Wall Street is currently in a bubble-or-not-bubble debate around the AI rally, with some investors warning a peak might be near, while others say the rally still has plenty of room to run.
Brad Gerstner, Altimeter Capital founder and CEO, continues to believe the AI trade has several tailwinds amid increasing spending and declining interest rates. In a latest interview with CNBC, the tech investor compared the AI industry with the Manhattan Project to give investors an idea about the size of the AI technology spending:
“Just to provide some context here. The Manhattan Project was $4 billion. You inflation adjust that that’s 40 billion. It was 1% of GDP. So if you take 1% of GDP, that’s 300 to 400 billion. Okay, that and that was a government-funded project that had a big impact on the economy. The compute buildout that’s going on now is 10x the Manhattan Project with no government funding. All privately funded by deals like the one you just heard announced. Right? So this is a when you think about the tailwinds in the economy,?” Gerstner said.
Brad Gerstner of Altimeter Capital
The analyst reiterated that we are at the beginning of an AI investment cycle and said the Federal Reserve’s interest rate cuts would also help the market.
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10. Blue Owl Capital Inc (NYSE:OWL)
Number of Hedge Fund Investors: 40
During a recent podcast on Bloomberg, James Van Geelen, the founder and portfolio manager at Citrini Research, was asked how to hedge the risks related to “circular financing” in the AI space. Here is what the analyst said:
“You could buy all the real companies that are building this kind of data center and then you could short Blue Owl and the private credit companies that are doing the kind of financing aspect of it. Because if it goes bad, they have limited upside and kind of unlimited downside. And if it continues happening, the companies that are actually building it have unlimited op upside and they’re still, like you said, these old line kind of industrial that like they still have a core business to go back to.”
9. Seagate Technology Holdings PLC (NASDAQ:STX)
Number of Hedge Fund Investors: 71
James Van Geelen, the founder and portfolio manager at Citrini Research, said in a recent podcast on Bloomberg that Seagate could be a potential beneficiary of the AI boom amid rising demand for storage. Here is what the analyst said before mentioning Seagate Technology Holdings PLC (NASDAQ:STX):
“People kind of forgot that video takes up a lot more storage than text does. And if we’re gonna start just like throwing out the slop on video, the part, basically one of the only areas of semiconductors that has gotten ignored has been storage. Not like, not like memory, like, like RAM and stuff, but like hard drives and solid state disks.”
Seagate Technology Holdings PLC (NASDAQ:STX) is up 96% over the past year.
8. Western Digital Corp (NASDAQ:WDC)
Number of Hedge Fund Investors: 74
James Van Geelen, the founder and portfolio manager at Citrini Research, said in a recent podcast on Bloomberg that Western Digital could be a potential beneficiary of the AI boom amid rising demand for storage due to the rise of AI videos.
“People kind of forgot that video takes up a lot more storage than text does. And if we’re gonna start just like throwing out the slop on video, the part, basically one of the only areas of semiconductors that has gotten ignored has been storage. Not like, not like memory, like, like RAM and stuff, but like hard drives and solid state disks. Like Western Digital Corp (NASDAQ:WDC) and you know,” he said.
Geelen said video models will play a key role in the overall LLM space.
“LLMs don’t really interact with the world, but we’re starting to see in robotics, AI models interact with the world. So you have these video language action models and you can structure it so that, there was a interesting paper on archive recently that, and you know, this is video models like VEO 3 are emergent zero shot learners and understands. And what that just means is you can give it basically like a second of context and then it can extrapolate about what’s going on beyond that. That becomes extremely important for robotics.”
