Investors are digesting the latest earnings of major technology companies for clues on the strength of AI demand. Dan Niles from Niles Investment Management said in a latest program on CNBC that data points in the AI space should be read in context, and yet again reminded investors that the AI momentum could slow down in the future. The analyst also emphasized that stock prices should not be confused with company fundamentals.
“Remember there was an MIT study that came out that 95% of companies weren’t seeing any, you know, improvement from their spending on AI. Then you get to company actions which matter more than these surveys, and you go, all right, Meta, which has been absolutely killing it with their Llama models. Now there’s talk that they’re going to work with either Google or OpenAI to get Llama 5 out. And after spending like, you know, Major League Baseball pitcher type salaries for AI researchers, they probably now restructured their AI team at least four times in the last six months,” Niles said.
Niles disagreed with the notion that companies are not seeing productivity and results from AI because we are still in the early stages of the technology cycle. He believes most of the market rally is being driven by rate cut expectations, and the euphoria will start to fade later this year.
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This article reviews ten major analyst calls made a few months ago by notable Wall Street analysts and examines how they performed. With each stock, we have mentioned its hedge fund sentiment. 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. Zoom Communications Inc (NASDAQ:ZM)
Number of Hedge Fund Investors: 39
Zoom Communications Inc (NASDAQ:ZM) apparently lost all its attraction after the pandemic days ended, since free video calling software became ubiquitous. However, OptionsPlay’s Tony Zhang believed the stock was a buy amid the company’s AI tool. Talking to Schwab Network in May this year, the analyst said:
“Recently they’ve really turned into an AI play, actually, from my perspective. We have the AI companion tool that they’ve launched recently—it’s their fastest growing product. Their enterprise model has been growing incredibly well, and from a valuation perspective, it’s one of the most compelling stories within the AI space. Trading at 14 times forward earnings, there’s really no other AI company trading at those types of valuations right now.”
The analyst said the stock has “struggled” a lot over the past few years but believes it can trade above $100.
“I said the AI tool that they recently just launched is their fastest growing product, and I think investors are starting to pay attention right now. When I say it should be trading in the $100 range, it’s really more longer term. Short term, you’re absolutely right—you have that $90 resistance level, so very short term that’s my upside target. But if we can get back above 90, we’re looking at 125 and potentially even higher than that.”
At the time of Zhang’s comments, the stock was trading at around $81, while it stands at $85 as of September 8.
Guinness Global Innovators stated the following regarding Zoom Communications Inc. (NASDAQ:ZM) in its Q4 2024 investor letter:
“Zoom Communications Inc. (NASDAQ:ZM) has struggled since coming out of the pandemic with changing consumer trends and a tougher macroeconomic environment. At purchase, Zoom looked attractive from a valuation perspective, having derated from its 2021 highs to near pre-pandemic levels – despite being a fundamentally better business. The company had built a strong brand, with ‘Zoom’ becoming synonymous with online conferencing and video calling after the company’s success during the pandemic, and the resulting paradigm shift towards increased hybrid working. What was once a more ‘speculative’ growth stock at the start of the pandemic, was now a slightly more mature growth company with high market share (underpinned by a best-in-class product), stickier revenues, and a stronger balance sheet with $5bn in cash creating room for growth investment. With a superior product and strong brand presence, growth expectations for the company were around mid to high single digits. However, since purchase, Zoom has returned -34% versus the MSCI World Index, which was up 28%, with a growth profile that has disappointed. The company’s key Enterprise segment has seen decelerating growth, with both customer growth and the net dollar expansion rate (Zoom’s revenue per user metric slowing significantly). Customer growth has slowed from a rate of 25% YoY in the quarter prior to purchase to an estimated 3.6% by the first quarter of 2024. Net Dollar Expansion rate has slowed even further, currently at 101% (1Q24) vs c.123% at purchase…” (Click here to read the full text)
9. Coinbase Global Inc (NASDAQ:COIN)
Number of Hedge Fund Investors: 42
In February 2024, Ark Invest CEO and CIO Cathie Wood explained why she is bullish on Coinbase and praised the company’s execution. Here is what she said at the time.
