On May 12, Jeff Kilburg of KKM Financial and Dan Ives of Wedbush Securities appeared together on CNBC to discuss AI, cybersecurity, and mega-cap tech, especially as tech stocks soar as the US-China tariff deal boosts market confidence. Jeff Kilburg first identified the tech software sector as the primary beneficiary of the recent market pause amid optimism and gains, and highlighted that markets are broadly positive. He noted that many investors underestimated how quickly a China trade deal would materialize and contrasted it with the UK deal, which was expected to be a slower, tentative template. Kilburg suggests that faster deal-making could continue and benefit several software companies, which have been overlooked due to the focus on the MAG7. Dan Ives concurred with Kilburg’s view but singled out NVIDIA as the biggest near-to-medium-term beneficiary of the pause, especially given its prior exposure to China tariffs. He referenced the ongoing AI revolution and the surge in AI-related stocks and described the current environment as a dream scenario for tech investors. Ives anticipates new highs for tech and the broader market. He also described a ‘golden age’ for cybersecurity stocks, which are acting as secondary beneficiaries of AI growth.
On a question about the impact of the admin’s focus on reducing federal spending and debt, particularly on companies that derive substantial revenue from government contracts, Kilburg responded that this fiscal discipline is actually positive for software companies as it may drive more spending toward efficient software solutions. Kilburg also addressed the sectors to avoid or be cautious about amid the current market environment. He suggests trimming utilities, which have been a safe haven but may now be less attractive. He points out that the VIX volatility index dropping below 20, which is a big change from over 60 in April, indicates reduced market fear and increased investor confidence. This suggests a market environment favoring higher-beta and growth-oriented investments rather than defensive plays.
That being said, we’re here with a list of the 13 best technology stocks to buy for long-term investment.
A financial advisor in a crisp suit analyzing an array of graphs and diagrams, with the performance of U.S. stocks at the forefront.
Our Methodology
We first sifted through stock screeners, ETFs, and financial media reports to compile a list of the top tech stocks that have grown over 15% in the past 3 years. We then selected the 13 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, 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).
13 Best Technology Stocks to Buy for Long-Term Investment
13. Fortinet Inc. (NASDAQ:FTNT)
3-Year Revenue CAGR: 19.64%
Number of Hedge Fund Holders: 61
Fortinet Inc. (NASDAQ:FTNT) is a cybersecurity company that provides networking & security solutions. It also offers AI-driven security operation solutions that identify, protect, detect, respond, and recover from threats. The company serves large enterprises, communication service providers, government organizations, and small to medium-sized enterprises.
The company’s Unified SASE (Secure Access Service Edge) grew over 110% in security service edge billings year-over-year in Q1 2025, which propelled the overall unified SASE billings growth to 18%. FortiSASE penetration among large enterprises saw a ~10% sequential increase and reached 11%. The company also offers Sovereign SASE, which is a solution for organizations that require full on-premise or in-country data control, particularly for highly regulated sectors.
On May 8, Scotiabank lowered the price target on Fortinet Inc. (NASDAQ:FTNT) to $115 from $135 while keeping an Outperform rating despite the company’s solid Q1 2025 billings performance. Unified SASE and SecOps accounted for 25% and 10% of the total billings, respectively. Management at Fortinet also stated that the US-China tariffs did not impact fundamentals this quarter.
Conestoga Capital Advisors stated the following regarding Fortinet, Inc. (NASDAQ:FTNT) in its Q4 2024 investor letter:
“Fortinet, Inc. (NASDAQ:FTNT) is the worldwide market share leader in network security firewalls (by units). During the quarter, FTNT continued to see positive momentum in firewall services revenue and posted a big beat and raise of results and guidance. Looking ahead, the company is expecting a larger-than-normal product refresh cycle, with many customers ordering well in advance (often one year prior) of their firewall’s 2026 end-of-life schedule.”
