The tech world may be steering in a new direction with the emergence of DeepSeek and the cheaper and more efficient models it promises. In the latest news, bulls from Europe have deemed that the sector may have further to run, despite the emergence of these Chinese copies. This news emerged after January 27, when the tech world witnessed a broad market sell-off driven by DeepSeek’s advancements, investors’ concerns regarding West’s huge investments in chipmakers and data centers, valuation risks, and increasing competition from alternative AI models. In short, DeepSeek sparked a rout in the tech world.
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With the emergence of these models, companies are readjusting their approaches, focusing more on efficiency rather than demand. Even big AI names such as OpenAI have been prompted to rethink their strategies. The AI startup is reportedly thinking of “figuring out a different open-source strategy” after DeepSeek released a lower-cost open-source AI model, Seeking Alpha reported Saturday. Moreover, OpenAI Chief Product Officer Kevin Weil recently unveiled that the company was considering open-sourcing older AI models. This reflects a broader industry shift toward efficiency and accessibility.
Nevertheless, since the sell-off, tech stocks have thankfully rebounded. European markets in particular are hitting new highs, Reuters reports. One economic theory, known as the “Jevons Paradox” seems to be the answer. According to the paradox, when a resource becomes more efficient to use, demand may increase rather than the other way around. This is because the price of using the resource drops.
“I hadn’t discussed it until Monday (last week), and then suddenly it’s everywhere. This paradox highlights one of the uncertainties at the moment,” said Jewell, flagging that a key question for European stock-pickers is whether data centres and their suppliers will be less in demand.”
-Helen Jewell, Chief Investment Officer at BlackRock Fundamental Equities, EMEA, as reported on Reuters.
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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10. Alpha Modus Holdings, Inc. (NASDAQ:AMOD)
Number of Hedge Fund Holders: –
Alpha Modus Holdings, Inc. (NASDAQ:AMOD) is a technology company that creates, develops, and licenses data drive technologies. On February 4th, the company announced that its wholly owned subsidiary, Alpha Modus, Corp., had filed a patent infringement lawsuit against Walgreens Co. (“Walgreens”) in the United States District Court for the Eastern District of Texas. The company has alleged that Walgreens has willfully infringed on Alpha Modus’s patented AI-driven retail technology. This technology enhances in-store shopping through data-driven insights, interactive advertising, and consumer engagement tools. The event came to light when Walgreens deployed its Cooler Screens digital smart screens in its stores, which Alpha Modus claims mirror the patented innovations. Alpha Modus has previously taken action against major retailers and technology providers, including Kroger, Cooler Screens, Wakefern, Shelf Nine LLC, and more, reflecting the company’s commitment to protecting its AI technology. The company estimates potential damages exceeding $500 million, stating that they could easily run into billions over the life of its patents.
“We believe our technology is currently being used by scores of brands, retailers and technology providers. Our research demonstrates that, as a result, damages due Alpha Modus far exceed an estimated $500 million and could easily run into the billions over the life of our patents. This lawsuit is a necessary step to protect our intellectual property and uphold fair competition”.
– Alpha Modus CEO William Alessi.
9. Tempus AI, Inc (NASDAQ:TEM)
Number of Hedge Fund Holders: 7
Tempus AI, Inc (NASDAQ:TEM) is a healthcare technology company that provides AI-enabled precision medicine solutions. On February 3rd, the company announced that it had completed its acquisition of Ambry Genetics, a genetic testing company that strives to improve health by understanding the relationship between genetics and disease. The acquisition aims to leverage the powers of technology to expand Tempus AI’s testing capabilities for inherited cancer risk and complement its strategy of using data to advance clinical and scientific innovation. The company has paid $375 million in cash and $225 million in shares at closing. Of this, $100 million is subject to a lock-up agreement until one-year post-transaction close.
“This acquisition complements our strategy of leveraging diagnostics and data to drive innovation, further strengthening our ability to deliver cutting-edge solutions to clinicians, patients, and life sciences companies. We are excited to welcome Ambry to the Tempus team as we work together to improve patient outcomes and transform treatment journeys through the power of technology.”
-Eric Lefkofsky, Founder and CEO of Tempus.
