Artificial intelligence was one of the standout themes for investors in 2025. However, Max Wasserman, Miramar Capital co-founder and senior portfolio manager, believes it’s time for investors to take a closer look at their portfolios.
As the AI story begins to mature, market’s heavy reliance of a few tech giants is creating a single, risky point of failure, he believes. Wasserman told Yahoo Finance that investors should start diversifying, understanding what they own and what will happen if anything goes wrong.
Wasserman also highlighted concerns revolving around Wall Street’s AI darling OpenAI, which has been benefitting from massive AI funding. He noted how the company’s circular funding model has raised questions about circular financing, with investors eventually paying for their own revenue.
“If AI goes south on us, tech will go.”
-Tom Essaye, founder and president of Sevens Report, told Yahoo Finance in an interview.
Besides Wasserman, other names such as hedge fund manager Ray Dalio has also been warning about being in the early stages of an AI bubble. Dalio noted how U.S. stocks significantly underperformed non-U.S. equities and gold in 2025, fueling doubts on whether investments in the technology have been delivering real value for investors.
“Clearly, investors would have much rather been in non-U.S. stocks than in U.S. stocks, just as they would have preferred to be in non-U.S. bonds than in U.S. bonds and U.S. cash,” he wrote in the post.
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 Q3 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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
11. Five9, Inc. (NASDAQ:FIVN)
Number of Hedge Fund Holders: 29
Five9, Inc. (NASDAQ:FIVN) is one of the 11 AI Stocks on the Market’s Radar. On January 4, Piper Sandler analyst James Fish downgraded the stock from Overweight to “Neutral” with a price target of $21.00 (from $26.00).
The downgrade comes despite a compelling risk-reward for FIVN, as execution challenges may limit upside. The firm believes that FIVN is facing significant challenges even though the company is slowly gaining more market share in customer experience and also has room to improve cash flow.
Some of these challenges include how the company isn’t gaining market share in the contact-center-as-a-service market, is facing positioning challenges in the upmarket segment, and is also under increased competition.
The analysts also discussed how the company has had several “go-to-market shuffles over the last few quarters.” Moreover, the company’s growth is decelerating to less than 10%, and while management has provided outlook for 2026 (including a re-acceleration in the second half of that year to over 10%), the firm believes that this will likely take time to materialize.
Furthermore, despite the company’s AI traction and shift toward more consumption-based offerings, artificial intelligence concerns are continuing to weigh on seat-based models like FIVN, analysts noted.
“Growth is decelerating to [less than] 10%, and while management has given color for 2026 already that includes a re-acceleration in 2H26 to [more than] 10%, it will likely take some time for this to play out and AI concerns continue to weigh on primarily seat-based models like Five9 (despite AI traction and shift towards more consumption). A new CEO has taken over, but the best path medium-term would be likely to go private at this stage.”
Five9, Inc. (NASDAQ:FIVN) is a technology company that offers cloud software solutions for contact centers.
10. SentinelOne, Inc. (NYSE:S)
Number of Hedge Fund Holders: 42
SentinelOne, Inc. (NYSE:S) is one of the 11 AI Stocks on the Market’s Radar. On January 5, Piper Sandler downgraded the stock to “Neutral” and reduced the price target on the stock to $17 from $20. The rating downgrade comes as part of its 2026 outlook for Security and Infrastructure Software stocks.
“2025 proved to be a tough year for our coverage, with the average name showing negative performance and only four names outperforming the NASDAQ (fewest in 5+ years). We are cautiously optimistic for a better year in 2026, with many names entering the year at interesting valuation levels setup well to be longer-term GenAI winners, despite monetization at the software layer not yet occurring at scale.”
-Analysts led by Rob Owens.
According to the firm, even though the current valuation of ~3x EV/CY’27E revenue appears extremely modest on the surface, factors such as recent management changes, an absence of near-term catalysts and disappointing recent results make the stock less compelling than others.
Piper Sandler does remain positive on Sentinel One’s technology platform, acknowledging that more could likely go right than can go wrong at the current valuation. However, with no impending catalyst to slow or reverse deceleration, the analysts have adjusted the rating to Neutral.
SentinelOne, Inc. (NYSE:S) is one of the leading artificial intelligence-powered cybersecurity providers.
9. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 56
Baidu, Inc. (NASDAQ:BIDU) is one of the 11 AI Stocks on the Market’s Radar. On January 4, HSBC analyst Charlene Liu raised the price target on the stock to $130.00 (from $112.00) while maintaining a Hold rating. The rating update follows Baidu’s plans to spin off its artificial intelligence chip subsidiary, Kunlunxin, which the firm believes is value-adding for BIDU.
The firm noted how Baidu filed a confidential listing application on January 1st, for its AI chip subsidiary KLX on the Hong Kong Stock Exchange. A Reuters report from December 5 was also referred, which noted that KLX had received revenue of RMB2bn and made a net loss of RMB200m in 2024, aiming to generate over RMB3.5bn revenue and breakeven in 2025.
The firm assumes KLX’s 2026e revenue to reach cRMB6bn based on a similar growth rate (over 70%) in 2025, with its revenue split between direct hardware chips sales and chip-related cloud service revenue, likely to come in at 1:3 ratio as it anticipates expect to put more emphasis on stickier and higher-margin cloud revenue.
“Benchmarking respective comps for chip manufacturers and AI cloud, we value KLX’s chip revenue at 40x 2026e PS, on par with Cambricon (688256 CH, CP CNY135.55, NR), and cloud revenue at 2x 2026e PS (a discount vs our estimate for Alibaba Cloud of 2.7x — from our Alibaba SOTP cross-check — due to lower scale) or blended PS of 11x. To avoid double counting, we adjust the AI cloud valuation by removing the cloud revenue contribution from KLX. Separately, we assume Baidu’s equity stake will dilute to 51% after spinoff (from 59%). Our sensitivity analysis (exhibit 2), based on 5-15x PS, suggests KLX could be worth cUSD7-20/share to Baidu, with a base case estimate of USD15/share.”
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.
8. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 82
ASML Holding N.V. (NASDAQ:ASML) is one of the 11 AI Stocks on the Market’s Radar. On January 5, Bernstein upgraded the stock to “Outperform” from Market Perform and raised its price target to €1,300 from €800. The firm sees a slew of positive catalysts ahead for the European semis company.
The firm has chosen ASML as its Top Pick, driven by accelerating memory investment, stronger logic demand and a more attractive valuation backdrop.
“We upgrade ASML to Outperform and make it our top pick in EU semis for 2026.”
Analyst David Dai believes that ASML stands to benefit the most from the recovery in the memory-chip (DRAM) market. He also noted how investors are underestimating the new production that three largest DRAM manufacturers are planning.
Together, the producers are could add as much as 250,000 wafers per month of greenfield capacity in 2026, he noted, while also speeding up the transition to the 1c node and creating demand for ASML equipment.
“This is great for ASML, as litho intensity for 1c is 28% based on our estimates, much higher than previous nodes of 20–24%,” Dai wrote.
There is also a reduced near-term risk from DRAM technology changes.
Advanced logic is seen as another growth driver, with TSMC set to expand 3nm capacity to 180-200,000 wafers per month to address AI demand. Together, these trends position 2026 and 2027 as “big years for EUV and for ASML.”
ASML Holding N.V. (NASDAQ:ASML) develops and sells advanced semiconductor equipment, including lithography, metrology, and inspection systems for chip manufacturing.
7. Arista Networks Inc (NYSE:ANET)
Number of Hedge Fund Holders: 92
Arista Networks Inc (NYSE:ANET) is one of the 11 AI Stocks on the Market’s Radar. On January 5, Piper Sandler upgraded the stock to “Overweight” from Neutral Piper while raising its price target to $159.00 from $145.00. The firm said that it sees increased visibility for Arista, deeming 2026 as the “Year of Refresh” for the stock.
“With 2026 being the ‘Year of Refresh’ with increasing enterprise mentions and investments, the exposure to hyperscalers / AI-Titans, and a conservative setup at a reasonable valuation, we are upgrading ANET to OW and increasing our PT to $159.”
The firm noted that visibility behind Arista’s business model has been improving from multiple angles, which includes inventory and purchase commitments coverage ratio.
While concerns such as share shifts toward whitebox solutions and NVIDIA, worries related to capital expenditure cycle and a possible AI bubble do exist, Arista “appears to be holding its ground with its key customers.”
The company has been benefiting from large enterprise accounts across datacenter and campus, and is also benefiting from lagged capex trends as it “typically sees capex on a delayed basis relative to others in the datacenter.”
