As reported by Reuters, Wall Street’s major indexes started the final trading session of 2024 on a high note, continuing the two-year-long bull market. This was marked by economic recovery after the pandemic, hopes for lower interest rates, and excitement about the AI boom. All three major stock market indexes, the S&P 500, Dow, and Nasdaq, are near record highs and ready for their second consecutive year of gains.
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Despite an overall good year, late 2024 saw a pullback in artificial intelligence stocks. From profit-taking and investors locking in gains from the year’s substantial rallies to concerns over high valuations and the Federal Reserve’s cautious stance signaling fewer interest rate cuts in 2025, the sector was a bit “choppier” than usual these last few weeks.
However, Wall Street analysts expect that the artificial intelligence sector will be in full gear in 2025, with a $2 trillion surge in AI-related capital expenditure over the next three years. Moreover, regulatory discussions around AI ethics and safety, spearheaded by global governments, are creating a supportive environment for innovation.
“We believe tech stocks will be robust in 2025 on the shoulders of the AI Revolution and $2 trillion+ of incremental AI capex (spending) over the next 3 years”.
-Wedbush Securities analyst Daniel Ives.
According to Ives, tech stocks are anticipated to rise 25% in 2025 as Wall Street and investors deal with “a less regulatory spiderweb” under the administration of President-elect Donald Trump. He also believes that stronger artificial intelligence initiatives in the federal government should give the sector a boost. However, there may be “white-knuckle moments” in the year ahead over Federal Reserve decisions, uncertainty over U.S.-China tariffs, and concerns from critics who believe stock valuations are too high.
“This will create the opportunities to own the tech theme and key names which has been our core investing tech playbook the last 2 years”.
-Dan Ives.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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10. Oklo Inc. (NYSE:OKLO)
Oklo Inc. (NYSE:OKLO) is a nuclear technology company leveraging the growing demand for clean energy to power AI-driven data centers. On December 19, analysts led by Daniel Ives initiated coverage of Oklo Inc. with an “Outperform” rating and set a price target of $26. The analysts quoted Oklo’s “momentum into 2025” and its ability to benefit from the artificial intelligence boom behind the rating. The rating is also derived from the company’s attractive “build, own, and operate business model,” which the firm states differs from its competitors. Oklo has also announced a partnership to sell energy to Switch, a privately held company operating data-center campuses. All in all, Wedbush states that the AI boom has put “OKLO in a great position to capitalize on this elevated demand”.
9. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 7
BigBear.ai Holdings, Inc. (NYSE:BBAI) is an artificial intelligence specialist that provides decision intelligence solutions. On December 30, H.C. Wainwright analyst Scott Buck raised the firm’s price target on BigBear.ai to $7 from $3 and kept a “Buy” rating on the shares. The analysts told investors in a research note that several factors are responsible for Big Bear’s rally, including the increasing demand for the company’s artificial intelligence-enabled services across multiple sectors. Moreover, the company recently announced a convertible note exchange which extends $182.3M of 2026 convertible senior notes to new 2029 senior convertible notes. HC Wainwright anticipated that this would remove a potential near-term investor concern. Big Bear is also benefiting from better conditions for small growth companies, supported by declining interest rates. Additionally, the analyst also affirmed that pure-play companies such as BigBear.ai deserve a higher valuation since they are rare. The firm believes that BigBear.ai has a scalable platform that will help its revenue, profits, and earnings grow to match its increasing valuation over time.
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