Despite dominating headlines and market caps, mega-cap stocks may be the most overlooked sector by active managers today. According to a recent Morgan Stanley note, mega-cap tech companies are now the most under-owned group relative to their weighting in the major indices among actively managed funds in over 16 years.
In an interview on CNBC on August 19, Morgan Stanley analyst Erik Woodrink said, “Most of the mega-caps are generally underowned.” The gap between the portfolio weightings and the representation in the S&P 500 of these stocks has significantly expanded. This has created a massive opportunity, according to Morgan Stanley. The firm noted that “mega-cap tech is underowned by about 140 basis points,” up from 115 basis points just a quarter earlier.
The Mag 7 stocks ex-Tesla are trading at an average forward P/E ratio of 26.76, which is reasonable, considering the premium they command. This holds true for mega-cap stocks across the board, which are trading at historically lower valuations. In this article, we’ll dive into the top 10 mega-cap stocks to buy according to hedge funds.
Our Methodology
To identify the top 10 mega-cap stocks to buy according to hedge funds, we used Finviz’s screener to choose stocks with at least a market cap of $200 billion, in order to include only mega caps. Additionally, we included only those mega-cap stocks that had an upside of at least 15%. We sorted the final list in ascending order of hedge fund sentiment as of Q2 2025.
Note: All data was recorded on September 3, 2025.
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).
Top 10 Mega-Cap Stocks to Buy According to Hedge Funds
10. Costco Wholesale Corporation (NASDAQ:COST)
Average Analyst Upside: 15.54%
Number of Hedge Fund Holders: 91
Market Cap: $419.73 billion
Costco Wholesale Corporation (NASDAQ:COST) is one of the top 10 mega-cap stocks to buy according to hedge funds. On August 28, Telsey Advisory maintained its Outperform rating on Costco Wholesale Corporation (NASDAQ:COST), while setting a price target of $1,100. As of September 3, the stock was trading at $945.18, meaning the firm’s implied upside for the stock is a solid 16.37% for the next twelve months.
Analysts cited the company’s membership-based model as a key driver of stable revenue growth. That translated into membership fee income growth of 10.4% year-over-year in Q3 of Fiscal Year 2025. The company reported a renewal rate of 92.7% in the U.S. and Canada and 90.2% globally during the quarter.
Costco’s revenue has grown at a compounded annual rate of 11.1% over the last four years, while improving its net margin from 2.4% to 2.9% in that period. Telsey is only one of the many admirers of the stock. Out of the 36 Wall Street analysts tracking the stock, 21 rate it as a Strong Buy or a Buy, while 14 think it’s a Hold, and only one analyst rates it a Strong Sell. The stock does command a premium, though, as it trades at a lofty forward P/E ratio of 52.29x.
9. Merck & Company, Inc. (NYSE:MRK)
Average Analyst Upside: 20.25%
Number of Hedge Fund Holders: 92
Market Cap: $210.18 billion
Merck & Company, Inc. (NYSE:MRK) is one of the top 10 mega-cap stocks to buy according to hedge funds. On September 2, Merck & Company (NYSE:MRK) shared early results from a study called CORALreef Lipids. This study tested a new medicine named enlicitide decanoate.
It’s a pill you take once a day to help adults with high cholesterol. The study showed the medicine worked well; it lowered Low-Density Lipoprotein (LDL), also known as bad cholesterol, and other fats in the blood more than a fake pill called a placebo. They checked this after 24 weeks.
What’s also important is that the medicine seems safe. People taking it didn’t have more side effects than those taking the placebo. If the drug gets approved, it could be a lot easier for patients because it’s a pill, not a shot. While shots have been efficient, they have faced adoption challenges
Merck plans to show these results to health authorities worldwide and talk about them at future meetings. This study is part of a bigger effort called the CORALreef program. It tries to help many people who still can’t get their cholesterol under control, even with medicine.
