In this article, we discuss 11 trending AI stocks on news and ratings.

China’s Growing Influence in the AI Race

The rise of Chinese open-source AI models highlights their growing influence in the global AI landscape, challenging traditional proprietary systems. Their accessibility and competitive capabilities signal a shift in the balance of AI innovation. On December 17, CNBC’s Arjun Kharpal reported that Chinese AI models are advancing rapidly, with several matching or exceeding the performance of U.S. models despite chip restrictions imposed by Washington.

Open-source models, referred to as “open weight,” are key to this growth. These models, such as Deepseek and Alibaba’s QN, are highly popular on platforms like Hugging Face, allowing developers worldwide to freely access and build applications without strict licensing. The strategy enables Chinese companies to distribute their technology widely and challenge proprietary systems from firms like OpenAI, which rely on closed ecosystems to monetize their models. The growing adoption and strong capabilities of Chinese large language models present a significant challenge to U.S. dominance in the AI sector.

READ ALSO: 12 AI News and Ratings Investors Are Watching Right Now and Jim Cramer’s Latest Lightning Round: 8 Stocks in Focus.

OpenAI’s o3 Surpasses Milestones, Challenging Global AI Competitors

While China is making significant moves in AI, US-based companies are also making strides. OpenAI concluded its 12-day “shipmas” event by unveiling o3, a new reasoning model and successor to o1, along with o3-mini, a smaller version tailored for specific tasks. CEO Sam Altman highlighted the advanced capabilities, including exceptional performance in coding, mathematics, and scientific problem-solving.

The o3 model achieved a groundbreaking 87.5% on the ARC-AGI benchmark, prompting plans to develop a more challenging evaluation. The score shows the model’s ability to perform well on tasks that require learning and adapting to new challenges. ARC-AGI is a benchmark used to evaluate how well an AI can acquire new skills beyond its training data. This high score suggests that o3 is advancing toward more general intelligence capabilities. With a strong focus on safety testing and future enhancements, o3 represents a major step forward for U.S.-based AI development.

OpenAI’s decision to skip naming the model o2 is linked to trademark concerns with a UK telecom company. While o3 is not yet broadly available, safety researchers can preview o3-mini now, with general availability expected in early 2025.

For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 hedge funds.

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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

11. ZenaTech, Inc. (NASDAQ:ZENA)

Number of Hedge Fund Holders: N/A

ZenaTech, Inc. (NASDAQ:ZENA) specializes in AI-driven drones, quantum computing, and enterprise SaaS solutions for mission-critical business applications.

ZenaTech’s (NASDAQ:ZENA) subsidiary, ZenaDrone, has opened a new manufacturing facility in Phoenix, Arizona, to produce NDAA-compliant drones for the US military and NATO. The facility will focus on producing the ZenaDrone 1000, a multifunctional autonomous AI drone, and support R&D in Quantum Computing for defense applications. ZenaDrone plans to develop AI-powered drone swarms for military use in border control and perimeter security. The company is also working on its Sky Traffic project, using drones and Quantum Computing for advanced traffic management and environmental applications. ZenaTech aims to meet growing demand in the military drone market, expected to reach $47 billion by 2032.

10. Hyperscale Data, Inc. (NYSE:GPUS)

Number of Hedge Fund Holders: N/A

Hyperscale Data, Inc. (NYSE:GPUS) is shifting focus to owning and operating data centers that support high-performance computing services for emerging AI ecosystems. The company also offers AI software platforms and other products across diverse industries through its subsidiaries.

Hyperscale Data (NYSE:GPUS) has sold its St. Petersburg development property for $13 million through its subsidiary, Third Avenue Apartments LLC. The sale is part of the company’s strategy to focus solely on its data center operations, particularly to support the growing demand for high-performance computing services in AI. Approximately $11 million from the sale will be placed in a segregated account, bringing its balance to about $18.3 million. The company is in talks with its lender regarding a potential cash dividend for shareholders, with some funds also allocated for working capital.

9. Webuy Global Ltd (NASDAQ:WBUY)

Number of Hedge Fund Holders: 1

Webuy Global Ltd (NASDAQ:WBUY) is an e-commerce retailer operating in Southeast Asia, offering a variety of products including food, beverages, personal care, and packaged tours, with a growing focus on AI-driven solutions for its operations.