8. Booz Allen Hamilton Holding Corporation (NYSE:BAH)
Number of Hedge Fund Holders: 32
Booz Allen Hamilton Holding Corporation (NYSE:BAH) is a military-defense-focused AI stock and the leading provider of artificial intelligence (AI) services to the US government. On January 31st, the company reported its third-quarter fiscal year 2025 results. The company reported double-digit growth in both revenue and adjusted EBITDA for the third quarter. The adjusted EPS for the quarter was $1.55, topping the analyst consensus estimate of $1.51. Quarterly sales for the company were $2.92 billion, up 13.5% year-on-year, and beating the street view of $2.86 billion. Despite potential uncertainties related to the new presidential administration and its impact on the procuring environment, Booz Allen is optimistic about its operations on the back of its strong backlog and strategic partnerships. These factors position the company for continued growth, particularly in artificial intelligence. Following the earnings report, on February 3rd, TD Cowen analyst Gautam Khanna maintained a “Buy” rating on Booz Allen with an associated price target of $155.00. Khanna remains bullish on the AI stock due to its effective cost management strategies, high employee utilization rates, and potential for sales growth. Financial gains from the acquisition of the AI-powered cybersecurity platform SnapAttack have also contributed to the optimistic outlook for Booz Allen.
7. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 43
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. On February 3rd, William Blair analyst Louie DiPalma reiterated their bearish stance on the stock, giving a “Sell rating”. The rating largely stems from Palantir’s valuation and future growth prospects. According to the firm, recent revenue and operating income exceeded expectations, and its software products, Foundry and Gotham, are also gaining traction. CEO Alex Karp has attributed much of the company’s growth to their use of artificial intelligence. Nevertheless, the firm stated that the stock is currently valued at a premium compared to peers with similar business fundamentals. Moreover, despite positive developments in AI, the risk of valuation multiple compression remains a risk. The potential market correction and the company’s revised revenue guidance for 2025 which falls short of previous targets has in turn led the firm to maintain the Sell rating.
6. MongoDB, Inc. (NASDAQ:MDB)
Number of Hedge Fund Holders: 49
MongoDB, Inc. (NASDAQ:MDB) provides a general-purpose database platform worldwide. It securely amalgamates operational, unstructured, and AI-related data to streamline building AI-enriched applications. On February 4, the company announced that it has partnered with Lombard Odier, a global Swiss private bank, to further streamline its banking technology systems. The collaboration between the two has helped Lombard Odier to modernize its systems and applications with generative AI, enabling code migration 50-60 times faster and reducing project timelines from days to hours. Lombard Odier builds on its 10-year relationship with MongoDB to lead its transformation initiative. As part of the GX Program, a seven-year initiative launched in 2020, the bank has been leveraging MongoDB’s scalable data platform to enhance the digital experience for its customers. It has also co-built a modernization factory to create customizable generative AI tooling, streamlining integration testing and code generation for easy deployment.
“Financial institutions with as much history as Lombard Odier undoubtedly have large, complex legacy systems that have been supporting the business for decades. However, it is important for organizations to constantly evaluate these systems to understand if they are still serving their best interest today, and for the future. This can be a daunting task, but we are proud to have worked through this with Lombard Odier to prove that it is possible and can actually be quite simple with the right technology. The transformation work Lombard Odier has done sets them up to take advantage of new, cutting-edge technologies which improve customer experience immensely.”
-Sahir Azam, Chief Product Officer at MongoDB.
5. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 56
International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products. On February 3rd, Wedbush assumed coverage of the stock with an “Outperform” rating and a $300 price target. The firm is bullish about IBM, stating that it fits well into the tech investment outlook for 2025. It also expects strong growth over the next 12 to 18 months. In particular, Wedbush is highly optimistic that the company is in a sweet spot to have an “AI turnaround for the ages” over the coming years led by its CEO Arvind Krishna.