Arista Networks Inc (NYSE:ANET) develops, markets, and sells cloud networking solutions.
6. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 120
Tesla, Inc. (NASDAQ:TSLA) is one of the 11 AI Stocks on the Market’s Radar. On January 5, UBS analyst Joseph Spak reiterated a Sell rating on the stock with a $247.00 price target. While the firm is bullish on Tesla’s technological progress, it believes that AI upside is more than priced in.
According to Spak, Tesla’s stock continues to rise despite declining electric vehicle sales and negative earnings revisions, with the bull case remaining about robo taxis and Optimus. Consensus EPS estimates for 2025 and 2026 are an estimated 50% and 46% lower than they were a year ago.
The firm believes that the market is assigning a higher value to Tesla’s artificial intelligence ventures, while applying a declining valuation to the company’s core EV business.
“So in our view, given a declining valuation for TSLA’s EV business, the market is already assigning a higher and higher value to the AI ventures. While the TAM for these ventures may be large, they could also be further out (especially Optimus). Still, this could make 2026 another year of milestone catalysts propelling the stock.”
UBS highlighted several positive catalysts working in favour of Tesla, including removing safety driver in Austin robotaxis, expansion of the ODD and the number cities for robotaxi, opening robotaxi for public use, FSD version updates, Cybercab production update, and Optimus V3 updates.
Besides these catalysts, Tesla’s technological progress is also worth noting, but is already baked into the stock price.
“Potential positive catalysts include: 1) taking out the safety driver in Austin robotaxi, 2) expanding the ODD and the number cities for robo-taxi, 3) opening up robo-taxi to public use, 4) FSD version updates, 5) Cybercab production SOP, 6) Optimus V3 updates. The bear case remains more anchored to valuation. While we are more positive than not on TSLA tech and progress, and believe there could be a strong milestone catalyst path, we do believe that many of these ventures/developments are already (more than) baked into the stock price.”
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. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 122
Oracle Corporation (NYSE:ORCL) is one of the 11 AI Stocks on the Market’s Radar. On January 5, UBS reiterated the stock as “Buy” and lowered its price target to $280 per share from $325. The firm is cautiously optimistic on the stock as it sees recovery potential tied to OpenAI sentiment shift and Abilene capacity ramp.
The analysts noted how Oracle’s 41% share correction from mid-September highs is a reflection of deteriorating investor confidence in Oracle outlook as well as OpenAI’s prospects.
Apprehensions related to OpenAI have weighed on the entire “OpenAI complex of stocks.” This includes Oracle and other technology companies that have ties to the artificial intelligence organization.
The firm has therefore taken a step back, hitting refresh on the Oracle story. They believe that Oracle’s revenue growth should improve as its new Abilene data center capacity ramps up and OpenAI narrative begins to improve. The OpenAI sentiment reversal is seen as a positive catalyst for the first half of 2026.
“Bottom line, we reaffirm our Buy rating in light of the material pending revs growth acceleration and ramp of Abilene data center capacity, the potential that the cautious OpenAI narrative begins to reverse in 1H26 and our view that the credit/financing risks are now largely embedded in the stock.”
Oracle Corporation (NYSE:ORCL) is a database management and cloud service provider.
4. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 194
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the 11 AI Stocks on the Market’s Radar. On January 4, Goldman Sachs raised its price target on the stock to NT$2,330.00 from NT$1,720.00 while maintaining a Conviction Buy rating.
The firm has raised its earnings estimates for 2026 and 2027 by up to 15%, driven by a “multi-year growth engine” in artificial intelligence (AI). According to analyst Bruce Lu, surging demand for AI tokens is rising exponentially, which means chip demand will be ahead of supply.
Lu forecasts TSMC to spend over $150 billion on capex from 2026 to 2028 to meet surging demand, including $54 billion in 2027 as new fabs become operational.
Robust demand is also anticipated to keep TSMC’s 3nm/5nm wafer capacity tight through 2027. The firm anticipates 30% revenue growth in 2026 and 28% in 2027, up from his earlier estimates of 22% each year.
Gross margins are also likely to exceed 60% from 2026 to 2028, even though there is elevated capex and overseas growth. Steady productivity gains and limited dilution at foreign fabs will likely lead to this growth.