12. Shopify Inc. (NASDAQ:SHOP)
3-Year Revenue CAGR: 24.78%
Number of Hedge Fund Holders: 64
Shopify Inc. (NASDAQ:SHOP) is a commerce tech company with tools to start, scale, market, and run businesses of various sizes. It offers the Shopify platform that allows merchants to manage products & inventory, process orders & payments, fulfill & ship orders, build customer relationships, source products, and use analytics for running businesses.
In Q1 2025, GMV/Gross Merchandise Volume processed through Shopify Payments reached a penetration rate of 64%. This represents a significant portion of the total $74.8 billion in GMV for the quarter, which itself grew by 23% year-over-year. However, Stifel lowered Shopify’s price target to $100 from $120 on May 9 with a Hold rating. This adjustment came as Shopify delivered a thinner top-line beat than in recent quarters, with margins gross merchandise value slightly below/in-line.
The success of Shopify Payments is deeply intertwined with the growth of Shop Pay, which is the buyer-facing component of the company. In Q1, GMV processed through Shop Pay saw a 57% year-over-year increase and exceeded $22 billion. During Q1, Shopify Payments was launched in 16 new markets, which almost doubled its availability from 23 to 39 countries. Shopify Inc. (NASDAQ:SHOP) introduced multi-currency payouts in 20 countries across Europe.
Artisan Global Opportunities Fund stated the following regarding Shopify Inc. (NASDAQ:SHOP) in its Q4 2024 investor letter:
“Among our top Q4 contributors were Atlassian and Shopify Inc. (NASDAQ:SHOP). Our conviction in Shopify grew after it decided to exit the logistics business in favor of a capital-light partnership model, which we viewed as significantly narrowing the downside range of outcomes and allowed it to focus on what it does so well: developing great e-commerce software solutions for brands of all sizes. We have been encouraged by Shopify’s subsequent pace of innovative new product enhancements, including using AI assistants to help brands run their businesses. Shares rallied after the company reported strong earnings results, including 24% growth in gross merchandise volume, and management raised its forward guidance.”
11. Palantir Technologies Inc. (NASDAQ:PLTR)
3-Year Revenue CAGR: 23.67%
Number of Hedge Fund Holders: 64
Palantir Technologies Inc. (NASDAQ:PLTR) builds and deploys software platforms for the intelligence community. The company assists in counterterrorism investigations and operations through different platforms, such as Palantir Gotham, Palantir Foundry, Palantir Apollo, and Palantir Artificial Intelligence Platform/AIP. It also helps US commercial customers with data analytics.
In Q1 2025, Palantir’s US commercial revenue surged by 71% year-over-year and surpassed a $1 billion annual revenue run rate. This segment now constitutes 71% of the company’s overall business. The growth in the US commercial sector is fueled by the demand for Palantir’s Artificial Intelligence Platform/AIP. The company closed $810 million in US commercial TCV/Total Contract Value, which marked a 239% increase.
Palantir Technologies Inc. (NASDAQ:PLTR) also doubled the number of deals worth $1 million or more compared to the same period last year, which indicates larger customer engagements. BofA also raised the price target on Palantir to $150 from $125 while maintaining a Buy rating on May 12. According to the analysts at BofA, Palantir’s value is creating ‘outcome-focused bespoke AI-enabled products.’
Alger Mid Cap Focus Fund stated the following regarding Palantir Technologies Inc. (NASDAQ:PLTR) in its Q4 2024 investor letter:
“Palantir Technologies Inc. (NASDAQ:PLTR) builds advanced platforms for data integration, management, and security, enabling interactive, AI-assisted analysis for its users. Its core offerings include Palantir Gotham, designed for government clients, and Palantir Foundry, tailored for commercial customers. Originally focused on U.S. intelligence agencies, Palantir has expanded into defense contracts with western governments and entered the commercial market in 2016. During the quarter, shares contributed to performance after the company reported better-than-expected fiscal third quarter operating results, along with management raising its full year 2024 revenue guidance. Management noted that the recent launch of its AI platform (AIP), which leverages generative AI to optimize business operations, has driven significant growth and investor interest. Additionally, we believe Palantir could be a key partner for the U.S. government’s new Department of Government Efficiency (DOGE), as its AI-driven platforms are ideally suited to help identify inefficiencies, allocate resources effectively, and achieve cost reductions.”