8. Alibaba Group Holdings Ltd (NYSE:BABA)
Average Analyst Upside: 18.17%
Number of Hedge Fund Holders: 101
Market Cap: $334.88 billion
Alibaba Group Holdings Ltd (NYSE:BABA) is one of the top 10 mega-cap stocks to buy according to hedge funds. On September 1, Citi reiterated its Buy rating on Chinese e-commerce giant Alibaba Group Holdings Ltd (NYSE:BABA), while increasing its price target from $148 to $187. The huge increase in the price target comes after the company reported stellar Q1 Fiscal Year 2026 results on August 29. The renewed price target implies an upside of 37.19% from the current price of $136.3 on September 3.
Citi was impressed by the company’s solid cloud growth and noted that the management sees growth sustaining going forward. The company’s Cloud Intelligence Group generated revenue of $4.66 billion in Q1, a solid 26% growth year-over-year. The stock has surged by over 13% since reporting earnings.
Alibaba’s domestic e-commerce platforms Taobao and Tmall reported a 10% year-over-year growth in Q1, which was driven by a 10% increase in customer management fees. The company’s push towards faster local delivery has yielded returns, with its quick commerce revenue rising 12% year-over-year.
Alibaba reported an EPS of $2.058 per share, beating Wall Street estimates of $1.977 per share. The company’s net margin expanded to 17.41%, compared to 5.24% in the previous quarter and 12.99% in the previous fiscal year. The stock is currently trading at a more than reasonable forward P/E of 15.83x, which is well below many global tech peers.
7. Walmart Inc. (NYSE:WMT)
Average Analyst Upside: 15.61%
Number of Hedge Fund Holders: 105
Market Cap: $791.15 billion
Walmart Inc. (NYSE:WMT) is one of the top 10 mega-cap stocks to buy according to hedge funds. On September 3, Tigress Financial maintained its Buy rating on Walmart Inc. (NYSE:WMT) while increasing its price target on the stock from $120 to $125. The increase in price target came after the retailing giant posted its Q2 Fiscal Year 2026 results on August 21. As of September 3, the stock was trading at $98.79, giving the stock a 12-month upside potential of 26.5%, based on Tigress’ new price target.
Tigress cited that the company demonstrated “robust” sales growth along with significant advancements in the digital and omnichannel segments and increased operating efficiency. The firm pointed out that its new price target represents a total return, which includes dividends, of close to 30%.
Walmart’s revenue in Q2 grew by a steady 4.76% to $177.4 billion. The growth was driven by the company’s U.S. comparable sales, which rose 4.6% year-over-year, which, in turn, was fueled by growth in the grocery and health & wellness segments.
To Tigress’s point of increased operating efficiency, the company’s net margin in Q2 expanded to a solid 3.96%, which is much higher than the average discount retailer in the US, which is typically slightly below 3%.
The management increased its full-year outlook for net sales to 3.75%-4.75% and adjusted EPS to $2.52-$2.62 per share, compared to $2.51 it reported for Fiscal Year 2025. However, the stock’s valuation is on a frothier side, with the forward P/E currently standing at 36.67x.
6. The Walt Disney Company (NYSE:DIS)
Average Analyst Upside: 16.3%
Number of Hedge Fund Holders: 111
Market Cap: $212.94 billion
The Walt Disney Company (NYSE:DIS) is one of the top 10 mega-cap stocks to buy according to hedge funds. On September 4, Needham analyst Laura Martin maintained her Buy rating on The Walt Disney Company (NYSE:DIS) with a price target of $125. At the time of Martin’s research note, the stock was trading at $116.80, implying a modest 7% 12-month upside.
Laura Martin still says Disney is a “Buy,” even after lowering Disney’s operating income and EBITDA for the last quarter of fiscal 2025 in her model. That said, she expects earnings per share to keep growing.
One of the reasons she reduced the income estimates was due to the company’s recent guidance, particularly its comments about the Content, Sales & Licensing segment during the earnings call. But Martin didn’t lower her forecast for the full year’s revenue.
In the third quarter of Fiscal Year 2025, Disney’s Content Sales, Licensing & Other segment posted an operating loss of $21 million on $2.26 billion in revenue. That’s a big drop from the same time last year, when the segment brought in $254 million in operating income on $2.1 billion in revenue.
