In this article, we will take a detailed look at American Politicians are Buying These 10 AI Stocks. For a quick overview of such stocks, read our article American Politicians are Buying These 5 AI Stocks.
Despite lofty valuations of mega-cap technology companies on the back of the generative AI boom, the AI craze seems to have no end in sight as investors begin to pour money into AI-focused pick-and-shovel companies that will actually power AI applications to be used by millions of people. Major technology companies that have been the laggards in the AI race are coming up with new AI-focused initiatives to please investors.
Apple Strikes Back with AI Plans
For example, Apple Inc (NASDAQ:AAPL), which has been having a rough year so far amid iPhone sales growth concerns, rebounded this month after reports that the company was planning to launch refreshed M4-equipped Macs that will specialize in AI applications. A Bloomberg report cited Daniel Skelly, Head of Morgan Stanley’s Wealth Management Market Research and Strategy Team, who said that Apple will “come back” as the company is expected to provide more “clarity” and “visibility” for its AI pipeline. Another latest report from Bloomberg said that Apple Inc (NASDAQ:AAPL) is in talks with OpenAI to integrate AI features into Apple Inc (NASDAQ:AAPL)’s iOS 18.
The net effect of Apple Inc (NASDAQ:AAPL)’s AI efforts is highly positive and has ushered a new interest from investors in the stock. Bloomberg cited JPMorgan’s Samik Chatterjee, who said that hedge funds are starting to “warm up” to the opportunity of Apple’s “AI upgrade cycle.”
A New AI-Focused ETF Craze
Retail investors as well as hedge funds are piling into AI stocks like there’s no tomorrow. A Bloomberg report recently highlighted a latest trend in Taiwan where people are investing their entire savings in AI-focused ETFs. Bloomberg data shows that Taiwanese have invested a whopping $50 billion in ETFs tracking local stocks. This is up about 80% from the year-ago period. Most of this surge came after the AI boom started. Taiwan Semiconductor, which is the top supplier of chips to NVIDIA Corp (NASDAQ:NVDA), has seen its stock price surge by over 60% over the past one year.
AI Stocks Have More Room to Run, BlackRock Strategist Says
Despite all these gains, analysts believe AI stocks are just getting started. BlackRock Global Chief Investment Strategist Wei Li recently said that earnings trajectory and guidance of companies show that this is a “forward-looking” market when it comes to AI. She said that many companies, including the ones in the Magnificent Seven group, were punished because of their guidance or earnings because the “bar” has been raised. She expects AI opportunities beyond just the tech sector, and mentioned healthcare, financials and industrials.
AI Opportunities in Datacenter and Utilities
Data center and utilities companies are the biggest examples of the spillover effects of AI gains. Power demand and data center solutions will see a huge rise in the coming months and years as AI software solutions go live, to be used by millions of users worldwide. Electricity company Exelon’s CEO Calvin Butler recently said that AI would drive a 900% increase in power demand from data centers in the Chicago area.
Data center company Vertiv in its latest earnings call talked about how it’s seeing AI-related momentum in its business:
“We continue to see strong momentum with AI-related orders. While we are not disclosing specific detail on our liquid cooling orders, or more broadly AI-related orders, we did see the pipeline for AI projects more than double in the last 2 months.
We are starting to see AI scaling in North America. This is consistent with the GPU road maps, whereby next-generation chips will require liquid cooling. The pipeline is reflecting that technology shift, not only in terms of liquid cooling but in terms of the whole powertrain and thermal chain. We are working closely with our customers to get their infrastructure ready for what is ahead.
Supply chains continue to operate as expected, not without an occasional bump, but that’s where our constantly improving supply chain resilience comes into play. We continue to build out our supply chain to support deployment of liquid cooling technology with the same rigor and resilience we have built in our existing supply chain. The geopolitical environment is becoming increasingly complex. We are working to constantly increase the resilience of our business. Looking at material inflation, a mixed bag, but we know things can change quickly. We continue to believe we are in an inflationary world, and the price/cost plans we’re executing reflect that yet.
There is an intense focus on thermal management lately and rightfully so. As the market leader in data center cooling, we are uniquely positioned for that opportunity. But power is also very central to the evolution of data center design and to enable AI deployment and to fuel the overall market acceleration.”
Read the full earnings call transcript here.
Pixabay/Public Domain
Methodology
It’s not just the hedge funds or retail investors that piling into AI stocks. In this article we decided to see which AI stocks American politicians like. For that we used publicly available data of American Congress members and senators and picked 10 AI stocks that saw buying from politicians in the US over the past few months. With each stock we have mentioned the number of hedge fund investors. Why is it important to see what Washington insiders, corporate executives and hedge funds are buying? Insider Monkey’s monthly newsletter and portfolio that focuses on activist hedge funds, insider trading and stock picks from hedge fund investor newsletters and conferences returned 199.2% between March 2017 and March 12, 2024 and outperformed the S&P 500 ETFs’ 144.9% gain by more than 54 percentage points.
10. IBM Common Stock (NYSE:IBM)
Number of Hedge Fund Investors: 50
IBM Common Stock (NYSE:IBM) is one of the stocks that have strong growth catalysts because of the AI boom. Earlier this year, investment firm Evercore called IBM Common Stock (NYSE:IBM) an “overlooked beneficiary of increasing AI adoption.” On March 11, Congressman Lloyd Doggett bought a stake in IBM Common Stock (NYSE:IBM) worth between $1,000 to $15,000. Since then, IBM Common Stock (NYSE:IBM) shares have declined by 5%.