10. Coherent Corp. (NYSE:COHR)
3-Year Revenue CAGR: 20.00%
Number of Hedge Fund Holders: 71
Coherent Corp. (NYSE:COHR) develops, manufactures, and markets engineered materials, optoelectronic components & devices, and optical & laser systems & subsystems. These are used in industrial, communications, electronics, and instrumentation markets. The company also benefits from the demand for AI-related components like optical transceivers, which are required by data centers.
On May 8, B. Riley analyst Dave Kang lowered the firm’s price target on Coherent to $77 from $95 with a Neutral rating following the company’s FQ3 2025 report, where the revenue increased by 24% year-over-year to a record $1.5 billion. The Networking revenue in particular surged by 45% year-over-year due to the booming AI data center market, which itself achieved record Q3 revenue with 54% growth. However, the reduced price target reflects the contraction of the optical group in recent months.
To support the demand for optical networking solutions, Coherent Corp. (NYSE:COHR) is expanding its in-house indium phosphide capacity, which grew by ~3x year-over-year in FQ3. The company is ramping volume production on its new 6-inch indium phosphide platform next quarter. Coherent is also advancing its new data center Optical Circuit Switch/OCS platform, which will expand the company’s addressable market.
Diamond Hill Select Strategy stated the following regarding Coherent Corp. (NYSE:COHR) in its Q4 2024 investor letter:
“Among our other top Q4 contributors were Amazon, WESCO and Coherent Corp. (NYSE:COHR). Coherent is a global leader in materials, networking and lasers for the industrial, communications, electronics and instrumentation markets. Demand for optical transceivers used in AI datacenter buildouts has been robust, benefiting Coherent and resulting in higher earnings and new orders which suggest momentum is likely to continue.”
9. HubSpot Inc. (NYSE:HUBS)
3-Year Revenue CAGR: 24.41%
Number of Hedge Fund Holders: 73
HubSpot Inc. (NYSE:HUBS) provides a cloud-based CRM platform that includes Marketing Hub, Sales Hub, Service Hub, Content Hub, Operations Hub, and Commerce Hub. It also provides professional services to educate and train customers on how to utilize its CRM platform.
On May 13, Citi raised the price target on HubSpot to $759 from $750 while maintaining a Buy rating on the shares. This adjustment followed the company’s solid Q1 2025 results driven by multi-hub adoption and AI opportunity, despite the macro backdrop. The quarterly revenue totaled $714.14 million, which was up 15.67% year-over-year.
In this quarter, over 37% of Pro+ customers by ARR were also utilizing four or more HubSpot hubs, which was a 7-point increase year-over-year. Pro+ customers are the company’s subscribers on Professional or Enterprise tiers. HubSpot also saw the highest-ever increase in new Pro+ customers starting with the full platform in Q1. This led to the increased adoption of core seats among Pro+ customers, with 24% purchasing additional core seats.
TimesSquare Capital Management U.S. Focus Growth Strategy stated the following regarding HubSpot, Inc. (NYSE:HUBS) in its Q4 2024 investor letter:
“Among the wide variety of Information Technology companies, we prefer critical system providers, specialized component designers, systems that improve productivity or efficiency for their clients, and others that are growing their shares of corporate IT budgets. Another addition to the sector was HubSpot, Inc. (NYSE:HUBS), a cloud-based customer relationship management platform provider. Its execution has been stellar, with a best-in-class software product driven by a robust innovation engine, a unified underlying data architecture platform, and a focus on the small-to-mid business market where we see high potential for productivity improvements from Generative AI innovation, They subsequently reported a strong third quarter earnings report was highlighted by billings growth and the new business backlog has accelerated. HubSpot added 10,000 net new customers in the quarter.”
