Wall Street’s AI trade took a hard hit on October 30. Reuters reported that a selloff in tech shares pushed MSCI’s global index down 1.5%, after results from Intel and Amazon showed how much cash AI spending is burning. Intel fell 28.6%, and the Philadelphia semiconductor index lost more than 7%, its biggest one-day drop since late June. Alphabet’s shares had already slid 12.6% a day earlier, after it reported that its AI spending pushed its cash flow negative.
The nervousness had been building. Reuters reported on October 15 that South Korea’s KOSPI index, home to some of the world’s largest chipmakers, fell roughly 8% in a single session. Saxo Bank chief investment strategist Charu Chanana said the Asian selloff looked less like a sudden deterioration in technology fundamentals and more like a repricing of the cost of capital.
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Rates are a large part of that story. Bloomberg reported on October 4 that benchmark 10-year Treasury yields sat near 5.3%, and Franklin Templeton Institute head market strategist Chris Galipeau said the conversation would change if they reached 6%. Bloomberg Intelligence analyst Robert Schiffman added that hyperscalers such as Meta, Amazon, Alphabet, Microsoft and Oracle now have cash needs far beyond what they generate, which pushes them toward debt markets.
Oracle is one of the companies Schiffman names, and the gap between its share price and the view on Wall Street is the subject of our analysis of why most analysts still like Oracle after its steep fall.
Chip Stocks Face a Different Test
For chipmakers, the worry has been competition as much as cost. Bloomberg reported on October 13 that the Kospi fell 5.5% in one day after China’s CXMT said it had achieved a memory-chip breakthrough, which undercut the bullish case for its global peers. The report added that Broadcom chief executive Hock Tan likened the approach of some AI investors to gambling, and warned that the industry can run into funding limits.
Nvidia sits at the center of the debate, and you might also be interested in reading our piece on whether Nvidia is trading as if growth will stop.
The same Bloomberg report said JPMorgan Chase and Goldman Sachs took the rare step of limiting their exposure to a loan for AI startup Volta Infrastructure Holdings. In Asia, the collapse of Nvidia-backed data center operator Firmus Grid’s initial public offering is making investors far pickier about AI deals that depend on future earnings.
Our Methodology
For this article, we started by screening stocks in our hedge fund database and selected undervalued stocks with a forward P/E under 15. Then we kept those with a forward expected revenue growth rate of at least 15% to focus on cheap stocks with growing sales. We took the 10 with the largest market caps and ranked them in ascending order of the number of hedge funds that have stakes in them, as of Q2 2026, from our database of 1,006 hedge funds.
Note: All data was sourced on November 2, 2026.
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. Insider Monkey’s quarterly newsletter strategy selects 14 small-cap and large-cap stocks every quarter and has returned 612% since May 2014, beating its benchmark by 375 percentage points (see more details here).
10 Best and Cheap Stocks to Buy Heading into 2027
10. Dell Technologies (NYSE:DELL)
Market Cap: $261.88 billion
Forward P/E: 13.30
Forward Revenue Growth: 34.15%
Number of Hedge Fund Holders: 77
Dell’s chief financial officer, David Kennedy, told analysts the company is raising its expectations across every line of business, and the numbers behind that claim are large. Dell booked a record $60.9 billion of AI server orders in its fiscal second quarter and ended it with a $95 billion backlog of AI servers waiting to ship. It lifted its full-year revenue outlook to $192 billion as a result.
The story is not only about AI machines. Revenue from traditional servers and networking jumped 122%, as customers replace aging data center equipment and need more general computing power to run AI and agentic software. Management said customers are modernizing data centers for performance, efficiency and resilience, and that demand is running ahead of the supply Dell can get, which keeps orders coming even while some components are tight. It sees the opportunity reaching well beyond AI-optimized machines.
Dell also returned a record amount to shareholders in the quarter through buybacks and dividends. That backlog is the subject of our look at whether Dell’s order book justified the end of its discount.
9. AppLovin (NASDAQ:APP)
Market Cap: $79.61 billion
Forward P/E: 12.06
Forward Revenue Growth: 28.88%
Number of Hedge Fund Holders: 88
AppLovin’s revenue grew 53% from a year earlier in the second quarter, and its adjusted EBITDA margin reached 84%, yet the stock fell sharply because revenue landed just below the company’s own guidance. Management said the shortfall came from a slower pace of improvements to the advertising models that match app advertisers with users, not from weaker demand from advertisers.
The next round of model improvements arrived right after the quarter ended and is already live, according to chief executive Adam Foroughi. The company guided to third-quarter revenue growth of 46% to 48%, even after allowing for the higher computing costs of training bigger models. Chief financial officer Matt Stumpf said AppLovin spends on that computing only when it expects extra revenue in return, and that margins should stay near current levels over the long run.
