According to a Reuters report posted on March 25, Chinese AI firms have made significant progress in closing the technology gap with the U.S., with some areas now only three months behind, according to 01.AI CEO Lee Kai-fu. He highlighted DeepSeek’s advancements in optimizing chip usage and algorithm efficiency, allowing China to compete more closely in AI development. Despite U.S. semiconductor sanctions, Chinese companies have adapted by improving their algorithms, with DeepSeek even surpassing expectations in certain areas like infrastructure software engineering.
As per the report, Lee emphasized that investing in proprietary models is becoming more challenging due to competition from major tech firms and open-source alternatives, leading 01.AI to focus on AI applications instead. The company recently launched Wanzhi, a platform for enterprise AI deployment, and expects substantial revenue growth in 2025.
China Advances AI Despite US Chip Export Controls
Senior foreign officials and major tech companies are urging the Trump administration to ease AI chip export restrictions. In a discussion on March 25, Bloomberg Intelligence analyst Mandeep Singh explained that initial U.S. controls began in 2022 under the Biden administration, limiting the semiconductor kingpin’s high-end chip shipments to China by restricting interconnect bandwidth. These measures expanded with a 168-page diffusion rule categorizing countries based on access levels. Despite restrictions, Chinese firms like Ant Group continue AI advancements by optimizing available resources, including Huawei and AMD chips, reducing pre-training costs by 20% through heterogeneous computing.
According to Singh, the semiconductor kingpin argues that these restrictions are cutting into its revenue, with its China exposure dropping from 20% to below 10%, while AI firms like OpenAI claim the market remains undersupplied, further driving demand for GPUs. Singh noted that U.S. AI models still outperform Chinese counterparts in reasoning and multimodal tasks, giving them a competitive edge. Furthermore, investors remain confident in the Mag 7 stocks, viewing market dips as buying opportunities. However, concerns are rising about data center expansion and energy supply challenges, especially in regions beyond traditional hubs like Virginia.
For this article, we selected AI stocks by reviewing news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s Q4 database of over 1000 hedge funds.
At Insider Monkey we are obsessed with 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).
9. Aurora Mobile Limited (NASDAQ:JG)
Number of Hedge Fund Holders: 1
Aurora Mobile Limited (NASDAQ:JG) provides developer services, market intelligence, financial risk management, and advertising solutions for different industries in China.
On March 26, Aurora Mobile’s GPTbots.ai partnered with EasyCraft to integrate AI-driven solutions into business process automation, knowledge management, and multi-platform collaboration. EasyCraft is known for its enterprise automation platforms, and it will incorporate GPTbots.ai’s AI agents to improve workflow automation, third-party integrations, and multi-device accessibility. The collaboration also focuses on AI-powered low-code development and advanced knowledge management using Retrieval-Augmented Generation technology. In addition, both companies plan joint marketing efforts and industry-specific AI solutions for sectors like finance, manufacturing, healthcare, and retail, aiming to accelerate enterprise digital transformation globally.
8. Asure Software, Inc. (NASDAQ:ASUR)
Number of Hedge Fund Holders: 8
Asure Software, Inc. (NASDAQ:ASUR) provides cloud-based HCM solutions, including payroll, tax management, HR compliance, and workforce management for small and mid-sized businesses.
On March 25, Asure Software announced that it is advancing its partnership with Amazon Web Services (AWS) to integrate AI-driven solutions into its Human Capital Management software. Asure’s CTO, Yasmine Rodriguez, emphasized that AWS’s technology enables rapid deployment of AI-powered innovations that will reshape HR and payroll systems. Future developments aim to automate payroll, improve compliance tracking, and provide personalized HR solutions at scale.
7. Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC)
Number of Hedge Fund Holders: 14
Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) provides mobile connectivity solutions, including networks, cloud software, enterprise communications, and media services worldwide.
On March 26, Ericsson announced that it signed a Memorandum of Understanding with SoftBank to collaborate on advancing AI, Cloud RAN, XR, and 6G technologies through their NextWave Tech initiative, aiming for long-term innovation by 2030. The partnership focuses on commercial readiness for Cloud RAN, AI integration, network design for XR, and optimizing centimeter Wave technologies for 6G development in Japan.
Both companies plan to explore new applications of radio waves while boosting connectivity and network efficiency. The initiative is expected to drive technological advancements, improve customer experiences, and contribute to digital transformation through AI-powered and cloud-based networks.
6. Rackspace Technology, Inc. (NASDAQ:RXT)
Number of Hedge Fund Holders: 15
Rackspace Technology, Inc. (NASDAQ:RXT) provides multi-cloud services, including infrastructure, security, data solutions, and managed cloud services across global markets.