Diamond Hill Long-Short Fund stated the following regarding International Business Machines Corporation (NYSE:IBM) in its fourth quarter 2023 investor letter:
“Other bottom contributors included our short positions in Garmin and International Business Machines Corporation (NYSE:IBM), as well as our long position in Chevron. IBM’s software and consulting businesses were solid in the quarter, helping drive revenue growth. But the company faces numerous fundamental headwinds in both these businesses, and we expect it will struggle to meet cash-flow guidance.”
9. Texas Instruments Inc (NASDAQ:TXN)
Number of Hedge Fund Investors: 55
Semiconductor company Texas Instruments Inc (NASDAQ:TXN) is one of the companies that can benefit from the AI boom. Republican Congressman Kevin Hern on February 13 bought shares of Texas Instruments Inc (NASDAQ:TXN) worth between $1,000 to $15,000. Since then the stock has gained about 5.5%.
Out of the 933 hedge funds tracked by Insider Monkey, 55 funds reported having stakes in Texas Instruments Inc (NASDAQ:TXN). The biggest stakeholder of Texas Instruments Inc (NASDAQ:TXN) during this period was Jean-Marie Eveillard’s First Eagle Investment Management which had a $728 million stake in Texas Instruments Inc (NASDAQ:TXN).
Diamond Hill Large Cap Strategy made the following comment about Texas Instruments Incorporated (NASDAQ:TXN) in its Q3 2023 investor letter:
“Shares of semiconductor manufacturing company Texas Instruments Incorporated (NASDAQ:TXN) underperformed as revenue guidance was slightly below market expectations. We believe these demand trends to be transitory and have a favorable view of the company’s long-term prospects and superior competitive position.”
8. Palo Alto Networks Inc (NASDAQ:PANW)
Number of Hedge Fund Investors: 77
Palo Alto Networks Inc (NASDAQ:PANW) saw interest from Congresswoman Nancy Pelosi, the most important politician in America when it comes to stock trading. Pelosi’s spouse on February 21 bought call options for Palo Alto Networks Inc (NASDAQ:PANW) worth between $100,001 – $250,000 with a strike price of $200 and an expiration date of 1/17/25.
ClearBridge Large Cap Growth Strategy stated the following regarding Palo Alto Networks, Inc. (NASDAQ:PANW) in its first quarter 2024 investor letter:
“Given our view that the overall market looks expensive, mostly due to mega cap valuations, the low likelihood that technology can continue to deliver well above market returns and an expected slowdown in economic growth, risk management has guided our recent positioning activity. We have been consistently trimming from the select bucket and redeploying into undervalued stable and cyclical names, while also being cognizant of position sizing to maintain the latitude to add to names when prices become attractive.
During the first quarter, we continued to trim IT stocks into strength to manage risk while also adding to high-conviction positions. For example, we trimmed our active weight in Palo Alto Networks, Inc. (NASDAQ:PANW) after the information security software maker lowered its guidance in part due to a new emphasis on providing short-term discounts on product bundles to pursue its consolidation opportunity more aggressively. While this strategy should position the company more strongly in the future, it potentially increases volatility in operating results in the near-to-medium term.”
7. Qualcomm Inc (NASDAQ:QCOM)
Number of Hedge Fund Investors: 78
Qualcomm Inc (NASDAQ:QCOM) ranks seventh in our list of the best AI stocks to buy according to American Congress members.
Earlier this month, Benchmark started covering Qualcomm Inc (NASDAQ:QCOM) stock with a Buy rating and a $200 price target. Benchmark analyst Cody Acree said Qualcomm Inc (NASDAQ:QCOM) was positioned well to capitalize on the trend of moving artificial intelligence workloads towards edge computing. On February 12, Congressman Earl Blumenauer bought a stake worth between $1,000 to $15,000 in Qualcomm Inc (NASDAQ:QCOM). Since then through April 22 Qualcomm Inc (NASDAQ:QCOM) shares have gained about 5.4%.
Madison Sustainable Equity Fund stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its fourth quarter 2023 investor letter:
“QUALCOMM Incorporated (NASDAQ:QCOM) also reported a solid fourth fiscal quarter with better than expected results. The company guided the first quarter ahead of expectations despite headwinds from Samsung as the inventory headwinds dissipate. Qualcomm remains well positioned in the mobile handset market and should benefit as Artificial Intelligence moves to edge devices which could drive an upgrade cycle.”
6. ServiceNow Inc (NYSE:NOW)
Number of Hedge Fund Investors: 91
On January 25, Congressman Josh Gottheimer bought a stake worth between $1000 to $15,000 in ServiceNow Inc (NYSE:NOW). Since then the stock is up about 2%.
In December, Macquarie Equity Research increased its price target for ServiceNow Inc (NYSE:NOW) to $800 from $612, citing generative AI potential.
Polen Focus Growth Strategy stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its first quarter 2024 investor letter:
“We trimmed our positions in Adobe and ServiceNow, Inc. (NYSE:NOW) earlier in the quarter as we believe positive AI narratives had driven the valuations of both companies higher than we felt was comfortable relative to their weighting in the Portfolio. We believe both companies will likely have incremental revenue and profits from generative AI products they incorporate into their offerings, such as Firefly for Adobe and Now Assist for ServiceNow. However, we do not expect them to be substantial revenue contributors in the near term. As such, we felt it was prudent to reduce the weightings and reallocate to other positions at better valuations.”
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Disclosure. None. American Politicians are Buying These 10 AI Stocks was initially published on Insider Monkey.