Foroughi also said he believes the business can compound at roughly 30% a year as its consumer and e-commerce advertisers scale. The company kept buying back shares and carries little net debt. Whether the market has marked the stock down too far is the question behind our look at why AppLovin’s discount may be unwarranted ahead of its next report.
8. Charles Schwab (NYSE:SCHW)
Market Cap: $153.97 billion
Forward P/E: 11.33
Forward Revenue Growth: 17.29%
Number of Hedge Fund Holders: 95
Schwab’s clients are handing it more of their money and then using more of what it sells. Core net new assets, the money clients add to their accounts, hit a record $190 billion in the third quarter, up 38% from a year earlier, and chief executive Rick Wurster said that growth is coming from every one of its client-facing businesses and every kind of client. Managed investing flows also set a quarterly record.
That growth is turning into profit faster than costs are rising. Revenue reached a record while expenses grew more slowly, which lifted Schwab’s adjusted pre-tax profit margin to 54.8%. Schwab is also rolling out an AI assistant to handle administrative work so its advisers can spend more time with clients.
Lending adds a second engine. Bank loan balances grew 35% as clients borrowed against their portfolios through margin loans and pledged-asset lines, and chief financial officer Mike Verdeschi expects the interest margin to keep widening into 2027. What protects a franchise like this is the subject of our analysis of whether Schwab’s economic moat is widening or narrowing.
7. Western Digital (NASDAQ:WDC)
Market Cap: $130.70 billion
Forward P/E: 8.64
Forward Revenue Growth: 46.52%
Number of Hedge Fund Holders: 98
Western Digital reported that fiscal first-quarter revenue rose 55% from a year earlier, above the range management had guided, and then pointed to something faster. It expects revenue growth of 66% to 72% in the current quarter, driven by cloud customers that now account for most of its sales and by steady demand for high-capacity drives.
The profit side is improving even more quickly. Adjusted gross margin widened to 58.1%, because customers pay more per terabyte for denser drives and Western Digital is adding capacity by packing more data onto each drive instead of building more factories. Chief executive Irving Tan pointed to multi-year visibility from its largest customers. The company also expects to start volume shipments of its first heat-assisted recording drives in the first half of next year.
That discipline keeps the supply picture for hard drives tight, which supports pricing. The board responded by raising the quarterly dividend 17%, and the company also returned cash through buybacks. Whether today’s share price already captures all of this is the question behind our piece on Western Digital at today’s price.
6. Oracle (NYSE:ORCL)
Market Cap: $370.41 billion
Forward P/E: 11.05
Forward Revenue Growth: 31.91%
Number of Hedge Fund Holders: 119
Oracle’s investor day gave the market something it had been missing: dates. Chief financial officer Hilary Maxson said free cash flow is expected to turn positive in the second half of fiscal 2028 and reach at least $30 billion in fiscal 2029, far above what Wall Street had been expecting, according to data compiled by Bloomberg and FactSet. Capital spending is expected to peak in fiscal 2027 and 2028 before easing, and Oracle said growth is expected to become self-funded once it does.
Management also capped new fundraising through fiscal 2030 at $20 billion, split evenly between stock and debt, which answered the worry that the AI buildout would keep demanding outside money. Oracle reaffirmed its goal of at least $225 billion in fiscal 2030 revenue and pointed to $664 billion of contracted future revenue behind it.
Executives said vendor financing, customer-supplied hardware and customer prepayments will cut Oracle’s upfront cash needs, so customers carry part of the construction bill, and management promised to keep leverage in check as the buildout continues. Our analysis of whether Oracle’s economic moat is widening or narrowing takes up what protects that backlog once it has been delivered.
5. Sandisk (NASDAQ:SNDK)
Market Cap: $162.04 billion
Forward P/E: 3.85
Forward Revenue Growth: 102.14%
Number of Hedge Fund Holders: 128
Sandisk’s revenue rose 378% from a year earlier in its fiscal first quarter, and the company still raised its outlook for the next one. Adjusted gross margin reached 85.1%, far above what flash-memory makers earned a year ago. Chief executive David Goeckeler said customers have underestimated how much NAND they need, and that at least one of its biggest buyers has already come back for a second round of long-term contracts.
Those contracts matter because they cover about half of this fiscal year’s storage bits, with customers prepaying part of the cost. Demand from data center customers drove the quarter, and management expects data centers to remain the industry’s main growth engine through next year. Sandisk also put its cash to work, spending $5.0 billion on buybacks in the quarter, which its free cash flow covered, while carrying no debt. A stock split takes effect later this month, though it changes the share price and not the value of the company.
