US President Donald Trump is all set to revive the country’s struggling coal industry. Last month, he signed a series of executive orders so that the government could meet the surging energy demand of AI data centers. Executive Order 14241 will allow several older coal-fired plants about to retire to continue generating power for the foreseeable future. This will be done to meet the growing demand for artificial intelligence.

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Repeatedly promoting coal as a power source for data centers, Trump told the World Economic Forum in January that he would be approving power plants for AI through an emergency declaration. He also called on tech companies to use coal as a backup power source.

“They can fuel it with anything they want, and they may have coal as a backup — good, clean coal.”

However, with the tech industry investing billions of dollars to expand renewable energy and leveraging nuclear power as a way to meet its growing electricity demand, the use of coal is actually against the tech companies’ environmental goals.

Nevertheless, the tech industry does acknowledge that fossil fuel generation will eventually be needed to help navigate the electricity demand from AI. However, these companies are focusing on natural gas as it emits less half the CO2 of coal per kilowatt hour of power.

“To have the energy we need for the grid, it’s going to take an all of the above approach for a period of time. We’re not surprised by the fact that we’re going to need to add some thermal generation to meet the needs in the short term.”

-Kevin Miller, Amazon’s vice president of global data centers.

Other companies, such as Anthropic, have stated that there are a broader set of options available than just coal. “

We would certainly consider it but I don’t know if I’d say it’s at the top of our list.”

-Anthropic co-founder Jack Clark

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 Q4 2024.

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).

11. Aurora Innovation, Inc. (NASDAQ:AUR)

Number of Hedge Fund Holders: 22

Aurora Innovation, Inc. (NASDAQ:AUR) is a self-driving technology company. On Monday, May 19, Cantor Fitzgerald maintained a positive outlook on the stock with an “Overweight” rating and a $12.00 price target. The company has recently achieved a significant milestone by launching its commercial self-driving service, Aurora Driver, in Texas. This milestone not only aligns with the management’s projected timeline but also places the company as the first to introduce self-driving trucks in the United States.

Aurora will also be deemed a pioneer in operating a commercial autonomous driving service with heavy-duty trucks on public roads in the country. The company has announced plans to extend its driverless services by the end of the year. Its Autonomy Performance Indicator (API), a metric used to track the performance and readiness of autonomous vehicle systems, has reached 95% in the first quarter of 2025. This figure exceeds Aurora’s commercialization goal of 90%, a win for the company, which underscores its advancement in delivering reliable self-driving technology.

10. Elastic N.V. (NYSE:ESTC)

Number of Hedge Fund Holders: 64

Elastic N.V. (NYSE:ESTC) is a search AI company offering cloud-based solutions. On May 19, the company announced that Elasticsearch, Elastic’s open source, distributed search and analytics engine, has integrated with the new NVIDIA Enterprise AI Factory validated design. The collaboration aims to enhance enterprises’ capabilities in building and deploying on-premises AI factories. This will be done through a recommended vector database designed to handle AI agents and generative AI applications efficiently.

“We are obsessed with building the best vector database in the market. NVIDIA Enterprise AI Factory validated designs enable Elastic customers to unlock faster, more relevant insights from their data.”

-Ken Exner, chief product officer at Elastic.

9. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Number of Hedge Fund Holders: 96

Advanced Micro Devices, Inc. (NASDAQ:AMD) develops and sells semiconductors, processors, and GPUs for data centers, gaming, AI, and embedded applications. On May 19,  Mizuho raised the firm’s price target on the stock to $135 from $117 and kept an “Outperform” rating on the shares. The rating update follows the firm’s adjusted price targets in the semiconductors group after an artificial intelligence server supply chain call.

8. Alibaba Group Holding Limited (NYSE:BABA)

Number of Hedge Fund Holders: 107

Alibaba Group Holding Limited (NYSE:BABA) is an internet giant that offers e-commerce services in China and internationally. On May 19, Susquehanna analyst Shyam Patil reiterated a “Positive” rating on the stock with a $175.00 price target. The rating update follows the company’s fourth-quarter results, which were a tale of mixed performance. Revenue for the company was 236.45 billion yuan, falling short of the 237.24 billion yuan expected by analysts. Despite the miss, the firm’s outlook for Alibaba remains unchanged. The analysts believe that the stock’s current valuation doesn’t fully reflect its growth prospects and market potential. This is particularly true in the context of ongoing investment in artificial intelligence and the Chinese e-commerce sector.

7. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 126

Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives. On May 19, Cantor Fitzgerald reiterated the stock as “Overweight” with a steady price target of $425.00. The firm stated that it sees a slew of positive catalysts in the months ahead for Tesla.

“With shares currently trading at ~$350, we remain bullish ahead of several material near-term potential catalysts.”

