As reported by Reuters, Wall Street’s main indexes rose on Monday to more than one-week highs, driven by a rally in semiconductor stocks and news suggesting that the incoming Trump administration could adopt a less aggressive tariff stance than previously anticipated.
READ NOW: Top 10 AI Headlines Shaping Wall Street for 2025 and 10 AI Stocks Taking Wall Street by Storm
Microsoft has recently announced that it plans to invest $80 billion in AI-enabled data centers in fiscal 2025, suggesting how semiconductor demand is expected to remain strong this year. According to Citigroup, the company’s spending plan was a “modest positive” update as it removed the risk of a drop in capital expenditures.
Ever since OpenAI launched ChatGPT in 2022, investments in AI have surged drastically. Since AI requires drastic computing power, tech companies have been investing billions to enhance their AI infrastructures and broaden their data center networks. The race, however, isn’t just limited to the US. Efforts are being made to protect the country’s leadership in AI against the rest of the world, particularly China. China, in turn, has begun offering developing countries subsidized access to scarce chips, and it’s also promising to build local AI data centers. Moves like these could position the country as an AI leader in the future, something that the US is actively making efforts to avoid.
However, regardless of the capital expenditures companies are making toward AI, one analyst says that these are no longer going to be enough in 2025. David Dietze of Peapack Private Wealth Management said that a major theme for 2025 is going to be “Show Me The Money”. Dietze said that even though major companies have been investing billions in AI partnerships and similar initiatives, investors are soon going to be demanding proof of returns.
“Wall Street’s the type of place where it’s like, ‘Show me the money, like, yesterday…These investments and capital expenditures are great, but when does the cash flow start coming in? And right now many AI companies have gotten a pass on that, but I think increasingly Wall Street’s going to say, ‘No, we’ve seen the capital expenditures, you’ve got the AI label, but now we want to see the cash flows coming in from that. And that’s what we’re gonna be watching so carefully next year”.
– David Dietze, Peapack Private Wealth Management.
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.
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A financial analyst giving a presentation to a group of investors about annuity insurance.
10. Asana, Inc. (NYSE:ASAN)
Number of Hedge Fund Holders: 18
Asana, Inc. (NYSE:ASAN) is a leading enterprise work management platform. On January 6th, Jefferies raised the firm’s price target on Asana, Inc. to $19 from $16 and kept a “Hold” rating on the shares. The analysts told investors in a research note that adopting a more cautious approach to software stocks is justified heading into 2025. This is because 2024 performance was stronger in the year’s second half. The analyst further anticipated that software space will accelerate in the second half of 2025 driven by increased contributions from artificial intelligence and as “positive revisions on conservative guidance come through”.
9. Astera Labs, Inc. (NASDAQ:ALAB)
Number of Hedge Fund Holders: 39
Astera Labs, Inc. (NASDAQ:ALAB) is engaged in the design, manufacture, and selling of semiconductor-based connectivity solutions for cloud and AI infrastructure. On January 6th, Stifel Nicolaus raised the firm’s price target on Astera Labs from $100.00 to $150.00 with a “Buy” rating on the stock. According to the firm, Astera Labs is one of the most attractive stocks in its coverage in the Analog, Connectivity, and Processors Sector. The analyst told investors in a research note that Astera Labs is a key AI infrastructure beneficiary. The company provides advanced connectivity and memory solutions that enable faster and more efficient data processing in AI infrastructure. The top 10 trends for 2025 by Stifel are Cyclical Recovery, Interconnect Technologies, Incremental Bandwidth Growth, Geopolitical Risk, Power and Data Centers, Electronics Manufacturing Services and Hyperscale Opportunity, Emergence of Consumer AI, Specialized AI Cloud, Mergers and Acquisitions, and Automotive Production Expectations.
8. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 43
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. Palantir has had a spectacular year fueled by artificial intelligence, but an analyst from Morgan Stanley has recently turned negative on the red-hot stock. On January 6th, analyst Sanjit Singh assumed company coverage with an “Underweight” rating and placed a $60 price target on the stock, an estimated 25% downside from Friday’s close. According to Singh, despite Palantir’s early AI strides, the potential risks seem to outweigh the potential rewards. The firm, which hadn’t previously rated the stock, acknowledged that the company has been performing well and has good momentum, but also contended that the stock price already reflects this success which is “more than priced in at the current multiple premium”.
“The skills/capabilities of the enterprise with respect to building AI applications should likely improve, which may make it difficult for Palantir to sustain its current level of momentum, creating downside risk given the premium valuation of the shares”.
-Morgan Stanley Analyst
7. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 60
Cisco Systems, Inc. (NASDAQ:CSCO) is an American technology company that provides information technology and networking services. On January 6th, Melius analysts upgraded Cisco Systems, Inc. (NASDAQ:CSCO) from Hold to Buy with a price target of $73.00. Ben Reitzes, Melius Research’s head of technology research, joined CNBC’s ‘Money Movers’ to discuss the firm’s upgrade of Cisco. He stated that Cisco was an underperformer last year, but believes that the company has turned the corner since networks for enterprises are getting ready for artificial intelligence.
The company’s advancements in optics and silicon technologies demonstrate upside in the hyperscaler market and the company’s security business is also getting better. Reitzes further stated that it’s a cheap stock and that it will get a bit of the AI halo effect. In data centers, the firm believes that networking content is going to go through the roof which will benefit Cisco as well. Firm analysts anticipate increased spending by hyperscalers and enterprise IT in 2025. However, most of the gains might come later in the year and extend into 2026. Reitzes also stated that excitement around AI may slow down in the third year, but the AI industry is only getting started.
6. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 70
Marvell Technology, Inc. (NASDAQ:MRVL) engages in the development and production of semiconductors, focusing heavily on data centers. On January 6th, Craig-Hallum analyst Christian Schwab raised the firm’s price target on Marvell Technology to $149 from $132 and kept a “Buy” rating on the shares. According to the firm, Marvell is a “Top Idea heading into 2025” as it is a major beneficiary of the accelerating multi-year AI megatrend. In FY’24, AI revenue for Marvell Technology was $550M. It is now anticipated that the AI revenue will be significantly above the previous expectations of over $1.5B in FY’25. Craig-Hallum added that AI revenue for FY26 is also expected to be significantly above the previous expectations of $2.5 billion. The upward revision mirrors Marvell’s strong position in the AI market. Analysts from Bank of America have also been bullish on the stock, citing that the chipmaker “has transformed into a data center silicon leader,” with “growth opportunities across cloud data centers, 5G infrastructure, advanced autos, enterprise networking, and security markets”.
5. Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Holders: 91
Vertiv Holdings Co (NYSE:VRT) is a global provider of digital infrastructure technology and services for data centers, communication networks, and commercial and industrial facilities. On January 6th, Morgan Stanley initiated Vertiv Holdings at “Overweight” with a $150 price target. According to the firm, the shares of the data infrastructure company are too attractive to ignore. The rating initiation highlighted the company’s potential for earnings per share (EPS) growth, particularly in a challenging industrial sector.
Moreover, its acquisition of assets from BiXin Energy Technology, enabling Vertiv to increase its chiller product offerings and support its portfolio of critical technologies and solutions designed to support high-performance compute and AI applications, specifies strategic expansion. The firm’s analysis suggested that the company’s growth has lagged behind overall data center spending in recent years which is an opportunity for the company to close the gap. As such, the market underestimates the essential nature of Vertiv’s products considering that power and thermal solutions are vital for data centers that Vertiv provides.
4. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 99
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 January 3rd, Evercore ISI reiterated Tesla as “In Line” and raised its price target on the stock to $275 per share from $195. The firm asserted that Tesla is a Trump beneficiary. The analyst’s comments further suggested that a Trump presidency is going to be beneficial for industries like autonomous vehicles and artificial intelligence. Since Tesla is a leader in these fields, it could be subject to reduced regulatory scrutiny, paving the way for faster advancement for the company and the sector at large. In particular, Elon Musk’s close ties with the incoming White House administration and friendship with Donald Trump are going to bode well for the company.
“DJT presidency may lead to lower regulatory risk for AV/AI [autonomous vehicle/artificial intelligence] in general and thus quicker commercialization for the industry”.
The analyst noted that the call option basket has risen to $900 billion and the market is pricing in a 50% chance of success.
3. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 128
Broadcom Inc. (NASDAQ:AVGO) is a technology company that offers custom chips and networking assets. One of the biggest analyst calls on Wall Street on Monday, January 6th, was for Broadcom. Bernstein reiterated the stock as “Outperform”, stating that it is bullish on it in 2025. The company has had a remarkable 2024, reporting a 220% year-over-year growth in AI-related revenue for its 2024 fiscal year, which amounts to US$12.2 billion. Moreover, the completion of the acquisition of VMWare is anticipated to contribute positively to Broadcom’s financial performance. Broadcom also targets $60 to $90 billion in AI revenue by FY’27, implying strong growth potential in the AI sector.
“Our top AI picks remain NVDA (still the best way to play AI and right at the start of a new product cycle), and AVGO (benefiting from their own potential ‘Nvidia’ moment as well as a significantly-reset core and significant VMware accretion on the way)”.
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a global technology company. On January 3rd, Bernstein raised the firm’s price target on Apple to $260 from $240 and kept an “Outperform” rating on the shares. The rating, issued as part of the 2025 outlook for the IT hardware sector, noted how IT hardware is a “structurally challenged sector”. Nevertheless, the firm anticipates a better IT spending backdrop in 2025, benefiting companies with robust product portfolios. The firm further stated that stock valuations are currently at the higher end and that profitability from artificial intelligence remains challenging.
One of the top stock picks for Bernstein was Apple Inc. The firm adjusted the price target for the company to reflect market appreciation since its last set of targets. The firm stated that Apple is a platform business, which has helped it grow steadily. It is characterized by mid-single-digit revenue growth, improving margins, disciplined capital returns, and double-digit earnings growth. Bernstein further stated that the stock’s valuation is “full”. Nevertheless, the company is a standout stock within the IT hardware sector owing to its focus on services and platform enhancement, particularly AI.
“Our top picks entering 2025 remain Apple and Dell”.
1. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms Inc (NASDAQ:META) is a global technology company. On January 3rd, Wolfe Research analysts led by Shweta Khajuria laid out their top stock picks for 2025, rating them all at “Outperform”. One internet stock the analysts cited opportunities in was Facebook-parent Meta Platforms Inc., with Khajuria lifting the target price for the stock to $730 from $670. Even though Meta has demonstrated outperformance in the last two years, Wolfe Research believes it still offers upside to investors. According to Khajuria, the social media giant has a strong positioning in artificial intelligence.
Highlighting the company’s advancements in AI, the firm believes that the company’s multi-year investments are now well-positioned to demonstrate potential returns on invested capital (ROIC). There is also potential for return on investments to grow including for its newer social media app Threads. Moreover, considering there is a ban on TikTok, it could translate to an upside of around 10% to Meta’s earnings. TikTok may face a ban in the US amid concerns that the Chinese government could gain access to sensitive information through it. TikTok is owned by the Chinese company ByteDance. Consequentially, lawmakers have passed a bill that forces China-based ByteDance to either sell the app or have it banned in the country.
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