Heightened competition in the development of powerful artificial intelligence models is more than welcome. That’s the sentiment echoed by Ark Investment Management chief executive officer Cathie Wood in the aftermath of DeepSeek rattling the markets and tech world with a cost-effective AI model.

While there have been concerns that DeepSeek’s new open-source AI model challenges US dominance around the advanced technology, Wood insists it is a positive development. According to Woods, DeepSeek has only fostered the need for tech companies to focus on cutting costs and developing powerful AI models.

“We looked at DeepSeek’s model and learned that it is moving down the cost curve associated with this new technology at a rapid rate, but not much different from the rate at which OpenAI and Anthropic are riding down the cost curve,” Wood said.

According to Wood, the costs of developing AI models have been dropping, even before DeepSeek came calling with a cost effective model. Similarly, she joins a growing list of high-profile individuals who have questioned whether $6 million was the only cost that DeepSeek incurred in developing its models.

Wood also insists that now is not the time to regulate artificial intelligence as DeepSeek development has opened the door for competition on AI costs. The remarks come on the heels of the European Union establishing rules that will govern the use of AI, marking the first comprehensive legal framework in the world.

The EU AI Act prohibits using specific AI systems that pose unacceptable risks to citizens. Companies face fines of up to $35.8 million for any breach. While the AI act could affirm sentiments that Europe regulates the tech industry heavily to the detriment of innovation, Diyan Bogdanov, director of engineering intelligence at Payhawk, shares contrasting views.

“While the U.S. and China compete to build the biggest AI models, Europe is showing leadership in building the most trustworthy ones. The EU AI Act’s requirements around bias detection, regular risk assessments, and human oversight aren’t limiting innovation they’re defining what good looks like,” said Bogdanov.

Even as the European AI Act seeks to promote ethical standards, accountability, and trust, its extraterritorial implications are creating a stir across the Atlantic. Businesses, legislators, and policymakers in the United States are currently negotiating a rapidly evolving artificial intelligence (AI) regulatory environment.

U.S. Senator Ted Cruz has already called for an investigation into European influence on US AI policymaking, a dramatic move that highlights rising tensions. Senator Cruz’s worries reflect a broader concern that unduly restrictive European standards may jeopardize the United States’ innovation-driven approach to technology.

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. The hedge fund data is as of Q3 2024.

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10. Faraday Future Intelligent Electric Inc. (NASDAQ:FFIE)

Number of Hedge Fund Holders: 3

Faraday Future Intelligent Electric Inc. (NASDAQ:FFIE) designs, develops, manufactures and distributes electric vehicles and related products. It has carved a niche by leveraging artificial intelligence and other advanced technologies to redefine the future of mobility. On February 18, it announced a hiring spree as it looks to strengthen its research team with the necessary expertise to support artificial intelligence initiatives.

Faraday Future Intelligent Electric Inc. (NASDAQ:FFIE) plans to expand its AI research and development efforts by hiring the best talents who specialize in large model development. The hiring spree is part of an effort that seeks to enhance large-model autonomous driving development within an open-source framework to accelerate the development of intelligent driving. Faraday Future Intelligent Electric is to focus on the development of an AI operating system that enhances intelligent cabin and user interaction experience through AI agents. Additionally, it will change its ticker symbol to FFAI on March 10, 2025 to affirm its renewed focus on AI.

9. BlackSky Technology Inc. (NYSE:BKSY)

Number of Hedge Fund Holders: 7

BlackSky Technology Inc. (NYSE:BKSY) is a technology company that provides geospatial intelligence, imagery and related data analytic products and services. The Earth observation satellite operator announced on February 18, that it has won a six-figure contract from a new strategic international customer. The contract is for providing subscription-based, on-demand Gen-2 imagery and analytics services. The company will train analysts on its AI-powered BlackSky Spectra multi-intelligence analytics platform.

The six-figure contract affirms BlackSky Technology Inc. (NYSE:BKSY) as a trusted partner in the provision of commercial monitoring solutions. Its Gen-2 imagery and analytics services should allow clients to create advanced national-spaced-based intelligence experiences. The training program on offer will equip analyst teams with the skills necessary to integrate BlackSky data with other intelligence sources and produce intelligence products to support a variety of missions.