8. Crowdstrike Holdings Inc. (NASDAQ:CRWD)
3-Year Revenue CAGR: 39.65%
Number of Hedge Fund Holders: 77
Crowdstrike Holdings Inc. (NASDAQ:CRWD) offers cybersecurity solutions through its unified platform that provides cloud-delivered protection of endpoints, cloud workloads, identity, and data through a SaaS subscription-based model. It primarily sells subscriptions to its Falcon platform and cloud modules.
The company’s Next-Gen SIEM (Security Information and Event Management) segment grew by 115% year-over-year and reached more than $330 million in ending ARR in FY2025. The Next-Gen SIEM is a component of the integrated Falcon platform and offers superior speed, scalability, and cost efficiency as compared to traditional SIEM solutions. CrowdStrike believes that the combination of its Next-Gen SIEM with its native first-party data and the AI-powered capabilities of its GenAI security analyst, called Charlotte AI, provides an advantage in leading the AI security revolution.
A notable 7-figure win in this segment during FQ4 2025 was a major US airline that chose CrowdStrike’s Next-Gen SIEM to replace its legacy QRadar SIEM. The price target on CrowdStrike was raised to $500 from $400 with an Outperform rating by Citizens JMP analyst Trevor Walsh on May 5. Walsh believes that Crowdstrike Holdings Inc. (NASDAQ:CRWD) is continuing its momentum in core and new markets.
Aristotle Atlantic Large Cap Growth Strategy is positive on the company and stated the following regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its Q1 2025 investor letter:
“CrowdStrike Holdings, Inc. (NASDAQ:CRWD) provides cybersecurity products and services that offer endpoint protection and threat intelligence solutions, enabling customers to prevent damage from targeted attacks, detect advanced malware and search all endpoints. The company’s open cloud architecture enables it and third-party partners to rapidly innovate, build and deploy new cloud modules that can provide customers with enhanced functionality across a myriad of use cases.
We see the cloud cybersecurity market as positioned to experience strong growth over the next few years, driven by continued migration from on-premises to cloud-based architecture. We believe CrowdStrike can benefit from this trend due to its early-mover advantage, multiple product offerings and native integrations with leading cloud platforms. The increasing threats from state-sanctioned cybercriminals using high-performance computing and AI necessitate higher spending on advanced cybersecurity products. The total addressable market (TAM) is projected to grow significantly over the next four calendar years. Additionally, CrowdStrike’s cloud-native architecture and unified platform approach provide competitive advantages, resulting in high customer retention and widespread adoption of multiple modules.”
7. ASML Holding (NASDAQ:ASML)
3-Year Revenue CAGR: 19.98%
Number of Hedge Fund Holders: 86
ASML Holding (NASDAQ:ASML) provides lithography solutions to develop, produce, market, sell, upgrade, and service advanced semiconductor equipment systems. It offers lithography, metrology, and inspection systems. It also offers hardware, software, and services to chipmakers to produce the patterns of ICs.
ASML’s EUV/Extreme Ultraviolet system sales contributed EUR3.2 billion to the total net system sales of EUR5.7 billion in Q1 2025. This segment benefited from a favorable product mix with a higher proportion of NXE:3800E systems. Higher average selling prices and the achievement of customer productivity milestones on already installed EUV systems also drove the company’s growth. These factors together pushed the gross margin above guidance to 54%.
ASML Holding (NASDAQ:ASML) is continuing the ramp-up of leading-edge logic nodes by customers utilizing the NXE:3800E system. Furthermore, the progress in High NA EUV technology, with the shipment of the fifth NXE:5000 system and the upcoming shipments of the NXE:5200, indicates a longer-term growth trajectory for the company. However, Morgan Stanley analyst Lee Simpson lowered the price target on ASML to EUR640 from EUR 680 while keeping an Equal Weight rating.
