China’s artificial intelligence sector is evolving into a fiercely contested arena. It hasn’t been long since artificial intelligence startup DeepSeek introduced its low-cost yet efficient AI models, shaking up the tech world. Ever since, several other companies have joined in, intensifying the race. In the latest news, Chinese tech giant Tencent has launched the official version of its T1 reasoning model, marking a step forward in the nation’s accelerating AI push.

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According to The South China Morning Post, the new artificial intelligence (AI) reasoning model, Hunyuan T1, rivals DeepSeek’s R1 in performance and pricing. Tencent’s model leverages large-scale reinforcement learning, a technique which has also been employed by DeepSeek in its R1 reasoning model. According to the company, the upgraded T1 model features faster response times and improved capabilities for handling extended text documents.

T1 can “keep the content logic clear and the text neat and clean”, the post said, while the hallucination rate is “extremely low”.

The T1 has been officially released after the beta run of the T1 preview on Tencent’s chatbot Yuanbao. It scored 87.2 points on the Massive Multitask Language Understanding (MMLU) Pro benchmark, a test that thoroughly assesses large language models’ language comprehension and reasoning across diverse domains. The score beat DeepSeek-R1’s 84 points but trailed the 89.3 points achieved by OpenAI’s o1, according to South China Morning Post’s report.

Tencent has claimed to be the first in the industry to adopt a hybrid architecture combining Google’s Transformer and Mamba. This architecture has been developed by Carnegie Mellon University and Princeton University. According to the company, the hybrid approach “significantly reduces training and inference costs” by cutting memory usage.

The company further praised T1 as “significantly reducing resource consumption while ensuring the ability to capture long text information”. T1 offers a 200 percent increase in decoding speed.

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 Q4 2024.

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 373.4% since May 2014, beating its benchmark by 218 percentage points  (see more details here).

10. monday.com Ltd. (NASDAQ:MNDY)

Number of Hedge Fund Holders: 68

monday.com Ltd. (NASDAQ:MNDY) develops software applications globally, offering a cloud-based Work OS for creating work management tools. On March 17, Scotiabank analyst Allan Verkhovski lowered the firm’s price target on the stock to $315 from $400 and kept an “Outperform” rating on the shares. The analyst told investors in a research note that amid worsening demand trends and recession odds rising, it is favoring market leaders in the software and services space. This is particularly true for those with strong free cash flow that can benefit from artificial intelligence.

9. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)

Number of Hedge Fund Holders: 77

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a leader in AI-driven endpoint and cloud workload protection. On March 20, Jefferies maintained a “Buy” rating and a $425 price target on the shares. The firm said it was positive about Google’s acquisition of cloud security company Wiz after it came away from its meeting with Crowdstrike CFO Burt Podbere.

The analyst also told investors in a research note that it will take some time to fully integrate Wiz tech into the Google Cloud Platform. This could help Crowdstrike since its agent architecture is viewed better than Wiz’s agentless offering. The company also views the second half of FY26 positively in terms of net new ARR and free cash flow margin expansion. It is also prioritizing Flex, Crowdstrike’s flexible licensing program, and views benefits from vendor consolidation due to budget scrutiny.

8. Accenture plc (NYSE:ACN)

Number of Hedge Fund Holders: 79

Accenture plc (NYSE:ACN) offers strategy and consulting services. On March 21, Piper Sandler lowered the firm’s price target on the stock to $364 from $396 and kept an “Overweight” rating on the shares. The rating update follows Accenture’s second-quarter earnings report, which demonstrated a modest outperformance in revenue and earnings per share (EPS) against consensus estimates. However, operating income slightly missed expectations. Guidance for fiscal year 2025 revealed revenue/EPS targets narrowing to the upside while operating margin narrowed to the downside.

Analysts expressed concerns regarding Accenture’s ability to drive the market due to the pressure on its Federal Services segment and the broader macroeconomic uncertainty. This was evidenced by the company’s recent performance which was marked by flat bookings and a slowdown in hiring during the quarter. Nevertheless, Accenture’s GenAI bookings have been a positive aspect, which has continued to increase. GenAI, which is associated with artificial intelligence readiness and enhancements to the digital core, is anticipated to become a significant source of income for Accenture over time.

7. AppLovin Corporation (NASDAQ:APP)

Number of Hedge Fund Holders: 95

AppLovin Corporation (NASDAQ:APP) provides a leading marketing platform powered by AI technology. On March 22, Bank of America analyst Vivek Arya recommended buying the dip on several buy-rated tech stocks, one of which is AppLovin Corporation. The firm said that shares of the company are just too attractive to be ignored.

Several meetings with the management have made its bullish thesis on the company clearer, and it noted how AppLovin has a first-mover advantage and is poised to benefit from an increase in digital spending. Moreover, the analyst noted how investors are hardly shaken despite several short seller reports that targeted the company. The firm has a Buy rating on the stock with a price target of $580.