Whether a peak is already priced in is the question behind our look at Sandisk’s valuation on forward earnings.
4. Seagate Technology (NASDAQ:STX)
Market Cap: $139.43 billion
Forward P/E: 9.23
Forward Revenue Growth: 46.16%
Number of Hedge Fund Holders: 131
Seagate told investors that its debt-cutting phase is finished and that cash will now go back to shareholders. Chief executive Dave Mosley said the company has strengthened its balance sheet and regained investment-grade status, so share repurchases will become its main way of returning cash, with buybacks set to rise significantly starting in 2027. The company also raised its quarterly dividend and retired more debt after the quarter ended.
The cash comes from hard drives bought for AI data centers. Fiscal first-quarter revenue grew 61% from a year earlier, and adjusted operating margin hit a record 50.7% as pricing improved and customers moved to its higher-capacity Mozaic drives. Data center customers took 90% of the capacity Seagate shipped, and free cash flow reached nearly $1.5 billion.
Management guided to a further sequential increase for the December quarter and said it expects annual revenue growth to meaningfully exceed last year’s, citing the Mozaic ramp and the multiyear demand its customer agreements provide. That turnaround for a business many had written off is the subject of our article on how Seagate revived a technology everyone had buried.
3. Capital One Financial (NYSE:COF)
Market Cap: $127.52 billion
Forward P/E: 8.88
Forward Revenue Growth: 19.96%
Number of Hedge Fund Holders: 133
Capital One’s chairman and chief executive, Richard Fairbank, told analysts the Discover deal is paying off ahead of schedule. About $1.8 billion of annualized synergies have already appeared this year, mainly from moving Capital One’s debit cards onto Discover’s payment network and from cost savings. The company earned adjusted profit of $6.69 per share in the third quarter, and Fairbank said the earnings power envisioned when the deal was announced is now visible in the results.
The network is carrying more business as a result. Transaction volume on its Global Payment Network rose 25% after the debit conversion, and management plans to move credit card volume onto it more gradually. Credit looks healthier too, with the domestic card charge-off rate falling to 3.98%, lower than a year earlier, as delinquencies eased and recoveries on past losses came in strong.
The integration is also moving onto Capital One’s own technology. Every new Discover card is now issued on its platform, and management expects the older accounts to finish converting by the first quarter of 2027, which is the step that lets the combined company start trimming duplicate costs.
2. Micron Technology (NASDAQ:MU)
Market Cap: $968.10 billion
Forward P/E: 4.05
Forward Revenue Growth: 104.48%
Number of Hedge Fund Holders: 184
Memory makers rarely persuade customers to pay in advance, and Micron has done exactly that. It has signed 26 multi-year strategic customer agreements with take-or-pay volume commitments, and customers have put up $32 billion in financial commitments, mostly as cash deposits. Chief executive Sanjay Mehrotra said most of next year’s output is already committed, which is unusual for a business that used to sell its chips at whatever the market would pay on the day.
Those contracts sit on top of a record year. Fiscal fourth-quarter revenue reached $54.23 billion, with a gross margin of 87%, and both DRAM and NAND selling prices rose in the quarter as supply stayed tight. Micron has also agreed most of its 2027 high-bandwidth memory supply at significantly higher prices than this year, and management guided to another sequential increase in revenue for the current quarter.
The company also reported design wins with every top-tier computer maker for its AI workstation memory. The gap between those margins and the share price is what our article on what Wall Street is missing at Micron examines.
1. Nvidia (NASDAQ:NVDA)
Market Cap: $4.98 trillion
Forward P/E: 13.07
Forward Revenue Growth: 74.40%
Number of Hedge Fund Holders: 285
Nvidia’s chief financial officer, Colette Kress, told investors the company expects revenue to grow about 70% in fiscal 2028 and called that outlook supply-constrained, meaning customers want more chips than Nvidia can build. That guidance came after a second quarter in which revenue grew 106% from a year earlier.
The current quarter points the same way. Nvidia guided to $108 billion of revenue, and its Vera Rubin platform is shipping in production and is expected to make up about 20% of data center revenue. Management has said supply, not demand, is what limits how fast it can grow, and it flagged higher memory prices as a pressure on margins. The board also authorized an additional record share repurchase, which the company expects to use through fiscal 2028, and chief executive Jensen Huang said it reflects confidence in a lasting shift toward AI and accelerated computing.
Nvidia reports its next quarter later this month, with results on hyperscaler spending and its newest platform both in focus. Its push beyond data centers and into cars is covered in our piece on how Nvidia is expanding its autonomous driving opportunity.
READ NEXT: Is Nvidia (NVDA) Stock Priced Right? and Micron (MU) Looks Cheap at 5 Times Forward Earnings. Can Its Profit Boom Last?