Baron Fifth Avenue Growth Fund is optimistic about ASML Holding (NASDAQ:ASML) due to its monopoly in critical lithography and stated the following in its Q4 2024 investor letter:
“ASML Holding N.V. (NASDAQ:ASML) is a Dutch company that designs and manufactures photolithography equipment for semiconductor manufacturing. While ASML is the leader across all types of lithography, most importantly, it is the only manufacturer of extreme ultra-violet lithography tools, which are critical for the manufacturing of leading-edge chips. Shares fell 16.6% during the fourth quarter (finishing the year down 7.7%) on reduced guidance for 2025 as well as growing investor concerns about the potential impact of U.S. government restrictions on Chinese demand and the possibility of peaking lithography intensity. Despite near-term noise, we believe that the growing demand for chips in general and AI chips in particular will continue to support long-term growth for the wafer fab equipment industry with ASML’s competitive positioning remaining unassailable. While lithography as a percentage of capital expenditure may decrease from current levels, the chip layer count requiring lithography will continue to increase, in our view, as chips continue to become more complex. As a monopoly on critical lithography tools supporting an industry with growing demand fueled by the proliferation of AI, we see strong long-term upside for ASML.”
6. Applovin Corp. (NASDAQ:APP)
3-Year Revenue CAGR: 22.19%
Number of Hedge Fund Holders: 95
Applovin Corp. (NASDAQ:APP) builds a software-based platform for advertisers to enhance the marketing and monetization of their content. It serves individuals, small and independent businesses, enterprises, advertisers & advertising networks, mobile app publishers, and indie studio developers. It operates through two segments: Advertising and Apps.
UBS raised the firm’s price target on AppLovin to $475 from $450 on May 8 while keeping a Buy rating. This is because the company’s Q1 2025 results reflected another quarter of broad-based strength. The company made $1.48 billion in quarterly revenue, which was an improvement of 40.25% year-over-year. AppLovin’s Advertising business alone generated $1.16 billion in revenue in Q1.
This was driven by improvements in the company’s AI-powered tech for app discovery and the contribution of its web-based advertising solution. Notably, over 90% of the company’s ad revenue comes from mobile games, which aren’t directly impacted by tariffs. The analysts at UBS also noted that Applovin Corp. (NASDAQ:APP) tested exclusionary targeting for ad audiences, which could potentially attract more advertisers due to the company’s willingness to engage with advertiser requests.
ClearBridge Mid Cap Strategy stated the following regarding AppLovin Corporation (NASDAQ:APP) in its Q1 2025 investor letter:
“AI-beneficiary and strong fourth-quarter performer AppLovin Corporation (NASDAQ:APP) came under pressure from several reports from short sellers seeking to capitalize on a reversal in the company’s strong momentum amid the broader tech retreat. However, we believe the AI-enabled advertising software platform continues to be one of the best AI opportunities within the mid cap market. Recent positive channel indicators for its e-commerce business point toward a solid and persistent future of attractive returns for AppLovin, and we used the short-natured weakness to add to our position.”
5. ServiceNow Inc. (NYSE:NOW)
3-Year Revenue CAGR: 22.38%
Number of Hedge Fund Holders: 110
ServiceNow Inc. (NYSE:NOW) provides a cloud-based solution for digital workflows. It operates the Now platform, which is an AI platform for digital transformation ML, robotic process automation, process mining, analytics, and low-code/no-code development tools. It serves several sectors that range from government to healthcare & life science.
ServiceNow’s Now Assist product suite is focused on AI-powered workflows and is a significant driver of the company’s growth. This is evidenced by a more than quadrupling of Pro Plus deals year-over-year in Q1 2025, which included 39 deals with three or more Now Assist products. Pro Plus deals are customer agreements that include ServiceNow’s premium-tier offerings.
ServiceNow Inc. (NYSE:NOW) is making active AI innovations, as seen in the internal deployment of Now Assist. This resulted in efficiency gains like a 16x improvement in lead-to-sale conversion and over 86% deflection of manual work. On May 7, Scotiabank analyst Allan Verkhovski raised the firm’s price target on the stock to $1,100 from $1,075 while keeping an Outperform rating on the shares due to its strong position as an enterprise software company with an AI platform that is transforming its business.