“Coinbase is doing right, right now. One of the things that it’s doing right is that it is, from a regulatory point of view, the most compliant exchange out there, and it’s losing all its competition. Last year’s demise of FTX was very important, and even Binance’s issues have had a positive impact on Coinbase from a market share point of view. I think they’re also in the right place at the right time, and they’re executing brilliantly. The market is very volatile, so trading platforms benefit from volatility, and we certainly have had a lot of that recently. Then, of course, with these spot Bitcoin ETFs coming out, we’ve seen the price increase, or there’s been volatility around it, but now it seems to be breaking out the price, and that’s also good for Coinbase. So, a lot of wins.”
Cathie Wood’s ARK owns 2.6 million shares of the company as of the end of the June quarter. It’s ARK’s second biggest position. Coinbase has gained about 93% over the past year.
Patient Capital Management stated the following regarding Coinbase Global, Inc. (NASDAQ:COIN) in its Q4 2024 investor letter:
“The top performers in the fourth quarter were once again Financials and Travel names. We’ve been over-indexed to them since the pandemic, which has served us well. We strategically added to certain financial names like Sofi Technologies (SOFI) and Coinbase Global, Inc. (NASDAQ:COIN) during the year. Both companies rebounded strongly in the fourth quarter. We believe Coinbase is building the platform for the crypto ecosystem. Certain recent advances (wallet, base improvements, USD Coin) could cause an adoption tipping point. We like that Coinbase continues to widen its moat by persistently investing in innovation.”
8. Qualcomm Inc (NASDAQ:QCOM)
Number of Hedge Fund Investors: 74
Stacy Rasgon, Bernstein senior U.S. semiconductor analyst, explained in a program on CNBC in June why he was bullish on Qualcomm. At the time, QCOM was among the analyst’s best stock ideas. Here is what he said at the time:
“I’m pretty positive on the continued prospect at least for content growth if not necessarily for unit growth in smartphones. personally think they can probably grow their Android business high single to even low double digits um in a flat unit market on the back of new AI phones and everything else that are continuing to drive content. Yeah, I think there’s a lot of other stuff to like here as well though. Look, I think the smartphone market which has been in decline does look like it’s bottomed. Again, those mixed trends I think are good.”
QCOM is up 8% since Rasgon’s comments.
Mairs & Power Balanced Fund stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q1 2025 investor letter:
“The Information Technology sector underweight had the largest relative impact on returns during the quarter. Only one of the Fund’s technology holdings posted a positive quarterly return – QUALCOMM Incorporated (NASDAQ:QCOM) – making this a somewhat hollow outperformance. Qualcomm is a “value tech” company which has enviable cash flows but we believe has been consistently underappreciated in the market for its technology licensing business, which has frequently been targeted for legal action by some of its major customers. However, we believe it continues to prove its best-in-class technology and, despite companies attempting to circumvent Qualcomm, we continue to see a long-term position in the wireless technology space for the company.”
7. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
During a CNBC interview on May 9, Ark Invest CEO Cathie Wood reiterated her $2,600 price target on Tesla and justified her case for the EV company. The stock was trading at $298 at the time.
“Our target in 5 years of 2030 again is $2,600, and our confidence in that number has gone up now that Tesla is commercializing robo taxis in August, in June. What we don’t have in that number and what is happening faster than we expected—and as you know we’re very focused on learning curves and how quickly new technologies are going to evolve—humanoid robots. And Elon has been talking about that market being bigger ultimately than the robo taxi market, and he talks about Tesla being number one globally when it comes to humanoid robots. Also, Elon says that China is number two to 10, and so we have to get moving on that score as well. We think that’s a $26 trillion revenue opportunity split between home and industrial in the next 5 to 10 years. It’s going to be a huge market. And the reason Tesla is ahead of the game is we’re talking about the three tech—the three platforms it’s already innovating on: robots, robo taxis are robots, energy storage—they will be electric—and AI.”
Tesla Inc (NASDAQ:TSLA) is trading at $350 as of September 8.
Baron Focused Growth Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q1 2025 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) manufactures electric vehicles (EVs), solar products, and energy storage solutions alongside the development of advanced real-world AI technologies. Shares fell due to declining analyst expectations for auto delivery volume and margins in 2025 as a result of 1) a refresh of the Model Y, its highest volume vehicle and the world’s best selling car in 2024; 2) Elon Musk’s controversial role in the Trump administration; and 3) regulatory changes that could pose potential operational challenges. Despite these headwinds, we remain confident in Tesla’s long-term growth, underpinned by secular trends in EVs and energy storage adoption, a compelling product line, its leading cost structure, and cutting-edge technology. A Model Y refresh alongside the debut of new mass-market models should boost demand. Over time, we expect the political pressure to fade, while Tesla’s AI ambitions—a robotaxi service launching this year and a fast-growing humanoid program—hold the promise of transforming its growth story.”
6. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 128
Stacy Rasgon, Bernstein senior U.S. semiconductor analyst, said in a CNBC program in May that AI demand is “off the charts” and CapEx is not slowing as it was feared. Rasgon liked Broadcom Inc (NASDAQ:AVGO) amid the company’s AI and software exposure:
“Look, I’ve liked the AI names. I felt that whereas for a lot of these other end markets people were really worried about what’s going to happen in the second half and whether demand is real or not, AI demand is real. I also think the AI hardware, if tariffs are implemented, is somewhat insulated because most of the AI servers come into the U.S. through Mexico — they’re USMCA-compliant and tariff-free. So I actually like AI. I like Broadcom Inc (NASDAQ:AVGO)— it has an AI story, and they’ve also got 40% of their revenue from software, which is safe. Their non-AI semis were already at a cyclical low.”
AVGO is up 80% over the past six months. For the fiscal fourth quarter, AVGO expects $6.2 billion in AI revenue, up 66% from a year earlier. The company said it secured $10 billion in AI infrastructure orders from a new customer. Many analysts believe this customer is OpenAI. Some media reports said the two companies co-designed a chip that will be launched next year.
Baron Technology Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q1 2025 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) is a leading fabless semiconductor and enterprise software company, with approximately 60% of revenue generated from semiconductors and 40% from software. The company’s focus on high performance AI compute and networking solutions, coupled with its disciplined execution in software, positions it as a strategic leader in critical technology markets. Broadcom delivered a strong quarter, beating expectations for both semiconductors and software. AI remained the key growth engine – reaching a $4.1 billion quarterly run rate, up 77% year over-year – driving a solid ramp in semiconductor revenue, even as non-AI segments like wireless and industrial declined. Software surged, fueled by VMware integration and a shift to subscriptions. Management projected continued AI momentum and steady software execution, with a more pronounced AI ramp expected in the second half. Despite strong quarterly results, the stock retreated amid the same AI-related skepticism as NVIDIA, but primarily due to the broad market pullback on tariff and trade-relations concerns. We remain confident Broadcom is on track to win with its three custom AI accelerator customers and will capture the majority share in the custom-compute space. Broadcom’s lead customer, Google, just rolled out its 7th generation TPU, nicknamed Ironwood, and as Broadcom’s two unnamed (but well speculated) non-Google customers gain traction, confidence in the broader pipeline of four additional partners should strengthen, supporting continued growth in Broadcom’s AI business. We spent two hours with Broadcom’s CEO Hock Tan in March, and he told us in no uncertain terms that “all of them will aggressively ramp and push custom accelerators.”
5. Uber Technologies Inc (NYSE:UBER)
Number of Hedge Fund Investors: 136
In early May, Jamie Meyers, securities analyst at Laffer Tengler Investments, said in a program on Schwab Network that Uber was in his best ideas portfolio. Here is what he said about the company:
“Uber Technologies Inc (NYSE:UBER) is a member of our 12 best ideas portfolio, and these results were actually pretty strong in our opinion. While the company missed by less than 1% on gross bookings and revenues, the other metrics were strong. Monthly active platform customers were up 14%, gross bookings still grew 18% in constant currency. Mobility was up 20%, delivery was up 18%. So we’re actually very happy with the results. Looking forward, we saw strong, confident management on the call and we think the company is well-positioned to continue growing EBIT, continue growing cash flow, and expanding margins moving forward.”
Uber is up by 16% since the start of May.
Optimist Fund stated the following regarding Uber Technologies, Inc. (NYSE:UBER) in its Q1 2025 investor letter:
“Uber Technologies, Inc. (NYSE:UBER) – Uber posted its strongest quarter yet, with gross bookings rising 18% year-over-year to $44.2 billion and revenue growing 20% to $12.0 billion. Adjusted EBITDA jumped 44% to $1.8 billion, fueled by record demand across both Mobility and Delivery, while free cash flow reached $1.7 billion. Exceeding its three-year financial targets, the company heads into 2025 with accelerating momentum and emerging upside from autonomous vehicles. Uber’s growing free cash flow profile is attracting broader investor attention—including a recent investment from renowned value investor Bill Ackman. Our investment thesis remains intact.”
4. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Katie Stockton, Fairlead Strategies managing partner, said in a program on CNBC in early August that Apple Inc (NASDAQ:AAPL) would need to break the resistance level of $216 to unlock more share price growth. She was sharing her thoughts on the stock jump following the company’s pledge for an additional $100 billion US investment.
“The sentiment got pretty bullish, of course, in July. So, I think the market’s suffering a bit underneath that overly bullish sentiment indication. So, not only do we need to see sentiment shift and shift uh sort of meaningfully in favor of upside followthrough, we want to see momentum behind the move. And in order for that breakout to be confirmed, meaning not only we see Apple get above it, but hold above it, that would require a momentum shift because it’s been very much neutral. The choppiness that we’ve seen in Apple has been very neutral. And as it has gone sideways overall, it’s actually continued to underperform overall versus the S&P 500.”
Apple is up 4.5% since the analyst’s comments.
3. Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 160
Deepwater’s Gene Munster said in a CNBC program in May that Alphabet Inc (NASDAQ:GOOG) Google search business is under threat from ChatGPT, which is expected to hit 800 million users by June.
“So that’s going to put it at about a quarter of the Google daily population is also going to be using GPT. And that’s obviously just one of a few generative products. And so, the central question that I think that Google investors should ask is ask themselves if they fall into the camp of using generative AI daily or ask anybody who does, how has your search behavior changed? And I think the answer is overwhelmingly it is a significance, a seismic change. And on top of that is that this effectively puts Google in a very difficult place into a corner. And that corner is that to monetize—what the reason why people love this is the simple straightforward answer. It might hallucinate, but they love the simple answer, and that’s something by definition that blue links can’t give them. So very complex, very complex set of challenges that’s ahead of Google, and this golden goose that they have is showing its age.”
GOOGL shares are up 41% since Munster’s comments that were made on May 10. The stock is rising following a court ruling that said the company does not have to sell its Chrome business in an antitrust case.
Alphabet Inc. (NASDAQ:GOOG) bulls believe concerns around AI-related threats to Google search are overstated. Google has an edge over competitors because it’s easier for the billions of users of its search engine to switch to Gemini instead of opting for a completely new model. As of April, Google had over 1.5 billion monthly users interacting with its AI-powered Search overviews.
Mairs & Power Balanced Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q1 2025 investor letter:
“The Fund’s holdings in the Communications Services sector dragged on portfolio returns during the quarter due primarily to security selection. Alphabet Inc. (NASDAQ:GOOG) led underperformance as it fell in tandem with the other mega cap tech stocks. Additionally, there is increasing concern about the impact of generative AI on Alphabet’s search business and whether it will be able to meaningfully respond.”
2. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 162
Jim Cramer during a program on CNBC in May discussed the importance of trusting the honest leadership of companies and sticking to their core business thesis despite tough times. To prove his point, Cramer gave the example of Salesforce Inc (NYSE:CRM) CEO Marc Benioff:
“Something very similar happened with Marc Benioff, the bankable CEO of Salesforce, during the depths of the great recession. He’s another important Charitable Trust name from pretty much the get-go. He explained his cloud software company would be fine and we should just—well, he just said it’s going to be the future of the industry. He said there had been no real slowdown at all in his business, even though there was slowing everywhere else. He was right, and if you listened to him, you made a killing.”
Salesforce shares are down 24% so far this year. The company recently reported a decent quarter, but the stock fell amid weak guidance. For the third quarter, the company expects revenue between $10.24 billion and $10.29 billion, below the Wall Street estimates at the midpoint.
Mar Vista U.S. Quality Select Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q1 2025 investor letter:
“Salesforce, Inc.’s (NYSE:CRM) stock came under pressure in Q1 as investors grew concerned about the potential negative impact of trade tensions and tariffs on the global economy, as well as the current lack of monetization from AI-enabled software solutions. Despite these concerns, we remain confident in Salesforce’s strong competitive position, deep customer relationships, and its ability to monetize AgentForce, its newly launched generative AI-enabled chatbot designed to automate customer service tasks and significantly reduce costs compared to traditional call center support solutions.
