In 2025, artificial intelligence emerged as a significant area of interest for investors, but experts now caution that the market’s heavy dependence on a handful of tech giants presents a substantial risk. Max Wasserman, co-founder and senior portfolio manager at Miramar Capital, emphasizes that investors should reassess their portfolios to ensure diversification. He warns that as the AI narrative evolves, the reliance on major players could create a single point of failure.
Wasserman shared his insights during a discussion with Yahoo Finance, highlighting specific concerns regarding OpenAI, which has attracted substantial funding in recent years. He pointed out that the company’s circular funding model raises questions about sustainability, suggesting that investors might ultimately be financing their own returns. “If AI goes south on us, tech will go,” stated Tom Essaye, founder and president of Sevens Report. This sentiment echoes a broader unease among investors regarding the current state of the AI market.
Notably, hedge fund manager Ray Dalio has also expressed concerns, suggesting that the industry might be in the early stages of an AI bubble. He noted that U.S. stocks have significantly underperformed compared to non-U.S. equities and gold in 2025, indicating that investments in AI may not be yielding the anticipated returns.
To identify promising AI stocks, a selection was made based on news articles, stock analysis, and press releases, with a focus on companies favored by hedge funds. As of Q3 2025, the following eleven AI stocks are noteworthy:
Top AI Stocks to Watch
Five9, Inc. (NASDAQ:FIVN) has seen interest from 29 hedge funds. However, on January 4, analyst James Fish from Piper Sandler downgraded the stock from Overweight to Neutral, adjusting the price target to $21.00 from $26.00. Despite gaining market share in the customer experience sector, Five9 faces execution challenges and stiff competition, which could limit its upside.
SentinelOne, Inc. (NYSE:S), with 42 hedge fund holders, was also downgraded to Neutral by Piper Sandler on January 5, with a new price target set at $17. Analysts noted that while the company’s technology remains strong, recent management changes and disappointing results have diminished its attractiveness compared to other stocks.
Baidu, Inc. (NASDAQ:BIDU), known for its advancements in AI, attracted the interest of 56 hedge funds. On January 4, HSBC analyst Charlene Liu raised the price target to $130.00 following the company’s plans to spin off its AI chip subsidiary, Kunlunxin. This move is anticipated to add value to Baidu, which is already a dominant player in the Chinese AI market.
Another notable stock, ASML Holding N.V. (NASDAQ:ASML), is favored by 82 hedge funds. On January 5, Bernstein upgraded its rating to Outperform, raising the price target to €1,300 from €800. The firm predicts a recovery in memory chip demand will benefit ASML, especially with the anticipated increase in production capacity from major manufacturers.
Arista Networks Inc (NYSE:ANET), which has 92 hedge fund holders, was upgraded to Overweight by Piper Sandler, with a new price target of $159.00. Analysts believe 2026 will be a pivotal year for the company, driven by its strong enterprise business and increasing investments in AI.
Tesla, Inc. (NASDAQ:TSLA) remains a focal point with 120 hedge fund holders. On January 5, UBS analyst Joseph Spak reiterated a Sell rating, setting a price target of $247.00. Despite advancements in AI, concerns linger over declining electric vehicle sales and negative earnings revisions.
Oracle Corporation (NYSE:ORCL), with 122 hedge fund holders, saw its price target adjusted to $280 by UBS on January 5. Analysts remain cautiously optimistic about Oracle’s potential for recovery, particularly as its new data center capacity ramps up.
With 194 hedge fund holders, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has been highlighted by Goldman Sachs, which raised its price target to NT$2,330.00 from NT$1,720.00. The firm anticipates robust demand for chips, driven by AI growth, prompting significant capital expenditure.
NVIDIA Corporation (NASDAQ:NVDA), a leader in AI technology with 234 hedge fund holders, has received an Outperform rating with a price target of $352.00 from Evercore ISI. Analysts believe NVIDIA is well-positioned for the ongoing shift towards parallel processing.
Lastly, Meta Platforms, Inc. (NASDAQ:META) has garnered attention from 273 hedge fund investors. Jefferies analyst Brent Thill reiterated a Buy rating on January 6, with a price target of $910.00. Meta’s ongoing investments in AI are expected to yield significant results in the coming years.
Investors are advised to remain vigilant and consider diversifying their holdings as the AI landscape continues to evolve. Recognizing the potential risks associated with over-reliance on a few major players could be crucial for future investment strategies.