Lakehouse Global Growth Fund stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its January 2025 investor letter:
“US-based software company ServiceNow, Inc. (NYSE:NOW) delivered another impressive quarterly result. Revenues grew 21% year-on-year in constant currency terms to $2.9 billion and net income grew 30% year-on-year to $384 million. The company’s key performance indicators remained healthy, with their backlog (remaining performance obligations) growing 23% year-on-year to $22.3 billion (i.e. greater than 2x annual revenue) and renewal rates held firm at 98%. As we have noted in the past, the company’s renewal rates are remarkable as not only are they best-in-class, but they are also extremely consistent, typically in the range of 97% to 99%. These industry-leading renewal rates speak to the mission critical nature of the platform and are a key driver of the long-term annuity value in the business. Zooming out, we continue to believe ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
4. Tesla Inc. (NASDAQ:TSLA)
3-Year Revenue CAGR: 15.46%
Number of Hedge Fund Holders: 126
Tesla Inc. (NASDAQ:TSLA) designs, develops, manufactures, leases, and sells electric vehicles, and energy generation & storage systems. Its Automotive segment offers EVs and related services and products. Whereas the Energy Generation & Storage segment engages in the design, manufacture, installation, sale, and leasing of solar energy generation & energy storage products and related services.
According to EV’s Claudio Afonso, sales of the new Tesla vehicles in China dropped 58% from the previous week and 69% year-over-year in the second week of May, which is the lowest level since January. Still, on May 13, analyst Colin Langan from Wells Fargo maintained a Sell rating on the stock with a $120 price target. Tesla Inc. (NASDAQ:TSLA) is also facing challenges in Europe, with declines in vehicle registrations in key markets like the UK and Germany.
The company is attempting to boost US sales by introducing a cheaper Model Y. Musk recently stated that the company is focused on bringing robotaxis to Austin in June, with unsupervised autonomy initially being solved for the Model Y in Austin. He anticipates expanding this capability to many other US cities by the end of 2025. While the exact ramp-up speed cannot be predicted, Musk is confident that millions of Tesla vehicles will be operating fully autonomously in H2 2026.
JDP Capital Management initiated a new core position in the company and stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q4 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) is new core position that I wrote about in 2024 Half Year Letter. The stock was up 115% in 2024. We benefited from the June 2024 timing of our purchase, buying after the stock had declined about 30% in the first part of the year.
We repurchased TSLA at a time when the market had [again] become overly bearish based on slowing vehicle orders despite the company having just achieved a breakthrough in Full Self Driving (FSD v12). If you haven’t had a chance to experience the most recent Full Self Driving software (FSD 13.3) I suggest you try it for yourself. If you’ve had a Tesla for a while, you know that the trajectory of FSD improvement has been nothing less than astounding.
It has become clearer to me that Tesla’s leadership position in the infrastructure layer underpinning mega-trends in robotics, smart vehicles and battery storage will unlock earnings growth that we can ride for years. Similar to AWS or the iPhone, Full-Self-Driving and Optimus will enable new business models to be built across a wide range of industries over time…” (Click here to read the full text)
3. Broadcom Inc. (NASDAQ:AVGO)
3-Year Revenue CAGR: 24.14%
Number of Hedge Fund Holders: 161
Broadcom Inc. (NASDAQ:AVGO) offers various semiconductor devices. It has a focus on complex digital and mixed-signal complementary metal oxide semiconductor-based devices and analog III-V-based products. Its products are used in many enterprise and data center networking applications, like AI networking and connectivity, home connectivity, and broadband access.
Barclays analyst Tom O’Malley lowered the price target on the stock to $215 from $260 on April 22 while keeping an Overweight rating due to Barclays’ updates on semiconductor and semiconductor capital equipment models to reflect tariffs and the trade war ahead of Q1 2025 earnings. The stock also declined as April was ending because reports emerged and rumors spread that DeepSeek was back for another round.