“BlackSky’s software-first adoption model gives this new, strategic customer the ability to create an advanced national space-based intelligence expertise at disruptive speed and economics,” said Brian E. O’Toole, BlackSky CEO. “This deal exemplifies the essence of BlackSky’s land-and-expand approach where quick-access, subscription-based services build the foundation for expanded growth in the region.”

8. Domo, Inc. (NASDAQ:DOMO)

Number of Hedge Fund Holders: 15

Domo, Inc. (NASDAQ:DOMO) is a software company that provides a cloud-based platform for data visualization and business intelligence (BI). It offers sophisticated end-to-end tools for creating AI and data products. On February 18, the company confirmed that Nucleus Research found customers enjoyed a return of $6.93 for every dollar invested in its AI and data products platform.

Nucleus Research notes that customers enjoyed consistent benefits, including a 35% improvement in user productivity, 20% technology cost savings, and a 15% average revenue increase. Consequently, Domo, Inc. (NASDAQ:DOMO) remains well positioned to enjoy robust growth in the crowded analytics market owing to the advancement of its AI-driven analytics and integration of emerging data technologies into its solutions.

7. Rocket Lab USA, Inc. (NASDAQ:RKLB)

Number of Hedge Funds: 16

Rocket Lab USA, Inc. (NASDAQ:RKLB) is a space company that provides launch services and space systems solutions for the space and defense industries. The company uses artificial intelligence technology in its space-related applications, including satellite constellation and launch services. On February 19, the company successfully launched its 60th Electron, paving the way for the deployment of a satellite in the Earth-imaging satellite constellation.

The launch of the Gen 3 satellite marks an important milestone in Rocket Lab USA, Inc.’s (NASDAQ:RKLB) bid to deliver transformative and next-generation space-based intelligence capabilities. Consequently, it will be able to provide high-resolution imagery and AI-enabled analytics.

Brian O’Toole, CEO of BlackSky, stated: “The successful launch of our first Gen-3 satellite represents a major step forward in delivering transformative, next-generation space-based intelligence capabilities to our customers. We look forward to commissioning this new satellite and delivering very high-resolution imagery and AI-enabled analytics at industry-leading speeds.”

6. HP Inc. (NYSE:HPQ)

Number of Hedge Fund Holders: 42

HP Inc. (NYSE:HPQ) provides personal computing, printing, 3D printing, gaming, and other related technologies. The company has also rolled out a broad portfolio of artificial intelligence-powered personal computers as it seeks to transform how people work. On February 18, it announced an agreement to acquire valuable artificial intelligence capabilities from Humane.

The acquisition includes the AI-powered platform Cosmos and a robust intellectual property portfolio with more than 300 patents and patent applications. HP Inc. (NYSE:HPQ) expects the investment to enhance its ability to develop new generation devices that seamlessly orchestrate AI requests locally and in the cloud.

“Humane’s AI platform Cosmos, backed by an incredible group of engineers, will help us create an intelligent ecosystem across all HP devices from AI PCs to smart printers and connected conference rooms. This will unlock new levels of functionality for our customers and deliver on the promises of AI,” said Tuan Tran, President of Technology and Innovation at HP.

5. Cadence Design Systems, Inc. (NASDAQ:CDNS)

Number of Hedge Fund Holders: 53

Cadence Design Systems, Inc. (NASDAQ:CDNS) is a technology company that provides software and hardware that helps customers design and develop electronic systems. Its products find great use in the automotive, aerospace, and consumer electronics segments. The company delivered solid fourth-quarter and full-year results on February 18, with a record backlog of $6.8 billion. Revenue in the quarter was up 13.5% to $1.356 billion as diluted net income per share increased to $1.24 compared to $1.19 a year ago.

The better-than-expected results come as Cadence Design Systems, Inc. (NASDAQ:CDNS) continues to position itself to benefit from the various phases of the artificial intelligence revolution. It’s already benefiting from the AI infrastructure build-out by providing reusable integrated circuit design blocks. Cadence Design Systems also expands into new markets, such as life sciences.