Several positive developments have been highlighted by analysts for the stock, particularly Tesla’s confirmation of the Robotaxi launch in Texas set for June and the planned introduction of a lower-priced vehicle in the first half of 2025. CEO Elon Musk has also stated that he will be spending more time at Tesla, another positive catalyst for the company.

Moreover, Tesla’s rollout of Full Self-Driving (FSD) features in China, as well as the expected release in Europe during the first half of 2025 (pending regulatory approval) are also seen as positive catalysts for the company’s future growth. The Optimus Bot’s high-volume production is projected for 2026, while the Tesla Semi Truck is also expected in the same year.

However, near-term challenges, such as broader macroeconomic conditions, tariff impacts, Musk’s controversial political stance, and the expected removal of the EV Tax Credit, also go hand-in-hand with the known positive catalysts.

6. Salesforce, Inc. (NYSE:CRM)

Number of Hedge Fund Holders: 162

Salesforce Inc. (NYSE:CRM) is a cloud-based CRM company that has gained popularity after it unveiled its AI-powered platform called Agentforce. On May 19, Citizens JMP analyst Patrick Walravens reiterated a “Market Outperform” rating and $430.00 price target on the stock. The rating update follows Salesforce’s new flexible pricing for Agentforce, its AI platform. The firm believes this pricing strategy reflects the company’s ongoing efforts to adapt its offerings to meet market demands and customer needs. Moreover, despite Salesforce’s stock performance unable to mirror the broader market trends this year, JMP Securities’ analysis reveals that its company’s fundamentals and market strategies will eventually pave the way for future growth.

5. Apple Inc. (NASDAQ:AAPL)

Number of Hedge Fund Holders: 166

Apple Inc. (NASDAQ:AAPL) is a technology company known for its consumer electronics, particularly the iPhones and MacBooks. On May 19, Evercore ISI analyst Amit Daryanani reiterated an “Outperform” rating and a $250.00 price target on the stock. Highlighting Apple’s Services business as a key factor in the company’s valuation and growth, the segment remains central to Apple’s business despite the legal and technological challenges that it has been facing. The analyst noted how, despite regulatory issues impacting the App Store and potential changes to the default search engine payment from Google, the company maintains a strong financial position. Moreover, the potential for artificial intelligence to be overstated could allow the company to take advantage of AI search and help grow its Services business.

4. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 223

NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services. On May 19, Raymond James analyst Srini Pajjuri reiterated a “Strong Buy” rating on the stock with a $150.00 price target. Pajjuri noted that despite the company’s upside in the current quarter, the July 2025 quarter consensus estimates might not fully account for the impact of the recent H20 export restriction.

Strong Blackwell product ramps will allow the company to maintain its trend of revenue increase by $4-5 billion per quarter, as seen sequentially over the last six quarters. However, the H20 restriction is expected to create an estimated $4 billion headwind, potentially limiting sequential growth in the second quarter. Analysts still expect robust hyperscale capital expenditure trends and recent AI diffusion rules changes to allow NVIDIA’s management to be optimistic about the second half of the year.

3. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Holders: 234

Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses. On May 19, Bernstein analyst Mark Shmulik maintained a “Hold” rating on the stock with an unchanged price target of $185.00. The analyst noted that Alphabet holds a promising market position with strategic initiatives in technology, particularly artificial intelligence. However, the company is also facing its fair share of challenges. A major obstacle for the company is the competitive landscape in which it operates, particularly with major players such as Apple. This landscape is making it challenging to capture market share and developer interest. Moreover, a moderate growth trajectory implies growth potential for the company, but it is not as robust as investors may have anticipated. This is why the firm has opted for a cautious approach toward the stock.

2. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Investors: 235

Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On May 19, Morgan Stanley reiterates Apple and Meta as “Overweight.” The firm said Meta remains over-owned by large-cap institutional investors and that Apple remains under-owned.

“AAPL remains the most under-owned mega cap tech stock we track, while META remains the most over-owned”

Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $693 implies an 8% upside, however, the Street-high target of $918 implies an upside of 43%.

1.  Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 317

Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements. On May 19, the company kicked off its annual developer “Build” conference in Seattle, bringing together thousands of coders looking to turn AI investments into profitable products and services for consumers and businesses. Ahead of the conference, Microsoft’s Technology Officer Kevin Scott said that the company visualizes a future where artificial intelligence agents from different firms can work together and have better memories of their interactions.

Scott noted that Microsoft is backing a technology called Model Context Protocol (MCP). The MCP is an open-source protocol introduced by Google-backed Anthropic, having the ability to create an “agentic web” similar to the way hypertext protocols helped spread the internet in the 1990s.

“It means that your imagination gets to drive what the agentic web becomes, not just a handful of companies that happen to see some of these problems first.”

As reported by Reuters, Microsoft is also looking to shift its partnership with OpenAI. Having already spent $64 billion this year, largely on data centers, it is seeking to become a neutral arms dealer in the AI race.

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.

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