Broadcom Inc. (NASDAQ:AVGO) generated $4.1 billion in its AI revenue in FQ1 2025, which was up 77% year-over-year. In FQ2, the company expects AI revenue to increase by 44%. This is fueled by hyperscale customers who invest in next-gen AI models. Broadcom is also innovating new technologies like the advancements in co-packaged optics/CPO, 200G/lane DSP and SerDes, 400G optics, and PCIe Gen6 over optics. These solutions help grow and scale AI clusters.
Mar Vista US Quality Select Strategy maintains a positive long-term outlook on the company and stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q1 2025 investor letter:
“We maintain a positive outlook on Broadcom Inc. (NASDAQ:AVGO) shares, despite recent stock price pressure stemming from two key concerns: (1) uncertainty around potential tariffs and the impact on global growth, and (2) investor skepticism regarding the return profile of large-scale AI capex investments by hyperscalers. This skepticism has been amplified by the efficiency gains recently demonstrated by DeepSeek, an unknown Chinese software company, which developed a competitive large language model at a much lower cost. These efficiency gains stoked fears that hyperscalers may have overbuilt AI infrastructure.
Broadcom maintains a strong competitive position in the custom AI ASIC market, as well as a disciplined capital allocation, most recently reflected in the VMWare acquisition. That deal is already delivering better than-expected top-line growth and margin expansion. Broadcom is the leading provider of custom AI ASICs and has been steadily diversifying its customer base beyond its initial anchor client, Alphabet. Many hyperscalers are interested in developing custom ASICs, which are tailored to specific computing tasks, given their lower costs and attractive performance attributes relative to general-purpose GPUs from providers like NVIDIA.
While we remain constructive on Broadcom’s long-term prospects, we did trim our position earlier in the quarter at higher levels to reallocate capital toward a more favorable risk-reward opportunity. Nonetheless, Broadcom remains a core holding in our portfolio and offers an attractive margin of safety. We believe the company is well-positioned to grow intrinsic value by +20% over the intermediate term.”
2. Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM)
3-Year Revenue CAGR: 22.32%
Number of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) manufactures, packages, tests, and sells ICs and other semiconductor devices. It provides various wafer fabrication processes, such as processes to manufacture complementary metal-oxide-semiconductor logic, mixed-signal, radio frequency, embedded memory, and others.
The company generated $25.78 billion in FQ1 2025 revenue, which was up ~41% year-over-year. 59% of this revenue came from the HPC segment, which itself improved by 7% sequentially due to the sustained demand for AI-related applications. On April 21, Barclays analyst Simon Coles lowered the price target on TSMC to $215 from $255 while keeping an Overweight rating.
The firm believes that the company’s shares are already pricing in a slowdown and look increasingly attractive. TSMC’s FY2025 guidance was also maintained, which could imply some slowdown in H2 of the year. Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) forecasts that revenue growth from AI accelerators will reach a mid-40% CAGR for the 5 years starting from 2024.
The company’s results and guidance showcased strong AI chip demand, which is why Sands Capital Technology Innovators Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q4 2024 investor letter:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) third-quarter 2024 results and guidance showcased strong continued demand for artificial intelligence (AI) chips. Revenue increased by 29 percent, and earnings saw a 54 percent rise year-over-year. Gross margins were at their highest since 2022, bolstered by price hikes and record utilization at both the 3 nanometer (nm) and 5nm nodes. TSMC’s full-year revenue outlook was revised upward from 25 percent to 30 percent growth. The company also anticipates higher capital expenditure in 2025, a leading indicator for revenue.