4. Accenture plc (NYSE:ACN)

Number of Hedge Fund Holders: 60

Accenture plc (NYSE:ACN) is a technology company that offers strategy and consulting services. It also offers systems integration, application management and security solutions. On Feb. 18, INFRONEER Holdings and Accenture plc (NYSE:ACN) announced a joint venture, INFRONEER Strategy & Innovation, to promote innovation in the construction and operation of infrastructure in Japan. The JV, 81% owned by INFRONEER HD and 19% by Accenture, will be established on April 1, 2025, with around 100 employees.

While leveraging advanced technologies like artificial intelligence, the two companies aim to address critical issues plaguing Japan’s aging infrastructure. The joint venture is to accelerate the adoption of data-driven models to enhance productivity at construction and infrastructure operation sites.

Atsushi Egawa, CEO of Accenture Japan, stated, “Japan is facing a severe labor shortage, and we believe digital technology is the key to solving this challenge. Digital technologies augment human capabilities and facilitate collaboration within and beyond organizations, and across borders, resulting in gaining unparalleled advantages in productivity and efficiency for businesses and organizations.”

3. Snowflake Inc (NYSE:SNOW)

Number of Hedge Fund Holders: 71

Snowflake Inc (NYSE:SNOW) is a technology company bringing generative artificial intelligence into analytics and empowering teams to maximize the value of underlying data. The company is increasingly investing in AI to strengthen its cloud offerings. Likewise, analysts at Truist Securities reiterated a Buy rating on the stock on February 18, with a $210 price target, impressed by the company’s new cloud offerings and AI integration.

The bullish stance stems from growing expectations that Snowflake will exceed expectations due to strong demand for AI-powered products. The analysts expect the company’s Snowpark, Dynamic Tables, and Cortex products to drive financial results significantly. The growing use of artificial intelligence (AI) and Snowflake Inc’s (NYSE:SNOW) success in closing big deals are expected to be key drivers of long-term revenue growth and margin enhancements.

2. Datadog, Inc. (NASDAQ:DDOG)

Number of Hedge Fund Holders: 71

Datadog, Inc. (NASDAQ:DDOG) operates a cloud-based monitoring and analytics platform, allowing companies to run applications and services smoothly. The company delivered impressive fourth quarter and full year 2024 results characterized by a 25% year-over-year revenue increase to $738 million. The growth was driven by strong demand for the company’s AI-powered observability solutions and the adoption of its multipurpose offerings.

On the other hand, analysts at Wolfe Research downgraded the stock to Peer Perform from Outperform on February 18, on Datadog, Inc. (NASDAQ:DDOG), providing a disappointing 2025 growth guidance. The research firm also cited competitive pressures and margin concerns. The analysts remain wary of large customers cutting back on software spending, which could hurt Datadog’s core business.

Amid these concerns, Datadog is increasingly positioning itself to capitalize on the rapid advancement of AI technologies and the continued shift toward cloud computing. It is increasingly integrating AI capabilities into its product offerings while coming up with observability solutions tailored for AI workloads.

1. Uber Technologies, Inc. (NYSE:UBER)

Number of Hedge Fund Holders: 136

Uber Technologies, Inc. (NYSE:UBER) is a technology company that offers apps and products that match consumers looking for rides and independent providers of ride services. It also offers an application that helps people order and deliver food to their doorstep. The company has been using artificial intelligence to develop safe and reliable autonomous vehicles (AV) that can replace human drivers.

On February 18, Piper Sandler reiterated an Overweight rating on the stock and raised the price target to $87 from $80. The price hike follows a review of Uber Technologies autonomous vehicles on management, providing valuable data on capacity utilization and a solid outlook for the AV market. Early this year, Uber Technologies, Inc. (NYSE:UBER) inked a strategic collaboration with Nvidia to enhance the development of new solutions that support the development of AI-powered autonomous driving technology. Chief Executive Officer Dara Khosrowshahi has also reiterated that generative AI will power the future of mobility thanks to rich data and powerful computing.

While we acknowledge the potential of Uber Technologies, Inc. (NYSE:UBER) 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 timeframe. If you are looking for an AI stock that is more promising than UBER but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.

Disclosure: None. This article was originally published at Insider Monkey.