In this article, we will discuss: 8 Most Undervalued AI Stocks to Buy According to Hedge Funds.
On May 29, Reuters reported that Joachim Klement, investment strategist at Panmure Liberum, said that investors should consider the risks of a reversal in the AI investment bubble. He noted historical downturns following major technology cycles. He stated that annual spending on technology equipment and software had hit $1.5 trillion, which is around 70% higher than the inflation-adjusted peak of the late-1990s dotcom boom. Klement cited Bureau of Economic Analysis data to show that tech investment plummeted 5% after 1969 and 18.6% in the two years following 2000.
According to Klement, a 5% decline in US technology investment may reduce real GDP by up to one percentage point across the US, the UK, and the eurozone. He calculated that a 4.5% correction would result in a 15% reduction in the US market and over 20% losses in Europe, while a 6% investment drop would send both countries into recession, with declines reaching 20% in the US and 30% in Europe.
With that said, here are the 8 Most Undervalued AI Stocks to Buy According to Hedge Funds.
Methodology:
We used screeners to identify AI stocks that are trading below a forward P/E of 15 and limited our final selection to companies that have recently reported noteworthy developments likely to impact investor sentiment. These stocks are also popular among analysts and elite hedge funds. We then identified those with the highest number of hedge fund holders, which we assessed using Insider Monkey’s database of hedge funds as of Q1 2026. The stocks are ranked in ascending order of the number of hedge fund holders.
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 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
8. UiPath, Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 40
Forward P/E: 13.95
On May 29, 2026, BofA raised its price target on UiPath, Inc. (NYSE:PATH) to $13 from $12. The firm maintained an “Underperform” rating on the shares. It noted fiscal Q1 results that came in above both its estimates and the Street and a higher full-year outlook. BofA said the print was “likely good enough” given valuation but flagged the need for clearer ARR acceleration before turning constructive.
A day earlier, on May 28, UiPath, Inc. (NYSE:PATH) reported first-quarter 2027 results with revenue of $418 million, growing by 17% year over year. The ARR of $1.901 billion jumped by 12%, and GAAP operating income was $28 million. On the other hand, non-GAAP operating income was $92 million.
CEO Daniel Dines said ARR growth reached 12% as agentic products moved from pilot to production, while CFO Ashim Gupta said the corporation exceeded guidance across key metrics and achieved its first quarter of GAAP profitability.
UiPath, Inc. (NYSE:PATH) is a firm that works in the development and provision of a software platform to automate business processes.
7. Atlassian Corporation (NASDAQ:TEAM)
Number of Hedge Fund Holders: 44
Forward P/E: 14.27
On May 1, 2026, Reuters reported that Atlassian Corporation (NASDAQ:TEAM) raised its annual revenue growth forecast to about 24% from 22%. The firm is counting on AI-driven features and the enterprise segment to sustain growth. The company beat quarterly expectations, reporting revenue of $1.79 billion as compared to $1.69 billion estimated by LSEG. It also posted adjusted EPS of $1.75 against $1.32 expected, Reuters reported.
Shares jumped more than 18% in extended trading. CFO James Chuong told Reuters that cloud revenue grew by 29% year over year, pointing to strong seat expansion in Jira along with rising usage of AI features.
Reuters said demand for core products like Jira remained solid because of deep enterprise integration, even though customer budgets softened. The growth also benefited from shifts to cloud and data center offerings. The corporation cut roughly 10% of its workforce, or 1,600 roles, in March to refocus on AI and enterprise sales.
Atlassian Corporation (NASDAQ:TEAM) is a holding company that provides team collaboration and productivity software. Its products include Jira Software, Confluence, Jira Service Management, and Loom.
