An increasing number of analysts are starting to believe that the AI-led bull market has more room to run amid new catalysts like the Fed’s rate cuts and strong earnings from major companies. Peter Oppenheimer, Chief Global Equity Strategist at Goldman Sachs, said in a recent interview with CNBC that the current bull market is driven by tech companies with strong profits, and we are not in a bubble yet.
“For sure we’ve had a strong period of returns, particularly driven by tech stocks in the US. But the first thing to bear in mind is that that is not related to AI specifically. That’s become the increasingly strong narrative. But actually the tech stocks and the US market driven by them have been outperforming for 15 years and that’s been completely underpinned by extremely strong profit growth,” the analyst said. “So as yet this dominance of these large companies and the tech sector in particular has really been based on fundamentals not speculation or irrational exuberance about the future. So I think it’s really supported by fundamentals so far. Of course that could change as speculation builds but I don’t think we’re in a bubble at this stage.”
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10. Adtran Holdings Inc (NASDAQ:ADTN)
Number of Hedge Funds Investors: 28
Adtran Holdings Inc (NASDAQ:ADTN) is a fiber networking and telecommunications company selling networking solutions. Chris Retzler, Needham portfolio manager, recently talked about the stock during a program on CNBC and said it’s one of his favorite small-cap picks. Here is what he said:
“Another name we think where… money is finally going to begin to flow into rural broadband buildout is a company that’s really not moved with the market at all called Adtran. We think it’s good value.”
The analyst said the stock has a “catalyst” coming in the near future.
9. Badger Meter Inc (NYSE:BMI)
Number of Hedge Funds Investors: 32
Badger Meter Inc (NYSE:BMI) makes flow measurement, quality and control solutions. It sells utility water smart metering solutions and software technologies. Talking about his favorite small-cap picks, Chris Retzler, Needham portfolio manager, said the following in a recent interview on CNBC:
“Badger Meter Inc (NYSE:BMI), which is a water meter business where meters run out over time. It’s water utilities, and with infrastructure being built out, we think that Badger Meter is a really well-run company.”
The Brown Capital Management Small Company Fund stated the following regarding Badger Meter, Inc. (NYSE:BMI) in its Q1 2025 investor letter:
“In the first quarter of 2025, we added three companies, Badger Meter, Inc. (NYSE:BMI), Red Violet (RDVT) and TransMedics (TMDX). Badger Meter makes water meters and other devices primarily for water utilities to measure usage by its customers and to monitor conditions across its system. In an industry that has historically grown in the single digits, Badger Meter has generated a revenue compound annual growth rate of 14% over the last five years. The company has achieved this growth rate primarily by 1) adding layers of technology on top of traditional monitoring systems and 2) by improving the accuracy and capabilities of its advanced meters which are replacing aging conventional meters in water system infrastructure. Badger’s technology advancements include optimizing the transmission of usage data from meters and using sensors to monitor water pressure across the system, to detect leaks and to perform in-line testing of water quality. All of this data flows into Badger’s robust analytics software platform, which allows water-utility customers to have better visibility across their entire system and make better decisions. The company has a strong balance sheet with $295 million in cash and no debt and has been profitable for many years. With $827 million in revenue in 2024, we believe Badger Meter has a long runway for growth as it sells into a total addressable market which we estimate to be around $20 billion and growing.”
8. Generac Holdings Inc (NYSE:GNRC)
Number of Hedge Funds Investors: 51
Chris Retzler, Needham portfolio manager, said in a recent program on CNBC that small-cap stocks have strong growth potential amid the Fed’s rate cut cycle. He believes money will “flow” into small-cap stocks in the near future. Generac Holdings Inc (NYSE:GNRC) is one of the favorite picks of the analyst. The company makes backup power generation products for residential, light commercial and industrial markets. Here is why the analyst likes the stock:
“Generac is one, as you mentioned. They have a data center play where they have diesel backup generation, and they’re coming out with new products there that would be competing with some of the incumbents. But the demand for backup generation is sizable for data centers.”
Diamond Hill Small-Mid Cap Fund stated the following regarding Generac Holdings Inc. (NYSE:GNRC) in its second quarter 2025 investor letter:
“Despite markets’ relatively sharp bounce following April’s downward volatility, we were able to initiate several new positions in the quarter at what we consider compelling valuations: Generac Holdings Inc. (NYSE:GNRC), Alaska Air Group, Knife River Corporation, Taseko Mines, Century Communities and FTI Consulting.
