The recently imposed US sanctions on chip use have angered China. In recent news, the country has stated that it may take legal action against any individual or organization who are found assisting or implementing U.S. measures that advise companies against using their advanced semiconductors.
According to the U.S. published guidance, companies risk violating export controls if found using Ascend AI chips from Shenzhen-based Huawei. In response, China’s commerce ministry said there could be “corresponding legal liabilities” against those involved in implementing U.S. measures and that it constitutes “discriminatory restrictive measures” against Chinese firms.
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The sanctions are seemingly a new strategy adopted by the US to curb China’s progress in the AI arms race. The world is yet to watch the success of this strategy as opposed to the AI diffusion rule imposed earlier, which the world came to know had failed miserably after the arrival of DeepSeek.
Even Jensen Huang has deemed the AI diffusion rule to be a failure.
“All in all, the export control was a failure. The fundamental assumptions that led to the AI diffusion rule in the beginning, in the first place, has been proven to be fundamentally flawed.”
In fact, the sales block advanced AI chips to China, forcing companies to buy semiconductors from Chinese designers. It also pushed the country to invest aggressively in a robust supply chain that doesn’t rely on manufacturers outside the country.
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).
12. Pony AI Inc. (NASDAQ:PONY)
Number of Hedge Fund Holders: 20
Pony AI Inc. (NASDAQ:PONY) deals in the commercialization of autonomous vehicles. Analyst Ming-Hsun Lee from Bank of America Securities recently reiterated a “Buy” rating on the stock and increased the price target to $21.00 from $17.70. Lee’s optimism in Pony AI stems from the company’s growth potential and strategic advancements. In particular, its impressive Q1 2025 performance, driven by a 200% year-over-year growth in robotaxi services, proved to be convincing of its strong demand and market presence.
Gross profit margin did record a decline, but operational improvements tend to offset this concern. The company is also planning to expand its robotaxi fleet to 1,000 units by the end of 2025. Another key catalyst for the company has been key partnerships with companies such as Uber and a leading Singaporean transportation firm. These moves are positioning the company for global reach. The firm is also looking forward to the expected mass production of Gen-7 vehicles. These vehicles will be more cost-effective due to reduced autonomous driving kit and LiDAR costs, enhancing profitability. All of these developments reinforce a positive outlook toward the stock.
11. Keysight Technologies, Inc. (NYSE:KEYS)
Number of Hedge Fund Holders: 51
Keysight Technologies, Inc. (NYSE:KEYS) is a global technology company that provides electronic design and test solutions. On May 21, JP Morgan analyst Samik Chatterjee maintained an “Overweight” rating on the stock and increased the price target to $177 from the previous $172. Keysight announced strong second fiscal quarter performance, beating revenue and earnings estimates.
The company also delivered third-quarter guidance that exceeded market forecasts, upgrading its full-year outlook for fiscal year 2025. These factors imply how the company is capable of reaching its long-term revenue growth targets despite challenging macroeconomic conditions. In particular, Keysight has witnessed strong growth in the Wireline segment on the back of advanced equipment deployment. This growth is further helping offset challenges in areas such as General Electronics and Autos. Tariff-related cost headwinds do remain, but strategic pricing actions and the acquisition of Spirent are seen as a positive move supporting future growth.
Other analysts have also highlighted Keysight’s diversified supply chain and strategic investments in AI infrastructure playing a strong role against such tariffs. Analyst firms such as Barclays are also bullish on the stock, particularly its continued momentum in Keysight’s AI and defense sectors.
10. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Holders: 63
Dell Technologies Inc. (NYSE:DELL) provides IT solutions, including servers, storage, networking, and personal computing devices, to businesses and consumers worldwide. On May 21, Evercore ISI analyst Amit Daryanani reiterated an “Outperform” rating and $120.00 price target on the stock. The rating update follows Day 2 of Dell World, Dell’s major technology conference happening May 19-22 in Las Vegas. Featuring a keynote presentation by Dell’s Chief Operating Officer Jeffrey Clarke, Day 2 highlighted the importance of enterprise AI adoption and the role of Dell’s products and services in developing AI strategies for customers.