The dip came mostly from higher movie production costs, especially for Lilo & Stitch, the company said, and weaker box office results for films like Elio and Thunderbolts. That’s in contrast to last year, when Inside Out 2 had a strong run in theaters and helped boost the numbers.
Analysts expect the company’s EPS to grow to $6.48 per share in fiscal year 2026, which would represent a solid 10% growth from the current fiscal year. The stock is currently trading at a Forward P/E of 18.42, which is slightly cheaper than the sector median of 20.57x.
5. Advanced Micro Devices Inc. (NASDAQ:AMD)
Average Analyst Upside: 19.15%
Number of Hedge Fund Holders: 113
Market Cap: $261.03 billion
Advanced Micro Devices Inc. (NASDAQ:AMD) is one of the top 10 mega-cap stocks to buy according to hedge funds. On August 26, Truist analyst William Stein upgraded Advanced Micro Devices Inc. (NASDAQ:AMD) from Hold to Buy and raised the price target from $173 to $213. As of September 3, the stock was trading at $161.52, which means the new price target implies an upside of 31.87%.
According to the analyst, customers are finally starting to take AMD seriously. Instead of just being a backup option or a bargaining chip against Nvidia, AMD is now being considered for some pretty large AI projects.
Stein argued that AMD’s situation today is a lot like when it first started gaining traction in the server chip space. Back then, it had less than 1% of the market until the launch of its “Rome” chips, which helped it grab a bigger slice as Intel ran into issues.
Looking ahead, the analyst thinks AMD could eventually grab about 10% of the burgeoning GPU market, compared to the current 6%. He’s also raised his earnings forecast and now sees AMD earning $7.89 per share by 2027. To put that in context, the current year EPS estimates stand at $3.85 per share. Stein expects that to more than double in two years as the company is expected to grow its revenue as well as expand margins. A big part of that confidence comes from AMD’s new MI355 chip, which he expects will play a major role in the company’s growth moving forward.
4. Eli Lilly and Company (NYSE:LLY)
Average Analyst Upside: 24.15%
Number of Hedge Fund Holders: 119
Market Cap: $705.88 billion
Eli Lilly and Company (NYSE:LLY) is one of the top 10 mega-cap stocks to buy according to hedge funds. Eli Lilly and Company (NYSE:LLY) is stirring up major excitement on Wall Street with its upcoming weight-loss pill, Orforglipron. Jefferies analyst Akash Tewari believes the drug could generate over $10 billion in yearly sales once it hits the market in 2026. Tewari is projecting that peak annual sales could eventually climb to a staggering $25 billion. To put that in perspective, Eli Lilly generated $45.04 billion in revenue in the previous fiscal year.
That’s more than what Novo Nordisk made from Ozempic in 2024, and more than double the sales of Lilly’s own diabetes drug Mounjaro. The key difference? Orforglipron is a pill and not an injection, which could attract a huge number of people who want easier, needle-free weight-loss options.
Lilly recently said it has finished collecting all the trial data needed to apply for FDA approval. If the approval comes through as expected in the first half of 2026, the company plans to launch the pill globally that summer.
The stock has underperformed the market over the last year, falling by nearly 25% since it peaked in August of last year. Tough competition from Novo Nordisk and lofty valuation were the primary drivers of the decline. Despite the decline, the stock still trades at a forward P/E of 48.25x, a much higher premium compared to its pharma peers.
3. NVIDIA Corporation (NASDAQ:NVDA)
Average Analyst Upside: 25.78%
Number of Hedge Fund Holders: 235
Market Cap: $4.15 trillion
NVIDIA Corporation (NASDAQ:NVDA) is one of the top 10 mega-cap stocks to buy according to hedge funds. Seaport analyst Jay Goldberg remains skeptical of NVIDIA Corporation (NASDAQ:NVDA), maintaining a Sell rating and a Street-low price target of $100.