Generac Holdings is a leading energy technology solutions manufacturer with a dominant position in residential home standby power and a diverse offering of energy solutions. We anticipate the combination of increasing electricity usage and electrical grid instability will drive growing demand for Generac’s products. While the market seems to have focused on near-term consumer weakness and potential tariff-related headwinds, we believe the long-term outlook is constructive and capitalized on a discounted valuation relative to our estimate of intrinsic value to initiate a position.”
7. ASML Holding NV (NASDAQ:ASML)
Number of Hedge Funds Investors: 78
Anneka Treon, ING global head of private banking, said in a latest program on CNBC that ASML Holding NV (NASDAQ:ASML) is an “exciting” investment. She was commenting on the program’s host’s assertion that Nvidia could not “exist” without ASML Holding NV (NASDAQ:ASML).
“You need those EUV machines,” Treon said. “I think it’s an exciting investment. Essentially, innovation is an exciting place to invest in, and I think we can overthink, we can be skeptical, we can be cynical. However, if we zoom out and look at what is going on in markets, what are markets offering? Let’s take the US for example. You’re seeing easier monetary policy, you’re seeing easier fiscal policy, you’re seeing strong earnings growth, and you’re seeing capex booms. So, you don’t need to be too obsessed about one of the four. The general backdrop is very accommodating and very helpful.”
Bristlemoon Global Fund stated the following regarding ASML Holding N.V. (NASDAQ:ASML) in its third quarter 2025 investor letter:
“ASML Holding N.V. (NASDAQ:ASML) is a Dutch company that develops, assembles and sells photolithography (“litho” or “lithography”) machines that are used to print integrated circuit designs onto silicon wafers during the semiconductor fabrication process. ASML is the sole supplier of Extreme Ultraviolet (EUV) lithography machines that are used by the likes of TSMC and Intel to fabricate the most advanced chips for AI, smartphones and computing. It also has an effective monopoly over Deep Ultraviolet (DUV) machines which are the primary litho workhorses within a fab.
There is plenty of material in the public domain explaining why ASML is a one-of-a-kind business, so we won’t belabour the point here. Instead, we want to focus on why the opportunity to buy this business at a steep discount existed in the first place considering the AI investment boom taking place, and where our views diverged from the market.
Since attaining an all-time high of €1,002 in mid-2024, ASML subsequently experienced a -45% drawdown at the Liberation Day trough and has otherwise trodden water in the ~€700 range. A disastrous Q2 2025 earnings call where CEO Christophe Fouquet volunteered that ASML “cannot confirm” growth in 2026 despite no one asking him about 2026 further amped up the bearish narrative to eleven…” (Click here to read the full text)
6. Intel Corp (NASDAQ:INTC)
Number of Hedge Funds Investors: 82
Michael K. Farr, founder and CEO of Farr, Miller & Washington LLC, said in a recent program on CNBC that there are several tailwinds “on our back” and the current AI bull market could continue despite “warning signs.” The analyst also talked about Intel Corp (NASDAQ:INTC):
“We should look at some of the companies the government is buying and supporting. There are a couple of lithium companies, for instance, Intel. As we set floors and things, this is a new day in the US where the government is getting involved in individual companies. Maybe we need to make sure we own them as well as the government.”
5. Snowflake Inc (NYSE:SNOW)
Number of Hedge Funds Investors: 100
D.A. Davidson’s Gil Luria explained in a recent program on CNBC how AI is helping companies like Snowflake Inc (NYSE:SNOW). The analyst has a Buy rating on the stock and a $275 price target.
“I would say that it really hasn’t changed the markets for a lot of these companies, especially in the application software, quite as much as the narrative is, and it may take time for the markets to change as well. This is a technology that’s actually not a great fit for business software. Business software is very precise. It’s very integrated. There’s workflows, permissions, connections. So it’s going to take time until new AI software startups are going to disrupt the application software companies in spite of the narratives. But there are places in software where the benefit is very clear. You have to have the data all in one place — that benefits Snowflake Inc (NYSE:SNOW). You have to observe all the applications — that benefits Datadog. You’re developing a lot more code.”