As the largest provider of SaaS-based customer relationship management software globally, Salesforce possesses a vast repository of customer data. This data, when combined with generative AI solutions like AgentForce, can be mined for valuable insights and used to deliver enhanced customer outcomes. While AgentForce is still in its initial stages, it has already generated strong interest from both customers and global system integrators. Notably, Salesforce announced that approximately 5,000 customers are currently testing AgentForce, including around 3,000 paying customers. We continue to believe that Salesforce is well-positioned to monetize its AI offerings over time and expect the company to grow intrinsic value at a low double-digit rate.”
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Jim Cramer in a CNBC program in May discussed the importance of trusting the honest leadership of companies and sticking to their core business thesis despite tough times. To prove his point, Cramer gave the example of NVIDIA Corp (NASDAQ:NVDA):
“It matters when honest, smart executives tell you that something’s going incredibly well. I think you should believe them. This can be a very profitable strategy if you get it right. I give you the best example ever: when Jensen Huang, the visionary CEO of Nvidia, came on the show in September 2022, the stock had been eviscerated for the better part of a year. Everybody was giving up on tech in the face of the Federal Reserve’s relentless rate hikes. The stock had been beaten down to the 120s, but he told an incredible story about Nvidia’s ability to reinvent itself, including the notion of what artificial intelligence can really do if it’s powered by the right engine—Nvidia’s engine. Less than 30 years after Nvidia had been planning for ages, they had the best chips by far, and they built them out aggressively in advance. By the spring of 2023, Nvidia is making new all-time highs. By the way, we told you to stick with this one for the Charitable Trust because Jensen earned the benefit of the doubt. Nvidia was always able to reinvent itself in the past, so we told you to hang on even when things were at their most ugly in the great tech bear market of 2022.”
Nvidia shares have gained about 43% since May 10. Nvidia’s Hopper Infrastructure and now Blackwell form the core of AI infrastructure for LLM training and inference. But Nvidia’s growth is slowing compared to previous quarters amid competition and capex spending limitations from major companies. In the recently reported quarter, Nvidia’s annual revenue growth came in at 56%, compared with nearly 100% YoY growth in the past.
With its strong position in the data center market and rising demand, Nvidia is likely to keep growing, though not at the same pace it has in the past. Increasing competition from major companies like Broadcom is also expected to impact Nvidia’s margins in the long term.
Baron Technology Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2025 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a semiconductor and systems company specializing in compute and networking systems for accelerated computing. Its unmatched leadership in AI infrastructure, spanning GPUs, systems, software and networking solutions, continues to drive robust performance. However, NVIDIA’s stock came under pressure during the quarter, as media and investor narratives shifted toward skepticism, ranging from concerns over slower AI adoption to DeepSeek-related fears that future AI training and inference workloads may become more compute-efficient, reducing demand of accelerated computing systems. As discussed above, we believe these concerns are premature. Training cluster buildouts are progressing in line with expectations, while inference will progressively and steadily scale with usage as enterprises integrate AI into real-world workflows and consumers continue to adopt AI applications, such as ChatGPT, Grok, and Perplexity, to name just a few. Moreover, as we shift from standard Gen 1 (“gut based”) AI models to reasoning Gen 2 (long thinking) models, the query response can demand about 100 times more inference compute to provide a better answer. In contrast to these skeptical narratives, NVIDIA delivered a strong January 2025 quarter, which exceeded Street expectations, driven by data center compute revenues growing 93% year over year to $35.6 billion, with $11 billion of revenue from NVIDIA’s new Blackwell architecture, the fastest product ramp in the company’s history. On the February earnings call and at the GTC conference in March, CEO Jensen Huang reiterated a number of NVIDA growth drivers, including: (1) accelerated (GPU-based) computing architectures replacing legacy (CPU-based) computing architectures; (2) multiple generative AI scaling laws, including pre-training (more data, more compute, smarter models), post-training using reinforcement learning from human and AI feedback, and inference with test-time, long-reasoning compute; (3) agentic AI (autonomous, non-human workers); and (4) physical AI (robots, EVs, etc.).”
While we acknowledge the potential of NVDA, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than NVDA and that has 100x upside potential, check out our report about this cheapest AI stock.
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