Clarke stressed how enterprises don’t need to use the latest GPUs or models to embark on AI adoption, stressing a tailored approach to AI strategies instead. The company also announced all-flash storage offerings and the Dell Private Cloud software automation, amongst other things. However, the focal point of the conversation was simple: the need for early enterprise AI adoption and the role that Dell can play in assisting customers in starting their AI journeys. All of these factors reaffirm Evercore ISI’s confidence in the company’s direction and potential for growth.
9. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Fund Holders: 64
Palo Alto Networks, Inc. (NASDAQ:PANW) is a leader in AI-powered cybersecurity. One of the most notable analyst calls on Wednesday, May 21, is for Palo Alto Networks. Goldman Sachs analyst Gabriela Borges raised the price target on the stock to $231.00 (from $215.00) while maintaining a “Buy” rating. Analyst Gabriela Borges expressed optimism about the company’s strategic positioning in the industry.
The analyst noted Palo Alto’s mixed performance over the quarters due to industry spending normalization, increased cloud competition, and changes in the company’s business model. Despite these factors, the company is recognized to be in a good position to lead strategic enterprise security discussions and consolidate spending in the medium term, alongside Crowdstrike and Microsoft. Borges also noted that the field of next-generation AI security vendors will likely undergo consolidation over time, and that Palo Alto is likely to benefit from this.
“We maintain a Buy rating on the stock. Fundamentals have been mixed over the past 4+ quarters, in our view due to industry normalization in network security industry spending, competition in cloud, and moving pieces to the model (such as the mix of financing deals). However, we continue to view Palo Alto as one of only three companies well positioned to have strategic enterprise security conversations to consolidate spend over the medium term, with CrowdStrike and Microsoft the other two. While we expect to see a number of next-gen vendors in AI security, we ultimately believe that this field will consolidate over time in favor of leaders such as Palo Alto, that have the ability and willingness to invest in technology leadership, outsource R&D via M&A, and realize attractive unit economics from cross sell.”
8. 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. TD Cowen recently lowered the firm’s price target on the stock to $105 from $125 and kept a “Hold” rating on the shares. The firm holds a cautious outlook toward the stock ahead of its financial report scheduled for May 29. All eyes are going to be on the company’s guidance for FY26 on the said day.
While a 23% Cloud growth expectation is in line with estimates, FY26 guidance is anticipated to be slightly below the consensus estimate of 14%. This is because the forecast accounts for the recent CFO appointment and the current macroeconomic environment. As such, the upcoming earnings and guidance may prove to be a crucial test for investor confidence.
In other news, Elastic announced how Elasticsearch, its open-source, distributed search and analytics engine, has integrated with the new NVIDIA Enterprise AI Factory validated design. This collaboration strives to build and deploy on-premises AI factories.
“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.
7. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 83
Intel Corporation (NASDAQ:INTC) designs and sells computing hardware, semiconductor products, and AI-driven solutions for various industries. On May 20, Deutsche Bank analyst Ross Seymore resumed coverage on the stock with a “Hold” rating and a price target of $23. The firm noted that patience is still required from investors, warning that the company’s turnover may take some time.
This is because there have been quite a few challenges Intel is facing, including ongoing macroeconomic uncertainty and challenges such as high manufacturing costs and lagging leading-edge products. Seymore believes that these issues are expected to keep pressuring both revenue and profitability in the near term. The analyst did acknowledge Lip-Bu Tan’s entry as CEO, stating that it brings strong tech experience and a customer-focused strategy. Nevertheless, especially in Intel’s foundry business is still likely to be a long and difficult process.
Seymore further added how fixing the product roadmap and regaining competitiveness in chip manufacturing could lead to a substantial financial upside. All in all, the bank is awaiting further information on the new CEO’s strategic plans or signs of progress before it reconsiders its position.
6. 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. Bank of America Securities analyst Vivek Arya recently maintained a “Buy” rating on the stock and set a price target of $130.00. The firm believes that AMD holds strong potential for growth and profitability, and at the heart of this conviction lies the company’s impressive earnings potential.