Artisan Mid Cap Fund stated the following regarding Snowflake Inc. (NYSE:SNOW) in its third quarter 2025 investor letter:
“Notable trims in the quarter included Arista Networks, Snowflake and Tyler Technologies. Snowflake Inc. (NYSE:SNOW) is a leading player in data infrastructure, enabling organizations to unlock greater value from their data estates through unified access, scalable analytics and AI-driven insights across cloud environments. Following a strong performance and an elevated valuation, we trimmed our position—reflecting a degree of caution as increasingly powerful and cost-effective large language models raise questions about the long-term evolution of traditional data warehouse architectures and the role of centralized data platforms.”
4. Datadog Inc (NASDAQ:DDOG)
Number of Hedge Funds Investors: 103
D.A. Davidson’s Gil Luria explained in a latest program on CNBC how AI is helping companies like Datadog Inc (NASDAQ:DDOG). Here is what the analyst said:
“This is a technology that’s actually not a great fit for business software. Business software is very precise. It’s very integrated. There’s workflows, permissions, connections. So it’s going to take time until new AI software startups are going to disrupt the application software companies in spite of the narratives. But there are places in software where the benefit is very clear. You have to have the data all in one place — that benefits Snowflake. You have to observe all the applications — that benefits Datadog Inc (NASDAQ:DDOG). You’re developing a lot more code.”
D.A. Davidson has a Buy rating on Datadog Inc (NASDAQ:DDOG) with an $180 price target.
ClearBridge Large Cap Growth Strategy stated the following regarding Datadog, Inc. (NASDAQ:DDOG) in its third quarter 2025 investor letter:
“During the quarter, the Strategy initiated new positions in infrastructure software providers Oracle and Datadog, Inc. (NASDAQ:DDOG) and added to custom silicon developer Broadcom. Datadog operates a monitoring, observability and data security platform for cloud applications. Observability is a large and growing end market with penetration rising as use and complexity of applications grow, requiring more performance monitoring. Datadog is a leader in cloud application monitoring, offering ease of use, breadth and scalability superior to its competitors. We believe large language model (LLM) observability, a rapidly growing market due to the acceleration of Gen AI workloads, creates a new vector for growth not reflected in fundamental estimates. Datadog’s mission critical offering and rapid innovation should support attractive >20% revenue growth with an attractive valuation as the company further scales margin and cash flow.”
3. Salesforce Inc (NYSE:CRM)
Number of Hedge Funds Investors: 121
D.A. Davidson’s Gil Luria Right said in a recent program on CNBC that Salesforce Inc (NYSE:CRM) core business “suffered” because the company rushed to launch its AI technologies very early.
“The differentiation is between companies that have a core business that’s doing well, like ServiceNow, as opposed to companies with a core business that’s not doing well, like Salesforce. That’s the differentiation in application software, and that will only change when these upstarts come up and disrupt the core business. Until then, it’s going to be a slow roll, which is why Salesforce got in trouble — because they bet the farm on Agent Force before it was ready and they neglected the core business. That’s why you’ve seen this underperformance.”
Asked whether corporate America wasn’t yet ready for Salesforce Inc (NYSE:CRM) AI products, the analyst said:
“Companies aren’t ready because it’s really complicated to change your business software. If you think about the software you use every day at work, when’s the last time it changed? It doesn’t change very often. And you also have very high expectations for it. The results have to be exactly right. When we know that when we use AI software, it’s not exactly right, which we have a tolerance for as consumers and as employees, but in the technology stack, there’s no tolerance for the numbers being wrong. And so, it’s going to take time until we can use it in that context. So, yes, that’s correct — companies aren’t ready, but also Salesforce bet on it before it was even nearly ready, which is why the core business suffered.”
Vulcan Value Partners stated the following regarding Salesforce, Inc. (NYSE:CRM) in its third quarter 2025 investor letter:
“Salesforce, Inc. (NYSE:CRM) is the world’s leading SaaS vendor for customer relationship management (CRM) and salesforce automation (SFA) software, including AI agents. Salesforce offers many other products including software for marketing automation, customer service automation, analytics, application integration, and enterprise collaboration among others. Growth guidance for the upcoming quarter was slightly lower than anticipated leading some investors to question whether Salesforce’s growth was slowing and AI investments were not bearing fruit. These questions have been amplified by a bearish industry narrative that AI will take market share from enterprise software companies like Salesforce. We believe the company is poised for sustained growth and will actually benefit from AI. Salesforce’s software is deeply embedded in the enterprise. The company is expanding its product suite with multiple cloud offerings, proprietary data, and an emphasis on being an AI innovation leader. In addition, its customers would rather focus on running their businesses instead of designing, testing, maintaining, and securing internal AI products in an ever-evolving landscape. Salesforce is deeply entrenched within its customer base, has high retention, high recurring revenue, and is a very scalable business with high margin potential. Salesforce is dominant across its offerings and is constantly innovating with new products like Agentforce to deepen customer relationships and grow the business.
2. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Funds Investors: 235
Brad Gerstner, Altimeter Capital founder and CEO, said in a recent program on CNBC that he believes the AI demand will continue to increase and benefit major players like Nvidia. The investor believes Nvidia can “continue to compound”
“Yeah. It’s funny, 2005 I have one of the great portfolio managers of the world, Paul Reeder runs PAR Capital in Boston, and he would come into my office. I had all my public investment in Google, and Google would go up, and he would come and he’d say, well what are we going to do next? I would say buy more Google. Right, oftentimes the best ideas are your current ideas or the last ideas. When I look at NVIDIA Corp (NASDAQ:NVDA) over the course of the next three or four years, it’s going to continue to compound. Why? Because of the things we just talked about. You’ve got to build out this compute. Don’t trust, you know, just Sam Altman. If you listen to Satya Nadella, if you listen to Sundar, if you listen to Hock Tan, if you listen to any, they will all tell you the same thing — we are going to be compute constrained for the next several years.”
Polen Focus Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its third quarter 2025 investor letter:
“In early August we initiated positions in both NVIDIA Corporation (NASDAQ:NVDA) and Broadcom, after having not owned either company over the past 2½ years following the initial wave of enthusiasm around Gen AI. While we have long admired both companies, their highly cyclical business models have made it extremely difficult to forecast future earnings growth with any degree of conviction. Given our approach of seeking durable and persistent earnings growth that compounds over long holding periods, our concern in holding either was that we would be forced to endure a punishing downcycle within our typical holding period – there is very little room that in a concentrated portfolio of 20-30 companies. In fact, pre ChatGPT, NVIDIA had two punishing down cycles over the preceding five years.
That is specifically what has occurred for NVIDIA and Broadcom. While the sheer magnitude of demand for AI chips, servers and networking equipment was something that we clearly underappreciated, new incremental data points over the past few months lead us to conclude the current boom in AI chips and related hardware will likely continue for the foreseeable future giving us greater conviction over the trajectory of future earnings for both NVIDIA and Broadcom.
NVIDIA produces the fastest chips that are able to process compute intensive tasks like Gen AI training models extremely efficiently, are very flexible so can be used for any type of workload, and as a result are the chips in highest demand as the hyperscalers build out their Gen AI infrastructure (NVIDIA currently receiving 90c of every dollar spent on AI accelerated semiconductors). Their business has a very strong competitive moat, which is partly about the speed of their chips, but also the entire ecosystem they have built around them (programing language, training models and associated network effects)…” (Click here to read the full text)
1. Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Funds Investors: 294
Brad Gerstner, Altimeter Capital founder and CEO, said in a recent interview on CNBC that Microsoft is “misunderstood” when it comes to the benefits it’s getting from AI.
“We are investors in Microsoft Corp (NASDAQ:MSFT) and SoftBank in part for that reason. Okay. I think Microsoft Corp (NASDAQ:MSFT) in particular has really misunderstood how much they’re benefiting from the present moment. I’m going to have Satya on the BG2 pod coming up, and we’ll explore that in depth. But one of the things I would say on that is I think there’s still this underappreciation for the massive buildout that’s going on. If you think that’s going to occur, then SoftBank and Microsoft Corp (NASDAQ:MSFT) will continue to be big winners with those tailwinds.”
MSFT is up 25% so far this year.
Middle Coast Investing stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its third quarter 2025 investor letter:
“Big tech companies play in and are obviously affected by AI. We own Amazon (AMZN), Apple (AAPL), and a small position of Microsoft Corporation (NASDAQ:MSFT); of those, Microsoft has been seen as a winner due to its association with OpenAI. But really, the story seems to be that Microsoft’s Azure is gaining ground on Amazon Web services. AI is the source of demand driving the continued growth.”
While we acknowledge the potential of MSFT to grow, 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 MSFT and that has 100x upside potential, check out our report about this cheapest AI stock.
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