In this article, we discuss the 5 best artificial intelligence and robotics stocks to buy according to hedge funds. If you want to read our detailed analysis of these stocks, go directly to the 11 Best Artificial Intelligence and Robotics Stocks To Buy According To Hedge Funds.
5. ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Holders: 91
ServiceNow, Inc. (NYSE:NOW) offers built-in artificial intelligence services in the cloud computing solutions for enterprises. These products, which make use of “predictive intelligence”, integrate workflows with machine learning. They also automate routine tasks. The firm first introduced these new products into the cloud in 2020. It also bought AI startup Element AI that year as part of a plan to enhance AI capabilities on the flagship NOW platform. The firm beat market estimates on earnings per share and revenue in the second quarter.
ServiceNow, Inc. (NYSE:NOW) is placed fifth on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds. Analysts are bullish on the long-term future of the firm, with JPM Securities, Summit Insights, DZ Bank, and Barclays all rating the stock positively in the last few weeks.
Out of the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in ServiceNow, Inc. (NYSE:NOW) with 2.4 million shares worth more than $1.3 billion.
In its Q1 2021 investor letter, Palm Capital, an asset management firm, highlighted a few stocks and ServiceNow, Inc. (NYSE:NOW) was one of them. Here is what the fund said:
“ServiceNow provides software solutions to structure and automate various task and processes for large businesses. The company began in 2004 with a solution to help businesses manage the IT services they offer employees and customers. Unlike the existing solutions in the market, ServiceNow’s offering was built using modern architecture that was flexible, modular, and user-friendly. And it left the incumbents – large companies such as BMC, IBM and MicroFocus – playing catch up.
As the company grew to dominate this market, it saw the opportunity to expand its offering to include the broader task of IT Operations Management – or the monitoring and control of an entire business’s IT infrastructure. And over time its success in improving productivity and user experience in IT resulted in customers asking the company to expand its offering into other business workflows including HR Management and Customer Services – which it has since done.
All ServiceNow’s applications (including those built by customers and third parties) are built on its ‘Now’ platform. This allows the company and its customers to innovate and deploy new solutions quickly. And it helps ServiceNow gather a large amount of data to gain insights into and use machine learning to build solutions to meet customer needs in other areas. Crucially, this platform can interface with other SaaS and legacy software services used by its customers. Not only does this allow an IT department to manage all the myriad software services used by a business from a single point of control, it also reduces the operational disruption risk for those transitioning from legacy software systems to the cloud.
Aside from the ease of use of ServiceNow’s offerings, the other factor driving its growth is that its ‘land and expand’ strategy starts in the IT department of customers – the very department whose task it is to recommend other software solutions for businesses. It is therefore no surprise that more than 75% of ServiceNow’s customers use more than one of its products and 80% of its new business is from existing clients.
The company now serves…”[read the entire letter here]
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 155
Large companies like Alphabet Inc. (NASDAQ:GOOG) have a significant advantage over other software companies in the artificial intelligence domain because of the larger budgets available to them and the enormous datasets they can use to improve the capabilities of their AI products. Google AI, the AI division of Google, has made some Google products compatible with deep learning and AI software, while continuing research into the field. It is ranked fourth on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds.
Most market analysts are bullish on Alphabet Inc. (NASDAQ:GOOG) stock, with Goldman Sachs recently initiating coverage at Buy. The firm recently announced a $1 billion investment for the digital transformation of Africa. It had, earlier this year, announced a $1.2 billion investment in a Germany-based cloud computing project as well.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. (NASDAQ:GOOG) with 2.9 million shares worth more than $7.3 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
3. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 238
Microsoft Corporation (NASDAQ:MSFT) has pledged to use artificial intelligence tools to present solutions to some of the challenging environmental problems of the world. The company, which is placed third on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds, aims to accomplish this using the AI for Earth program. The company has also integrated AI capabilities into Cortana, a virtual assistant that comes loaded with some software products of the company.
Microsoft Corporation (NASDAQ:MSFT) has earned positive ratings from Tigress Financial and Morgan Stanley recently. The company has chosen Barcelona as a research and development hub for artificial intelligence. It aims to attract top European talent to the city in this regard over the next few years.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Microsoft Corporation (NASDAQ:MSFT) with 24.8 million shares worth more than $6.7 billion.
In its Q1 2021 investor letter, Polen Capital, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ:MSFT) was one of them. Here is what the fund said:
“We have written extensively about Microsoft in recent commentaries. It was our leading contributor last year and one of our largest weightings within the Portfolio. It continues to experience business momentum through several dominant, essential, and competitively advantaged businesses, like Office 365 and Azure. The markets it competes for are enormous, which gives the company the ability to compound at scale. In the past quarter alone, the company generated over $40 billion in revenue, representing a 17% growth rate. The inherent operating leverage in Microsoft’s business model continues and led to 34% earnings growth this past quarter. Despite the broad rotation we saw in the first quarter and Microsoft’s robust performance in 2020, we think its business fundamentals continue to exhibit strength, and the stock continues to reflect the fundamentals.”
2. Facebook, Inc. (NASDAQ:FB)
Number of Hedge Fund Holders: 266
Facebook, Inc. (NASDAQ:FB) has grown beyond a social media manager to a diversified technology company in recent years, expanding reach in the ecommerce, crypto, and artificial intelligence sectors. It is ranked second on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds. The firm has integrated AI into already existing applications as well. The DeepFace AI system made by the firm uses image recognition technology and AI tools to identify people in photos and suggest tags. It is over 90% accurate.
Facebook, Inc. (NASDAQ:FB) was recently named among a list of S&P 500 stocks that are expected to beat market expectations on earnings in the third quarter. The firm also recently received a Buy rating from Bank of America, which said the regulatory risk to the firm because of lawsuits was already factored into the share price.
At the end of the second quarter of 2021, 266 hedge funds in the database of Insider Monkey held stakes worth $42 billion in Facebook, Inc. (NASDAQ:FB), up from 257 in the preceding quarter worth $40 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Facebook, Inc. (NASDAQ:FB) was one of them. Here is what the fund said:
“We continued to keep our learnings from 2020 in mind during the quarter as we sought to increase the up capture of the portfolio. We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks, including Facebook, while trimming our weighting to stable names, which now represent 47% of the portfolio. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ:AMZN) has developed AI tools primarily for web services it markets, but these AI tools are being used across the suite of products made and sold by the firm. The company first made use of AI tools to suggest recommendations to users on the ecommerce platform. Since then, it has invested in AI to develop a range of other products, including the popular virtual assistant Alexa. The assistant is now integrated across Amazon Music, Prime Video, and other services.
Amazon.com, Inc. (NASDAQ:AMZN) is placed first on our list of 11 best artificial intelligence and robotics stocks to buy according to hedge funds. The company is also experimenting with robots instead of actual workers at fully automated stores in the US in a bid to compete with other retail giants with better manpower.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ:AMZN) with 3.8 million shares worth more than $13 billion.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”read the entire letter here]
You can also take a peek at 10 Best Dividend Stocks to Buy According to Michael Burry and 10 Best Cheap Stocks to Buy According to Michael Burry.