AppLovin “In our opinion, management’s articulation of the secular bull thesis becomes more effective with each investor meeting – we think investors will soon connect the dots. … .The market’s recent momentum unwind & multiple short seller reports have in our view resulted in an opportunity to acquire a secular grower, early in its inflection, at a steep discount to GOOGL & META, profitable high growth software stocks, & AI beneficiaries…”

6. Marvell Technology, Inc. (NASDAQ:MRVL)

Number of Hedge Fund Holders: 105

Marvell Technology, Inc. (NASDAQ:MRVL) engages in the development and production of semiconductors. On March 22, CNBC reported that Bank of America is recommending investors buy the dip in a slew of buy-rated tech stocks, one of which is Marvell Technology. Analyst Arya sees a slew of positive catalysts for the company.

After hosting CEO Matt Murphy for a series of meetings, the firm came away with a “reassuring tone in [the] near & longer-term growth outlook.” There is also a large data center opportunity for the company, noted Arya. The firm has a “Buy” rating on the stock with a price target of $120.

“We expect the overall data center TAM [total addressable market] to be raised towards ~$100bn with continued targeting of 20% share over time,” he added. In addition, Marvell has a much anticipated analyst day in June where it could raise its growth forecast. Meanwhile, shares of the company are down 37% this year and remain attractive.”

Marvell “Confident tone in AI opportunity, capability, execution. … .Reassuring tone in near & longer-term growth outlook. … .MRVL could raise growth opportunity at next analyst day. … .We expect the overall data center TAM to be raised towards ~$100bn (20% of $500bn long-term AI opportunity) with continued targeting of 20% share over time.”

5. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 126

Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that leverages advanced artificial intelligence in its autonomous driving technology and robotics initiatives. On March 21, Morgan Stanley lowered the firm’s price target on the stock to $410 from $430 and kept an “Overweight” rating on the shares.

The analyst told investors in a research note that even though Tesla deliveries have been mostly lower than expected, it doesn’t change the firm’s investment thesis. These softer deliveries are suggestive that the company is transitioning from an automotive “pure play” to a highly diversified play on AI and robotics.

“We reiterate our view that while Tesla’s YTD auto deliveries have been mostly below expectations, it is not particularly narrative changing for our investment thesis.”

4. Salesforce, Inc. (NYSE:CRM)

Number of Hedge Fund Holders: 162

Salesforce Inc (NYSE:CRM) is a cloud-based CRM company that has gained popularity after it unveiled its AI-powered platform called Agentforce. On March 19, Bank of America analyst Bradley Sills reiterated a Buy rating and a $400 price target, representing a potential 43.51% upside for Salesforce stock. According to Sills, it’s time for investors to buy as CRM shares have the potential for “quality growth at a reasonable price.”

Sills is bullish on the stock as it believes that Salesforce has huge growth potential, particularly on the back of Data Cloud, its hyperscale data platform, which has shown significant annual recurring revenue growth. Ongoing productivity efforts within the organization further position the company toward margin expansion and free cash flow growth. Despite high sales and marketing expenses, Salesforce can benefit from strategies such as optimizing account executive ratios, leveraging partnerships, and enhancing product packaging.

3. Apple Inc. (NASDAQ:AAPL)

Number of Hedge Fund Holders: 166

Apple Inc. (NASDAQ:AAPL) is a technology company. One of the most notable analyst calls on Friday, March 21, was for Apple Inc. JPMorgan reiterated the stock as “Overweight,” calling Apple “defensive”. The firm also said it has “cyclical drivers.”

“We expect product cycle drivers in the form of iPhone 16E as well as iPad and Mac refreshes to support upside and/or resilience to revenue and earnings, in contrast to the negative sentiment recently relative to delays in AI Siri launches, which are less impactful to near- to medium-term estimates.”

Analysts on Wall Street currently have a consensus “Buy” rating on the stock. The average price target of $255 implies a 16.8% upside, however, the Street-high target of $325 implies an upside of 48.9%.

2. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 223

NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services. On March 20, UBS analyst Timothy Arcuri reiterated a Buy rating and $185.00 price target on the stock. The firm said that the company is well positioned for AI after its Global AI Conference earlier this week.

“We have long viewed sovereign AI as an underappreciated driver of demand for AI infrastructure, and our sense coming out of this summit is that there is a long runway of AI infrastructure development ahead.”

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 317

Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements. On March 20, Tigress Financial analyst Ivan Feinseth reiterated their “Buy” rating on the stock and raised the price target to $595 from $550. Feinseth is optimistic about Microsoft’s strategic position in the market, with its ongoing development and integration of AI technologies anticipated to boost significant growth across its business lines.

Furthermore, the company’s leadership in AI is highlighted through the incorporation of ChatGPT into its products, positioning it at the forefront of digital transformation. Microsoft is also financially strong, as evident from its strong balance sheet and cash flow. This allows it to support its growth initiatives and strategic acquisitions, which further boosts shareholder returns via dividends and share repurchases. The analyst asserted that their raised target represents a potential return with dividends of over 25% from current levels.

While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some 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 MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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