced Micro Devices Inc (NASDAQ:AMD) and others are very well positioned to take advantage of it.”
Macquarie Core Equity Fund stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its second quarter 2025 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) designs and manufactures semiconductors, including central processing units (CPUs), graphics processing units (GPUs), and other high-performance computing solutions for various markets like gaming, data centers, and AI. The company currently maintains a small market share for GPUs used for AI applications though by 2027, we believe the company will have product on par with the market leader, NVIDIA. Hyperscale customers with deep programming expertise may increasingly decide to dual-source high-end chips leading to much larger revenue and profit gains in coming years for AMD than investors currently expect.”
3. Netflix Inc (NASDAQ:NFLX)
Number of Hedge Fund Investors: 133
Jessica Inskip from StockBrokers explained in a recent program on Schwab Network why she’s picking Netflix Inc (NASDAQ:NFLX). The analyst said the stock showed up in her “growth scan” and that she likes the company’s fundamentals.
“I’m looking at forward PE ratios relative to growth expectations in comparisons to the company’s benchmarks and the overall market and I’m looking for something that stands out. And Netflix was something that showed up on that list. So that’s where this came from. And then diving deeper, you said the ad supported that’s coming from Netflix. That’s just expected to be material by 2026. And they’re expanding into live events. And I’m noticing there is a lot of chatter around sports and gaming. If we’re looking at event contracts, well, if not necessarily everyone is utilizing that, but Netflix is also getting into that game. So that seems like that’s going to be a larger ad opportunity that will materialize and help with additional growth within Netflix.”
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.”
2. Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 294
Mike Fey, Co-Founder & CEO of Island, said in a recent program on CNBC that Microsoft has a lead in enterprise and discussed the company’s AI capability.
“The best for enterprise right now. It is hard to not support Microsoft Corp (NASDAQ:MSFT), you know, given they started with that concept. Most of the other AI players started on the consumer side and are now saying, look at what we can do in the enterprise. So Microsoft Corp (NASDAQ:MSFT) has a lead in the understanding of the enterprise. But if you look at ChatGPT and some of the other ones like Perplexity coming up, the tech is really good. So, it’ll be interesting to see that play out, but for the moment, enterprise Salesforce, enterprise access, enterprise contracts, you know, Microsoft Corp (NASDAQ:MSFT) in a good spot.”
Middle Coast Investing stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its third quarter 2025 investor letter:
“Big tech companies play in and are obviously affected by AI. We own Amazon (AMZN), Apple (AAPL), and a small position of Microsoft Corporation (NASDAQ:MSFT); of those, Microsoft has been seen as a winner due to its association with OpenAI. But really, the story seems to be that Microsoft’s Azure is gaining ground on Amazon Web services. AI is the source of demand driving the continued growth.”
1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 335
Frances Stacy from Scarlet Oak Financial said in a program on Schwab Network on Oct. 7 that Amazon has been lagging behind peers in “AI participation.” However, the analyst believes the stock has more room to run.
“Amazon is kind of old faithful when you talk about traditional cloud services, but it’s been a bit of a laggard in the AI participation. Its investment in Anthropic has been significant. Obviously, they’ve done a deal with Deote, they’ve done a deal with IBM, and that’s huge, and Claude is growing in its market share. The fact that Anthropic is kind of making some noise and Amazon is investing in that is bringing Amazon into that sort of up-and-coming AI conversation. So Amazon’s stock price has been kind of trading based on more traditional metrics and hasn’t been part of the AI bubble, but now I think it has an opportunity to catch up. And just looking at the chart here, we’ve been a bit rangebound between 216 and 224, trading at 222 right now. I think that if we can hold these higher lows here and we can particularly hold the August 4th low, I think that Amazon’s got some room to run as an AI play that might be a bit discounted.”
Amazon shares are down 3% so far this year and have underperformed major tech stocks. Why? Two major factors are impacting the stock. Tariff-related headwinds and weakening consumer buying power have been an overhang for the company’s e-commerce business. But more than that, Wall Street has been spooked by a relative slowdown in the company’s Cloud business. In the second quarter, AWS grew 17.5%, a deceleration compared to the previous few quarters. In the same period, Microsoft Azure grew 26% and Google Cloud rose 32%.
What’s ailing AWS? The cloud market is undergoing a structural shift amid the AI wave.
AWS has always been focused on infrastructure (IaaS), allowing customers to build their own applications with flexibility. However, companies are now preferring AI-first cloud platforms with strong integration with generative models. This helps Microsoft (OpenAI) and Google (Gemini) because of their strong AI and app ecosystems.
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.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