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 February 4th, Piper Sandler reiterated Tesla as “Overweight” with a $500 target. According to the firm, the stock is relatively insulated from tariffs. President Donald Trump recently put 25% tariffs on goods from Mexico and Canada and 10% tariffs on China. Even though he has agreed to pause the tariffs on Mexico and Canada for a month, the one on China is still active. Tesla produces a significant portion of its automobiles in China. Even though these tariffs will hit all automakers, Tesla will sidestep some challenges considering that it operates factories in the U.S., Berlin, and Shanghai, CNBC reports. Currently, Tesla boasts the highest percentage of domestically assembled cars with most of its models on Cars.com’s list of most American-made vehicles. The Piper Sandler analyst also trimmed his full-year vehicle deliveries forecast on the automotive company to just under two million. This is about 58,000 units lower than its previous outlook.
“In the meantime, we think TSLA is one of the most defensive stocks in our coverage. Tesla assembles five vehicles in the U.S., and all five rank among the most American-made cars. Nobody is completely insulated, but in relative terms, Tesla is better-positioned than most.”
-Piper Sandler
Post-election, Tesla has been worth more, Wall Street says. However, the main way it sees Tesla benefitting under Trump 2.0 is with federal standards easing the introduction of self-driving cars. Investors, in particular, are on the watch for self-driving cars.
“Musk has discussed FSD/autonomy as the true value of Tesla. This has been met with a higher level of skepticism from investors, but may have even greater upside than the core automotive business if successful”.
-Baird analyst Ben Kallo wrote on Tuesday.
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a technology company that has recently launched Apple Intelligence, its personal intelligence system. On February 3rd, Bank of America reiterated the stock as “Buy” with a $265 price target on Apple. Discussing tariffs, the firm said Apple can minimize the effects by shifting its iPhone components manufacturing to India. The firm remained a buy on the stock due to its stable cash flows, earnings resiliency, and the growing use of AI on edge devices, such as iPhones and iPads.
The following day, on February 4th, Morgan Stanley reiterated the stock as “Overweight”. Analyst Erik Woodring has pointed out that Apple hasn’t taken any known actions to mitigate the 10% tariffs on goods from China. The company may be forced to raise iPhone prices, the firm noted. Based on estimates, these tariffs could equate to 3.5% headwinds on earnings per share.
“Therefore, the short answer is, barring any intervention from President Trump, Apple will be forced to pay a 10% tariff on products imported from China starting Tuesday”.
Even if the smaller production base in India is used to skirt the levy, India’s plant, which accounts for 13% of iPhone production, can’t support the 67 million iPhones Apple chips to the U.S. This is in case the tariffs have longevity, he said.
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 286
Amazon.com Inc (NASDAQ:AMZN) is an American technology company offering e-commerce, cloud computing, and other services, including digital streaming and artificial intelligence solutions. On February 4th, Citi reiterated the stock as “Buy”, stating that it is bullish on Amazon ahead of earnings later this week. Amazon is expected to exceed consensus estimates due to its robust holiday sales, positive online advertising climate, and increasing demand for cloud services. Concerning the projection for Amazon Web Services, AWS is expected to grow 19% year-over-year particularly due to spending improvements led by generative AI. Additionally, the holiday e-commerce segment is also expected to do well based on quicker shipping times and improved conversion rates. Other factors complementing this boost are higher margins, improved retail conversion, and growing AWS demand despite currency exchange challenges.
“Amazon reports 4Q24 results on Thursday, 02/06 AMC [after market close], and given solid holiday sales, a healthy online advertising environment, and improving cloud demand, we believe results are likely to come in better than consensus expectations.”
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms, Inc. (NASDAQ:META) is a global technology company. On February 4, Meta was revisited by a Wall Street analyst, Sachin Mittal from DBS, who maintained his Buy rating on the stock with a $750 price target. Mittal’s buy rating stems from Meta’s strong financial performance and strategic initiatives. The company surpassed market expectations in terms of earnings and revenue growth, driven by reduced legal losses and strong performance from its Reels initiative. Reels are a form of short, vertical video format advertising that has achieved growth in monetization and user engagement. They leverage artificial intelligence and machine learning to boost content recommendation abilities and targeting capabilities. Besides the robust performance from Reels, the company’s investment in AI technologies, particularly the Llama large-language model, has also demonstrated growth and is anticipated to drive further user engagement and advertising efficiency. Further justifying the buy rating is Meta’s focus on Metaverse and a favorable profit outlook.
While we acknowledge the potential of META 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 timeframe. If you are looking for an AI stock that is more promising than META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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