Meanwhile, TSMC’s competitive position within the leading-edge chip fabrication industry has improved. The company noted that demand for its next-generation 2nm (N2) node is considerably higher than for its predecessor, N3. Additionally, TSMC has more capacity for N2 than N3. This situation contrasts with Intel and Samsung, which both recently disclosed struggles in ramping up their leading-edge nodes. Together, Intel and Samsung account for approximately $25 billion of foundry revenue, which could potentially migrate to TSMC over time…” (Click here to read the full text)
1. NVIDIA Corp. (NASDAQ:NVDA)
3-Year Revenue CAGR: 69.25%
Number of Hedge Fund Holders: 223
NVIDIA Corp. (NASDAQ:NVDA) is a tech company known for its edge in GPUs and AI platforms. Its primary revenue stems from data center GPUs like the H100 and Blackwell chips, which are essential components for AI workloads. The company is positioned to target huge markets like a $1 trillion-plus AI market, a $500 billion enterprise AI sector, and a $50 trillion robotics market.
The Trump administration is reportedly preparing a deal to grant Saudi Arabia greater access to advanced AI chips from companies like NVIDIA and AMD. The end goal is to boost the Gulf nation’s data center capacity amid US officials’ concerns about Chinese access to this tech through diverted shipments and/or cloud capabilities. An initial agreement has already been reached, but other negotiations are still being made, such as those concerning the potential US government control over data centers that use American chips.
On May 12, UBS lowered the price target on NVIDIA Corp. (NASDAQ:NVDA) to $175 from $180 while keeping a Buy rating as it expects FQ1 2026 revenue to be ahead of the $43 billion guidance, even with the H20 ban. NVIDIA is now preparing a downgraded version of its H20 chip for China to stay competitive, as China contributed $17 billion in revenue to NVIDIA, which was 13% of the company’s total sales in FY2025. UBS expects growth to reaccelerate in H2 as NVIDIA is potentially allowed to resume shipments of data center GPUs to China.
Guinness Global Innovators is highly bullish on NVIDIA Corp. (NASDAQ:NVDA) due to its dominant AI chip market position. It stated the following in its Q4 2024 investor letter:
“For a second year running, NVIDIA Corporation (NASDAQ:NVDA) was the Fund’s top performing stock, delivering a stellar return of +177.7% over the year. Since the beginning of last year, Nvidia’s ‘Hopper’ GPUs have been at the centre of exploding demand for chips powerful and efficient enough to facilitate the energy intensive requirements of AI processes within datacentres. Initially possessing over 95% of market share in these types of chips, Nvidia have been quick to entrench their position as the technological leader in the space, launching the successor to the current ‘Hopper’ GPU in March, Blackwell, inhibiting the likes of AMD and Intel making meaningful inroads in taking share of the fast-growing market. Compared to the previous iteration (Hopper) which is continuing to fuel Nvidia’s extreme revenue growth, the Blackwell chip is twice as powerful for training AI models and has 5 times the capability when it comes to “inference” (the speed at which AI models respond to queries). Throughout the year, Nvidia’s financial performance has remained resilient. Quarterly revenues hit $35.1 billion in their most recent quarter, beating consensus expectations by 6% and representing a +94% year-over-year increase. Additionally, Nvidia’s data centre segment, driven by the Hopper (H100) chip, grew fivefold over the past year, underscoring the sustained demand for advanced AI infrastructure. The H100 chip, priced at around $40,000, continues to see significant adoption due to its ability to enhance AI model training efficiency while lowering overall costs. This growth is expected to continue as companies invest in upgrading existing data centres and building new ones, with Nvidia well-positioned to capture a significant share of the estimated $2 trillion market opportunity over the next five years. There have been some concerns over Blackwell production delays causing share price volatility however, Nvidia has recovered swiftly, driven by positive earnings results through the year and assurances from management regarding future supply. Additionally, the release of the H200 chip promises to extend Nvidia’s technological leadership, ensuring continued momentum into 2025. While Nvidia’s valuation remains a topic of debate, the stock is not at a significant premium to history, and it still appears reasonable given its dominant market position, innovative prowess, and exposure to long-term secular growth trends in AI, cloud computing, and data infrastructure. As a result, Nvidia remains well-positioned to deliver sustained outperformance over the long term, making it a cornerstone of growth-oriented portfolios.”
While we acknowledge the growth potential of NVDA, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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.
