In this article we discuss the Top 10 Unlikely AI Stocks with Tremendous Upside Potential.
Artificial intelligence was the main force that drove the US stock market to record highs last year. While major indices have since pulled back, the big question is whether the AI trade is fully priced in. Nothing could be further from the truth, as we are still in the early stages of AI development and revolution.
Tech giants pumping billions of dollars into data centres, building AI platforms and investing in startups affirm that AI growth is all but starting. According to former OpenAI chief scientist Ilya Sutskever, we are still in the early stages of the AI revolution, and significant changes are on the horizon.
“We’re in the beginnings of this generative AI revolution as we all know. And we’re at the beginning of a new generation of foundation models that are able to do reasoning and able to do long thinking,” Sutskever said.
After years of building the foundation to support the AI revolution, generative AI is entering a new phase of advanced foundation models that should take AI reasoning and thinking to new heights. Likewise, Sutskever insists we are on the cusp of super-intelligent, self-aware AI capable of reasoning like humans as tech giants work on game-changing innovations.
Nvidia CEO Jensen Huang shares similar sentiments, who insists there is about $1 trillion worth of computers that need updating for accelerated computing. Consequently, AI is looked upon to bring about much-needed changes by improving business efficiency and developing game-changing products. This implies that there is plenty of room for AI-driven revenue growth that should benefit many companies.
Amid the stock run-up experienced in 2024, investment professionals are also optimistic that the trend will persist in 2025. Companies should start reaping the rewards of adopting generative AI as others start generating some returns from their AI investments.
Similarly, Wedbush analyst Daniel Ives expects a 25% rise in tech stocks in 2025, keeping up with the momentum enjoyed last year. While most of the gains will be driven by reduced regulatory pressure under President Donald Trump’s administration, a more AI-friendly environment will also significantly impact the upward momentum.
“We believe tech stocks will be robust in 2025 on the shoulders of the AI Revolution and $2 trillion+ of incremental AI cap-ex over the next 3 years,” analysts led by Daniel Ives said in a note.
Some cracks are starting to emerge amid the expected growth around artificial intelligence. Although generative AI has advanced rapidly over the last two years, Silicon Valley has grown increasingly concerned in recent weeks that the pace of advancement is slowing. The lack of advancement between models published by the industry’s major players is one early sign. The primary issue might be that AI firms are running out of data on which to train their models.
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.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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10. Penguin Solutions, Inc. (NASDAQ:PENG)
Number of Hedge Fund Holders: N/A
Penguin Solutions, Inc. (NASDAQ:PENG) is a technology company that designs and develops enterprise solutions worldwide. It operates through three segments: Advanced Computing, Integrated Memory, and Optimized LED. On January 10th, the company partnered strategically with SK Telecom and SK Hynix. The agreement paves the way for Penguin Solutions, Inc. (NASDAQ:PENG) to pursue developing and delivering comprehensive data center solutions. It also comes on the heels of SKT committing to invest $200 million to help Penguin Solutions pursue growth opportunities in the AI infrastructure market. Consequently, the company remains in a solid position to deliver AI infrastructure solutions and services efficiently.
The strategic collaboration comes on the heels of research firm Loop Capital’s initiation of the stock on January 7th. The firm has a buy rating on the stock with a price target of $30, affirming that the company is a promising player in the generative artificial intelligence (Gen AI) sector.
9. POET Technologies Inc. (NASDAQ:POET)
Number of Hedge Fund Holders: 5
POET Technologies Inc. (NASDAQ:POET) designs, develops, manufactures, and sells discrete and integrated opto-electronic solutions. Known for its advanced optical technology, the company is already playing an integral role in the AI landscape with the innovative POET Optical Interposed. The platform is proving to be of great help in accelerating data transmission while optimizing energy use and computation power crucial to AI applications.
On December 31st, POET Technologies Inc. (NASDAQ:POET) confirmed the acquisition of Super Photonics Integrated Circuit Xiamen Co., Ltd. The acquisition supplements agreements with Globetronics Manufacturing Sdn. Bhd (“GMSB”) to produce optical engines for POET. The two assembly and testing facilities, which are all devoted to the 800G and faster transceivers needed for AI clusters, will have a combined annual production capacity of more than one million optical engines.
Until the company chooses a different location for the operation, POET Technologies Inc. (NASDAQ:POET) plans to keep assembling optical engines at SPX in the cleanrooms it has leased from SAIC.
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