On March 25, Rackspace Technology introduced Rackspace AI Business, a private cloud platform designed to support enterprises in managing AI workloads, including training and inferencing. The platform is built with Dell Servers and NVIDIA GPUs and offers secure, high-performance infrastructure to streamline AI deployment and scalability. It includes capabilities for distributed training, scalable inferencing, and fine-tuning pre-trained models while ensuring compliance and data protection. Rackspace aims to simplify AI adoption by removing technical hurdles, enabling businesses to focus on maximizing the value of their AI initiatives without managing complex infrastructure.
5. Veracyte, Inc. (NASDAQ:VCYT)
Number of Hedge Fund Holders: 30
Veracyte, Inc. (NASDAQ:VCYT) provides genomic diagnostic tests for various cancers, including thyroid, prostate, bladder, breast, and lung.
Veracyte shared new findings at EAU25 (March 21-24), demonstrating that its whole-genome sequencing (WGS)-based MRD testing platform integrates AI and detects cancer recurrence in muscle-invasive bladder cancer (MIBC) patients with higher accuracy than ddPCR-based blood testing and earlier than standard imaging. Data from the TOMBOLA trial showed that Veracyte’s test matched ddPCR in negative predictive value but had greater specificity and detected recurrence an average of 93 days earlier than imaging. The platform combines WGS and AI to analyze tumor-specific mutations, using minimal blood samples for faster results and continuous monitoring of cancer progression. Veracyte aims to introduce its first MRD test for MIBC in 2026, with plans to expand to other cancers.
4. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 40
UiPath Inc. (NYSE:PATH) provides an automation platform with RPA, AI, and low-code tools to streamline business processes across various industries.
On March 25, UiPath introduced Test Cloud, an AI-powered software testing solution designed to improve productivity and reduce costs throughout the testing lifecycle. The platform integrates AI agents, including UiPath Autopilot, and tools from Agent Builder, to assist testers in streamlining test design, automation, and management. By using AI-driven testing, businesses can accelerate software delivery, improve stability, and reduce manual effort.
According to an IDC study, Test Cloud has increased test efficiency by 36%, doubled feature delivery speed, and significantly reduced troubleshooting time. For example, Cisco has cut manual testing nearly in half using Autopilot. The solution offers enterprise-grade automation, security, and integration capabilities, ensuring strong testing for applications like SAP and Oracle. UiPath emphasized that agentic testing can eliminate bottlenecks in software development, leading to faster innovation and improved customer satisfaction.
3. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 79
QUALCOMM Incorporated (NASDAQ:QCOM) develops wireless technologies, supplies chips for mobile, automotive, and IoT, licenses patents, and invests in emerging tech.
According to a Bloomberg report from March 25, Qualcomm has launched an antitrust campaign against Arm, alleging the company is limiting access to its technology to boost profits. Qualcomm has filed complaints with regulators in the U.S., Europe, and South Korea, arguing that Arm previously cultivated industry growth with an open licensing model but is now restricting access to compete more directly in chipmaking. The dispute aligns with Qualcomm’s legal battle against Arm in Delaware, where it successfully argued that it did not need a new license for acquired chip technology. Arm denies wrongdoing, calling Qualcomm’s claims an attempt to gain leverage in their ongoing conflict, the report stated.
2. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 107
Alibaba Group Holding Limited (NYSE:BABA) provides technology infrastructure, e-commerce platforms, cloud services, and digital media solutions for businesses and consumers globally. The company has also made significant investments in AI development.
Alibaba and BMW are collaborating to integrate AI into BMW’s upcoming models in China, aiming to advance in-car technology, Bloomberg reported on March 26. BMW will use AI cockpit features from Banma, a company backed by Alibaba, to improve voice recognition and trip planning. The move comes as Chinese automakers, such as BYD, lead in software-driven EVs, pushing European brands to seek tech partnerships. Alibaba, shifting its focus to AI, plans a major investment in AI infrastructure.
1. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 161
Broadcom Inc. (NASDAQ:AVGO) designs and supplies semiconductor and infrastructure software solutions for networking, telecommunications, and consumer electronics.
On March 25, Broadcom announced that it has expanded its 200G/lane DSP PHY portfolio with the introduction of Sian3 and Sian2M, designed to improve AI/ML cluster connectivity. These DSPs optimize power usage in both single-mode and short-reach multi-mode fiber links for 800G and 1.6T optical transceivers.
Sian3 is a 3nm 200G/lane PAM4 DSP and it improves energy efficiency for 800G and 1.6T transceivers using single-mode fiber, reducing power consumption by over 20% compared to its predecessor. On the other hand, Sian2M is tailored for short-reach multi-mode fiber links, integrating VCSEL drivers and using Broadcom’s 200G VCSEL technology to boost efficiency.
With AI workloads driving demand for higher bandwidth, these advancements support scalable, low-power optical connectivity. Broadcom is providing early access to customers, with Sian3 set for production in Q3 2025.
While we acknowledge the potential of Broadcom Inc. (NASDAQ:AVGO) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AVGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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