7. Caterpillar Inc (NYSE:CAT)
Number of Hedge Fund Investors: 76
James Van Geelen, the founder and portfolio manager at Citrini Research, talked about his visit to the Project Stargate facility in Abilene, Texas. Answering a question about companies powering this major facility, Geelen talked about Caterpillar Inc (NYSE:CAT):
“That was the first thing we saw in the drone is you fly over it and they just built their own natural gas plant. And the interesting thing is, these aren’t like the really good natural gas turbines because if you wanted, so natural gas turbines fall along, simple cycle, combined cycle. These are simple cycle. They’re each 35 megawatts, which is very much on the lower end. Half of ‘GE Vernova, half of ’em are from Caterpillar Inc (NYSE:CAT). A company the Caterpillar ons called Solar Turbines. And the reason why they’re not, you would think, oh, you’re spending half a trillion dollars on these things. You could probably get the best thing ever, but that’ll take you seven years.”
6. PG&E Corp (NYSE:PCG)
Number of Hedge Fund Investors: 77
Jim Lebenthal, a partner at Cerity Partners, recently explained during a program on CNBC why he likes utility company PG&E.
“This is a California utility. It got unreasonably smacked down with the wildfires earlier this year. Its liabilities are nowhere near what the market feared. And it’s got good momentum right now.”
Third Point Management stated the following regarding PG&E Corporation (NYSE:PCG) in its Q4 2024 investor letter:
“We are devastated by the recent events in Southern California. Several of our family members and team members call Los Angeles home, and our hearts are with all impacted by the fires.
While PG&E Corporation (NYSE:PCG) does not operate in this region, there is press speculation that one of the fires, Eaton, may have been related to transmission equipment owned by SoCal Edison (SCE), another investor-owned utility (parent company Edison International.) Edison has stated publicly that they do not believe their equipment was involved. The investigation is ongoing, and we believe it is premature to make conclusions about the origin of the fire…
If the Eaton fire ignition was related to SCE equipment, the California legal standard of “inverse condemnation” exposes SCE to resultant property damage liabilities. After PG&E’s bankruptcy in 2019, California passed a bill called AB1054 which protects the state’s investor-owned utilities (Edison, PG&E and Sempra) from these liabilities as long as they adhere to a rigorous safety standard. This includes a comprehensive wildfire mitigation plan approved annually by the government and a commitment to spend billions to harden the grid; for example, PG&E is spending a whopping $18 billion on wildfire mitigation from 2023 -2025. In exchange, AB1054 includes several protections, such as a legal prudency standard that entitles the utility to cost recovery via multiple avenues in the event of a catastrophic fire and a $21 billion insurance fund to cover incurred liabilities. SCE has an active safety certificate and thus should benefit from the protections under AB 1054, just as PG&E would in case of a future fire. Regulator-approved cost recovery is a routine proceeding for utilities in areas prone to severe climate events (hurricanes, tornadoes, earthquakes, etc.) in acknowledgement of the fact that it is not feasible to remove all risk from overhead grid infrastructure. PCG has been the preeminent advocate in California for undergrounding, which we believe is the only way to permanently eliminate wildfire risk from grid assets…” (Click here to read the full text)
5. Constellation Energy Corp (NASDAQ:CEG)
Number of Hedge Fund Investors: 79
Tim Seymour, the founder and Chief Investment Officer of Seymour Asset Management (SAM), recently said during a program on CNBC that he likes Constellation Energy. Here is what the investor said:
“Constellation Energy Corp (NASDAQ:CEG), I think you’ve got a lot of the same trends we talked about, but in a utility company with nuclear and in AI.”
ClearBridge Global Infrastructure Income Strategy stated the following regarding Constellation Energy Corporation (NASDAQ:CEG) in its second quarter 2025 investor letter:
“U.S. electric utility Constellation Energy Corporation (NASDAQ:CEG) Energy also outperformed for the quarter. Constellation is primarily a nuclear generation company and is the largest producer of carbon-free electricity in the U.S., serving states including New York, Illinois, Maryland, Pennsylvania and New Jersey. The company’s combined generation capacity is more than 32 GW and 90% of annual output is carbon free. Constellation’s share price benefited from the renewed optimism on data center deals.”