On December 23, Webuy Global (NASDAQ:WBUY) announced the success of its Disney cruise campaign, driven by its AI-powered travel assistant, Micky1.0, on WhatsApp. The campaign, which ran from December 10 to 23, 2024, resulted in a receivable booking value of SGD 465,527 (SGD 1 = US$0.73) and booking revenue of SGD 162,202. Micky1.0 efficiently handled customer inquiries and led to increased engagement, demonstrating the company’s ability to integrate AI with personalized service. CEO Vincent Xue Bin emphasized the campaign’s role in driving sales and underscored the potential for further growth by scaling Micky1.0 and expanding AI applications in travel services.

8. POET Technologies Inc. (NASDAQ:POET)

Number of Hedge Fund Holders: 5

POET Technologies Inc. (NASDAQ:POET) develops optoelectronic solutions, including its Optical Interposer platform, which integrates electronic and photonic devices for AI-driven applications in sectors like data centers, IoT, and automotive LIDAR.

On December 24, POET (NASDAQ:POET) announced agreements with Globetronics Manufacturing (GMSB) to produce optical engines at GMSB’s Penang facility. These agreements include a Master Agreement, an Optical Engine Purchase Agreement, and a Deed of Consignment for POET’s wafer-level process equipment. GMSB has allocated RM7.7 million (RM1 = US$0.22) for capital expenses related to this collaboration from 2025 to 2027. The collaboration involves advanced wafer-level process equipment installation and aligns with POET’s broader “China Plus One” strategy to enhance global manufacturing capabilities.

7. IREN Limited (NASDAQ:IREN)

Number of Hedge Fund Holders: 28

IREN Limited (NASDAQ:IREN) operates bitcoin mining data centers and offers high-performance computing solutions, including AI cloud services.

B. Riley analyst Lucas Pipes has raised the price target for IREN (NASDAQ:IREN) from $15 to $16, maintaining a Buy rating on the stock. He noted that since Election Day, Bitcoin (BTC) has surged significantly, reaching an all-time high above $107k on December 17. During this period, the global hash rate increased by 11%, briefly peaking at around 890 EH/s.  Additionally, the firm noted that IREN recently revealed its 1.4 GW Sweetwater data center project in West Texas and is exploring various opportunities at the site, including Bitcoin mining and AI-related ventures, such as co-location services.

6. TeraWulf Inc. (NASDAQ:WULF)

Number of Hedge Fund Holders: 35

TeraWulf Inc. (NASDAQ:WULF) is a Bitcoin mining firm that operates eco-friendly data centers fueled by renewable energy, with a focus on Bitcoin mining and growing its high-performance computing and AI infrastructure.

Cantor Fitzgerald believes TeraWulf’s AI/HPC (NASDAQ:WULF) growth is just beginning after the company secured a long-term data center lease with Core42 for a 60 MW IT load at the Lake Mariner facility. The deal includes a 10-year term with potential expansions, offering strong revenue prospects. The agreement’s terms, such as a 3% annual revenue increase and upfront payments, suggest financial stability and high margins. Analyst Brett Knoblauch maintained a Buy rating and $11 price target, seeing this as the first of many deals to drive future growth and potential share price increases.

5. CyberArk Software Ltd. (NASDAQ:CYBR)

Number of Hedge Fund Holders: 51

CyberArk Software Ltd. (NASDAQ:CYBR) develops AI-driven identity security solutions that protect access, manage credentials, and provide secure authentication across various industries and environments.

J.P. Morgan has identified CyberArk (NASDAQ:CYBR) as one of its “top picks” in security software for 2025, citing strong demand, favorable expectations, and potential for better-than-expected performance. J.P. Morgan emphasized focusing on companies with strong enterprise budget exposure and those expanding into adjacent markets. Additionally, as digital identity management becomes a top priority for businesses, securing AI is also highlighted as a key theme for 2025, with growing competition expected in this area. The firm said:

“We think that solutions to securing AI currently exist in a highly fragmented and nascent market, and that sustained investment from bigger players in the security space will likely increase competition and available solutions.”