The firm believes that AMD’s expected Earnings per Share (EPS) will significantly outpace Wall Street expectations for the coming years. The reason behind the optimism stands to be its continued market share gains in the CPU sector for both servers and PCs, along with the company’s strategic positioning in the rising AI market. This includes significant contracts in the Middle East and an encouraging pipeline of AI-related products.
Arya’s confidence also extends to AMD’s valuation, which is considered attractive due to its consistent management execution and capability to grow its topline and EPS at impressive rates. Moreover, while some big US active fund managers aren’t enthusiastic about AMD, its potential to capture a meaningful share of the AI accelerator market is a significant opportunity. The company has also recently expanded its stock buyback program further, boosting its long-term outlook. At the same time, Arya has noted challenges for the stock, such as geopolitical uncertainties, competitive pressures from larger AI players, and a possible Intel comeback under the new management.
5. 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. Morgan Stanley reiterated the stock as “Overweight” with a $410 price target. The firm said it’s standing by top pick Tesla. According to the firm, upcoming developments are likely going to boost investor confidence in Tesla’s role beyond automotive manufacturing. The analysts are optimistic about ’Muskonomy,’ a term which refers to the economic ecosystem surrounding Elon Musk’s ventures.
The rating reaffirmation follows Tesla CEO Elon Musk’s interview by CNBC’s David Faber at the Giga Texas facility in Austin. The firm noted the rarity of such interviews by Musk and also how insights from Musk could help steer the company’s future direction.
“We believe events between now and year-end will go some way to convince investors that Tesla is more than a car company. In many ways, we believe Tesla’s role in the ‘Muskonomy’ is more important than ever before.”
4. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 161
Broadcom Inc. (NASDAQ:AVGO) is a technology company uniquely positioned in the AI revolution owing to its custom chip offerings and networking assets. One of the most notable analyst calls for Wednesday, May 21, was for Broadcom Inc.
TD Cowen reiterated Broadcom and Advanced Micro Devices as “Buy.” The firm said stocks such as AMD and Broadcom have a differentiated offering.
“Beyond NVIDIA, companies such as AMD, Broadcom, and Credo all have strong tech differentiation tied to durable secular trends that are not evaporating overnight and should drive sustainable growth over the next few years.”
3. 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 21, UBS lowered the firm’s price target on the stock to $320 from $340 and kept a “Neutral” rating on the shares.
Per the analysts, a guidance reaffirmation for growth seems “most likely,” i.e., the company is going to stick with its current growth forecast. The company will release its next earnings report on May 27, 2025.
2. 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 21, JPMorgan analyst Doug Anmuth reiterated an “Overweight” rating and $195.00 price target on the stock. Doug highlighted the company’s strong position in the AI sector as a reason behind the optimism. The company’s advancements in artificial intelligence, especially through its Gemini platform, are leading the industry.
Even Google CEO Sundar Pichai opened his keynote at the I/O conference, stating how “Every day is Gemini season at Google.” Google has sound execution capabilities, as evident by how fast it is bringing AI-driven features to the market. Moreover, the company adopts a comprehensive approach to artificial intelligence, placing it well against competitors. Its leadership in AI technology is evident through Google’s foundational models and their adoption. With the stock’s current trading price presenting a discount compared to historical averages, the stock presents a potentially attractive entry point for investors.
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 21, Citi analysts reaffirmed a “Buy” rating on the stock and a price target of $540.00. The rating update follows Microsoft’s Build conference, where Microsoft made more than 50 announcements. The announcements highlight the company’s steady push towards creating an “open agentic web.” The firm acknowledged that all of these announcements currently don’t appear to be immediate drivers of revenue growth.
The firm has also acknowledged Microsoft’s commitment toward developing an open, collaborative ecosystem, predominantly in artificial intelligence (AI). The introduction of Agentic DevSecOps has been a standout development for the company, reflecting the company’s investment in AI integration. Moreover, the firm’s analysis reveals how over 230,000 organizations have utilized Copilot Studio to develop AI agents, with the user base doubling over the past year. The company stands out as a leader in the enterprise general AI (GenAI) space, showcasing the ability to monetize advancements effectively.
“We maintain our Buy rating as we see Microsoft maintains a leadership position in Enterprise GenAI monetization and momentum existing the Mar-Q should continue to drive upside to street numbers.”
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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