The firm also raised its CoWoS shipment forecasts to 1,185,000/2,195,000 wafers in 2026/2027 and CoWoS capacity to 1,275,000/2,310,000 wafers. This raise is a reflection of stronger AI-related demand.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures and sells advanced chips used in artificial intelligence applications.
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 234
NVIDIA Corporation (NASDAQ:NVDA) is one of the 11 AI Stocks on the Market’s Radar. On January 6, Evercore ISI analyst Mark Lipacis reiterated an Outperform rating on the stock with a $352.00 price target. The firm is strongly bullish on the AI chipmaker, viewing the stock as Top 2026 Pick.
“We reiterate our Outperform rating and $352 Price Target, and view NVDA as a top pick within our coverage universe for 2026 following CEO Jensen Huang’s keynote presentation and Financial Analyst Q&A session (hosted by CEO & CFO).”
According to the firm, commentary from the keynote presentation by Jensen Huang and Q&A session by the CEO and the CFO has reinforced the view that Nvidia is the ecosystem of choice for the “Tectonic Shift to Parallel Processing.”
This leadership will enable it to capture an estimated 70 to 80% of the value created driven by its genera-purpose, flexible ecosystem, noted the analysts. This very system is a key advantage that will allow it to offer the lowest costs of ownership as AI models evolve.
“We believe commentary reinforced our view that NVDA is positioned as the ecosystem of choice for the Tectonic Shift to Parallel Processing which should enable it to capture 70%–80% of the value created due to its general-purpose, flexible ecosystem which allows it to offer the lowest cost of ownership as AI models continue to evolve.”
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 273
Meta Platforms, Inc. (NASDAQ:META) is one of the 11 AI Stocks on the Market’s Radar. On January 6, Jefferies analyst Brent Thill reiterated a Buy rating on the stock with a $910.00 price target. The firm is confident in Meta’s growing artificial intelligence capabilities, citing five bullish drivers for 2026.
According to Thill, Meta is set to soar in 2026 driven by five key reasons. First, there is strong potential for upside to estimates, particularly since forecasts assume slower growth and lower profits due to AI spending; thereby creating a low bar.
Moreover, the stock has an attractive risk-reward than Google, whereas Meta’s AI hires are also poised to start delivering real results this year. There also seems to be continued momentum from AI investments in Meta’s Core Flywheel.
The rating update follows follows Meta’s $2 billion acquisition of AI agent startup Manus, a Singapore-based developer of general-purpose AI agents, with the goal of enhancing capacity to commercialize AI tools and expand services for SMAs.
“We see 5 reasons for META to outperform in ’26, making it a top pick: 1) strong potential for upside to estimates, with cons assuming revenue growth slows by ~3 pts to 18% y/y and operating margins compress ~500bps to 36% on AI investments — creating a low bar; 2) attractive risk/reward at 22x NTM PE a 6-turn PE discount vs. GOOGL; 3) big AI hires poised to deliver in ’26; 4) continued momentum from AI investments in META’s Core Flywheel; 5) accelerating activation of major incremental rev engines, w/ WhatsApp having potential to grow from a $9Bn run rate today to $36Bn by FY29, with additional upside from Threads & Llama/AI. We see potential for META to do over $33 in FY27 EPS which at 25x multiple = a >$825 stock.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 312
Microsoft Corporation (NASDAQ:MSFT) is one of the 11 AI Stocks on the Market’s Radar. On January 5, Jefferies analyst Brent Thill reiterated a Buy rating on the stock with a $675.00 price target.
The firm believes that investors should remain selective in software this year, recommending an underweight position until AI monetisation becomes more visible. Jefferies top mega-cap picks are Microsoft and Meta, along with large-caps Intuit, Atlassian and Oracle.
Some of their top predictions for 2026 include strong AI tailwinds for Microsoft, a “broad-based AI resurgence” at Meta, an AWS-driven Amazon rebound and a reacceleration at Oracle.
Microsoft continues to demonstrate strength across its various businesses, and it has also been expanding its artificial intelligence capabilities and integrating AI features across its portfolio. This is seen as a significant growth driver for the stock.
Analysts on Wall Street currently have a consensus Buy rating on the stock. The average price target of $630 implies a 33.23% upside, however, the Street-high target of $730 implies an upside of 54.38%.
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:12 Hot AI Stocks on Wall Street’s Radar and 10 Best AI Stocks to Buy Under $50
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.