4. Digital Realty Trust, Inc. (NYSE:DLR)

Number of Hedge Fund Holders: 52

Digital Realty Trust, Inc. (NYSE:DLR) offers data center solutions, providing secure and efficient interconnection to global data communities while addressing Data Gravity challenges.

Turing, a Japanese AI company developing full driving automation, has established its computation platform at Digital Realty’s NRT10 data center in Japan. The platform, is powered by 96 NVIDIA H100 GPUs. Digital Realty’s NRT10 data center, certified as NVIDIA DGX-ready, provides high-density colocation, optimized cooling, and power supply to enhance GPU performance. The collaboration has accelerated Turing’s AI development timeline, reducing it from one year to just three months.

Digital Realty’s Managing Director and Head of Asia Pacific, Serene Nah commented:

“Digital Realty is excited to be at the forefront of this transformative journey, leveraging our extensive AI experience and expertise to support Turing’s groundbreaking AI innovation. By providing a high-performance and flexible data center environment, we are enabling Turing to rapidly deploy and scale their critical AI computations. This collaboration not only accelerates the development of Turing’s full driving automation technology but also sets a new standard for the efficient and effective deployment of AI solutions. We are committed to helping Turing and other innovative companies achieve their goals, shaping the future of how the world operates through our advanced AI infrastructures and forward-thinking data center solutions.”

3. Western Digital Corporation (NASDAQ:WDC)

Number of Hedge Fund Holders: 66

Western Digital Corporation (NASDAQ:WDC) designs, produces, and markets data storage solutions, providing high-capacity, high-performance storage throughout the six stages of the AI data lifecycle.

On December 19, Morgan Stanley reduced its price target for Western Digital (NASDAQ:WDC) from $100 to $93 while maintaining an Overweight rating. Following Micron’s weaker-than-expected Q2 revenue guidance, largely attributed to a drop in NAND revenue, the analyst adjusted estimates and expects AI growth to face challenges due to weakness in commodity markets.

Previously, Benchmark analyst Mark Miller downgraded Western Digital to Hold from Buy, citing several concerns. They include weakening NAND prices due to customer inventory adjustments, slow demand in industrial and automotive markets, weak Q2 guidance from Micron, and a declining share in the NAND market. As a result, the firm lowered its FY25 forecast for non-GAAP net income to $7.57 per share and sales to $16.7 billion.

2. Micron Technology, Inc. (NASDAQ:MU)

Number of Hedge Fund Holders: 107

Micron Technology, Inc. (NASDAQ:MU) specializes in memory and storage solutions, providing high-speed, low-latency technologies for industries like data centers, automotive, mobile devices, and AI-driven applications.

Analyst Quinn Bolton from Needham maintained a Buy rating on Micron (NASDAQ:MU) but lowered the price target from $140 to $120. Despite Micron’s recent earnings slightly exceeding expectations, weaker guidance due to sluggish consumer markets and data center SSD segments led to inventory adjustments, particularly in NAND. However, Micron’s strength in high bandwidth memory (HBM) and data center DRAM is expected to remain strong, helping to offset challenges in NAND. The revised price target reflects these factors while maintaining confidence in Micron’s long-term outlook.

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 279

Microsoft Corporation (NASDAQ:MSFT) incorporates AI across its cloud services, productivity tools, and business solutions to improve automation, security, and user experience. Its AI initiatives include advanced cloud offerings, AI-driven business applications, and innovative language processing and computing technologies.

Reuters reported on December 23 that Microsoft (NASDAQ:MSFT) is integrating internal and third-party AI models into Microsoft 365 Copilot to reduce reliance on OpenAI’s technology and lower operational costs, sources revealed. While OpenAI remains a key partner, Microsoft is customizing OpenAI’s models and training its own smaller models, such as Phi-4, to improve cost efficiency and performance. This approach aligns with similar shifts in other Microsoft services like GitHub and its consumer chatbot Copilot. Though adoption has faced challenges, analysts predict over 10 million paid users by year-end, with 70% of Fortune 500 companies already utilizing 365 Copilot.

While we acknowledge the potential of Microsoft Corporation (NASDAQ:MSFT) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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