While most analysts stayed bullish after Nvidia’s Q2 Fiscal Year 2026, Goldberg flagged the company’s slowing Data Center growth as a red flag, just 6% sequentially (quarter-on-quarter), its weakest pace since the AI boom began. He also noted that Compute revenue actually declined 1%, even with the full launch of Blackwell GPUs.
Goldberg criticized Nvidia’s vague growth narratives, like “Agentic AI,” calling them more hype than substance. He also warned that U.S.-China trade issues could delay shipments, giving rivals time to catch up.
However, the rest of Wall Street remains bullish on the stock, with 47 of 65 Wall Street firms tracking it rating NVDA a Strong Buy, and 11, a Buy, while 6 rate it a Hold.
While the company’s growth rate may be decelerating, it is still growing at a ridiculous pace for a company of its size. On a year-on-year basis, the company’s revenue jumped 55.5% to $46.74 billion. However, as Goldberg pointed out, the revenue grew only 6% sequentially, which is still a robust 26.64% on an annualized basis.
The company’s margin continued to improve from the high watermark it set in Q4 of the previous fiscal year. The net margin in Q2 stood at 56.53%, beating Q4’s 56.17%. The company’s net margin for Q1 was affected by inventory write-offs in China, but was still at a healthy 42.61%. The fact that the company can charge such a high premium shows the clout it has among big tech hyperscalers.
2. Meta Platforms, Inc. (NASDAQ:META)
Average Analyst Upside: 17.55%
Number of Hedge Fund Holders: 260
Market Cap: $1.88 trillion
Meta Platforms, Inc. (NASDAQ:META) is one of the top 10 mega-cap stocks to buy according to hedge funds. Meta Platforms, Inc. (NASDAQ:META) is doubling down on its ambitions in India through a new joint venture with Indian conglomerate Reliance Industries. The partnership, announced on August 29 during a Reliance shareholder meeting, is aimed at advancing AI across the country. Meta and Reliance will be investing $100 million, 70% from Reliance and 30% from Meta, for developing “sovereign, enterprise-ready AI” for India.
Meta CEO Mark Zuckerberg described the partnership as a major step toward making AI accessible to everyone and eventually building toward “superintelligence”. The joint venture will use Meta’s open-source AI models to power applications in sectors like retail, telecom, finance, and energy, where Reliance is dominant.
Back in 2020, Meta invested $5.7 billion in Jio Platforms, the digital arm of Reliance Industries. The deal gave the tech behemoth a 9.99% stake in Jio Platforms.
Meta has been making a big AI push throughout the year. The company has been spending billions to compete with the likes of Open AI and Google. Just last month, Zuckerberg split the company’s “Meta Superintelligence Labs” (MSL) into four specialized teams focusing on research, “superintelligence,” products, and infrastructure.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Average Analyst Upside: 16.34%
Number of Hedge Fund Holders: 335
Market Cap: $2.51 trillion
Amazon.com, Inc. (NASDAQ:AMZN) is one of the top 10 mega-cap stocks to buy according to hedge funds. Amazon.com, Inc. (NASDAQ:AMZN) is changing the way Prime members share their benefits. Starting October 1, 2025, people who don’t live with the main account holder will no longer be able to use the Prime free shipping perk unless they buy their own membership. This was announced on September 2, signaling a move to tighten who can use Prime benefits.
Instead of the old sharing system, Amazon will focus more on its Amazon Family plan. This plan allows one adult to share benefits with another adult, up to four children, and four teens, as long as they all live at the same address.
The change comes after reports showed fewer new Prime signups in the U.S. before this year’s Prime Day compared to last year. Prime Day lasted four days this summer, and although growth was slower in the U.S., Amazon said signups were record-breaking worldwide.
By limiting how benefits are shared, Amazon wants to push more people to sign up on their own. This could help boost revenue, especially as the number of new U.S. members starts to slow down. Amazon had 197 million Prime members in the US, according to CIRP, as of the end of Q2.
While we acknowledge the potential of AMZN 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 AMZN and that has 100x upside potential, check out our report about this cheapest AI stock.
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