After years of soaring gains, technology stocks are facing heightened scrutiny as investors begin to grow increasingly wary of an “AI bubble” that may pop any time soon. Anxiety particularly heightened after the hedge fund investor who inspired the film The Big Short, Michael Burry, bet $1.1bn on a fall in prices for AI-related stocks Nvidia and Palantir.
For investors seeking protection without missing out on growth, Arnaud Girod, head of economics and cross asset strategy at Kepler Cheuvreux, believes that healthcare’s position is “the exact opposite” of anxiety around AI. Cheuvreux told CNBC’s Squawk Box that he believes healthcare may be the ultimate hedge against an AI correction in 2026.
“We are putting behind us a lot of headwinds like the tariffs.”
Girod noted that investors “need to find businesses where the franchises are not going to be challenged by the AI disruption itself and, at the same time, companies that could leverage the technology either through cost cutting, efficiencies, productivity, or indeed, incremental innovation.”
Healthcare, particularly pharma, offers a hedge due to easing tariff risks, supportive drug pricing policy, and robust long-term trends such as aging populations and obesity, even as tech stocks have outperformed healthcare this year.
“The recovery in Pharma stocks could accelerate as visibility improves after this year’s perfect storm and as the sector’s longer-term structural themes regain traction (ageing demographics, obesity).”
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.
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12. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 66
International Business Machines Corporation (NYSE:IBM) is one of the 12 Must-Watch AI Stocks on Wall Street. On December 5, Erste Group upgraded the stock from Hold to “Buy” following robust third-quarter performance and improved financial guidance. The improved financial outlook for IBM, together with Red Hat momentum, support the rating upgrade.
“Following the good Q3 results, IBM management has raised its financial guidance for the full year 2025. The company now expects revenue growth of more than 5%. The expectation for free cash flow for the full year has also been raised to around USD 14 billion.”
IBM’s software segment is also likely to continue gaining importance in the future, supported by Red Hat products. Analysts anticipate IBM to achieve a higher increase in sales next year than this year.
“The share should benefit from the Group’s positive outlook and achieve further price gains.”
International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products.
11. Coherent Corp. (NYSE:COHR)
Number of Hedge Fund Holders: 78
Coherent Corp. (NYSE:COHR) is one of the 12 Must-Watch AI Stocks on Wall Street. On December 5, Raymond James raised its price target on the stock to $210.00 from $180.00 while maintaining a “Strong Buy” rating. The firm is optimistic about the optical components manufacturer, anticipating its underappreciated AI exposure to drive continued upside.
“We maintain our Strong Buy rating and raise our price target on Coherent after refining our estimates for new segmentation and updating our sum-of-the-parts analysis.”
Coherent is a leader and critical enabler across multiple AI architectures within and between AI data centers, making it agnostic to operators or Large Language Models. As such, analysts at the firm believe that the value of COHR’s technology breadth and IP are not “fully appreciated.”
Industrial segments have bottomed, and recent strategic actions signal a recovery moving forward. The firm’s estimates remain high-on-the-Street with continued upside seen ahead.
Coherent Corp. (NYSE:COHR) is an American manufacturer of optical materials and semiconductors.
