We are currently witnessing ever-increasing use cases and growing acceptance of artificial intelligence (AI) in every walk of our life. From Apple’s Siri and Amazon’s Alexa as assistants to soon using deep reinforcement learning (DRL) and simultaneous localization and mapping (SLAM) to run our cars, AI is everywhere.
It’s not surprising that we are seeing an increasing number of investors flocking to tap the trend. Institutional investors and hedge funds, with their R&D into upcoming trends and “what’s next,” are also allocating more to this field.
Though there are a good number of promising AI stocks in their early stages, in today’s uncertain times, investors may be more interested in staying with ones that have stood the test of time, such as these:
The Best AI Stocks of May 2023
Forbes Advisor
In this article, I look into which of these stocks is getting more institutional attention and the lion’s share of hedge fund wealth.
From healthcare to retail, finance to education… AI is the catalyst for innovation across major industries. Ignite your portfolio—get the names of the top companies driving the AI revolution in this exclusive Forbes report, 12 Top AI Stocks to Buy Now.
Microsoft (MSFT)
Microsoft’s foray and investment into AI isn’t new to Wall Street anymore. The launch of a ChatGPT-powered Bing to take on rival Google’s first-quarter earnings call mentioned AI no less than 50 times.
MSFT is openly investing a lot into AI and institutional money is taking notice.
Institutional Fund Holdings in MSFT have increased over the past two years. Though stock price volatility dampened the overall assets under management (AUM) figure, the number of 13F funds investing in this AI stock has been increasing. The top 10 13F holders currently account for about 32% of MSFT stock ownership. More than 74% of Microsoft stock is held by institutions. Vanguard Group (8.6%), BlackRock (7.2%), and State Street (4.0%) lead institutional ownership of the stock, with FMR, George Capital, Morgan Stanleyand Norges Bank seen to have increased their stake in MSFT stock recently.
According to Nasdaq, as of May 18 there were 224 new positions in Microsoft stock by institutional investors vs. 108 sold out positions, indicating positive sentiment toward the stock from this investing community. Hedge funds have also been increasing their stake in Microsoft. As of March 31, top holders included Arete Wealth Advisors, Aspire Private Capital and Quilter Plc.
Next up: the e-commerce and cloud giant, Amazon.
Amazon (AMZN)
Amazon is another company that seems all-in when it comes to using artificial intelligence. From its plans to up-skilling Alexa to deliver stuff faster to increasingly using AI to drive advertising revenues, to even selling an AI-driven household robot, Amazon is leaving no stone unturned in the AI space.
Institutional money is taking notice and consequently, the number of 13F funds holding AMZN stock in their portfolios has increased over the past two years.
Amazon is more of a retail stock relative to MSFT, with institutional ownership accounting for 58.5% of its outstanding stock. According to Nasdaq, as of May 18 there were 241 new positions in Microsoft stock by institutional investors vs. 140 sold out positions, which indicates rising interest in the stock from the institutional spectrum.
Hedge fund data also indicates more stake increases than decreases over the last reported quarter, with Geode Capital Management being one of the more active hedge funds investing in the stock.
Let’s move on to one of the forerunners in the AI race–Nvidia.
Nvidia (NVDA)
Nvidia stock is up more than 100% year to date, and who would argue that it is anything other than AI driving this rally? NVDA is certainly one of the forerunners in the rise and adoption of artificial intelligence. The most powerful GPUs for AI come from the NVDA stable. Word on the street is that the company is now also getting into generative AI and supercomputing cloud services, as part of its new business model.
13F holdings for NVDA stock have increased, albeit at a slower pace than Microsoft or Amazon. Stock price support, especially in 2023 hasn’t been able to boost AUM with 13F holders. Stiff competition from other semiconductor players such as Advanced Micro Devices (AMD) and Intel (INTC) could be a reason.
After all, more than 65% of NVDA’s outstanding stock is already held by institutional investors, with about 34% of it being held by the top ten 13F investors. There is a strong bullish sentiment from the hedge fund community towards NVDA stock as evidenced by the huge (positive) difference between the new (504) vs. sold (118) positions in the stock recently.
Vanguard Group (8.3%) and BlackRock (7.3%) are the top two institutional holders of Nvidia and have been plowing into NVDA stock along with others such as T. Rowe Price, Geode Capital, JPMorgan Chase, Morgan Stanley, Northern Trust and Norges Bank.
Next up: Billionaire Thomas Siebel’s C3.ai.
C3.ai (AI)
The ticker itself (AI) speaks about the focus area of the company. This enterprise AI technology provider has been an institutional money magnet ever since its inception in 2009. The stock rose more than 15% after its fourth-quarter earnings beat the forecast, taking another step towards fulfilling its founder’s vision for the company.
The number of 13F funds holding C3.ai stock has bumped up over the last two years, though 13F AUM has been declining on account of the price slide. Recently, however, there appears to be renewed interest and investment flowing into the stock from institutional investors. More than 50% of AI stock is currently held by its top ten institutional investors. Founder and CEO Thomas Siebel holds a 27% stake. Vanguard Group (8.4%), Baker Hughes Holdings (7.9%), State Street (1.5%) and Goldman Sachs (1.5%) are among the top 13F institutional holders that have also increased their positions in the stock as of the last reported date. Hedge funds like Geode Capital, Renaissance Technology, Citadel Advisors and Tudor Investments have also been seen as more active with the stock lately. The new (123 positions) vs. sold out (40 positions) stats also point to the rise in institutional interest in the stock.
The next AI stock that’s driving up institutional interest is Google.
From healthcare to retail, finance to education… AI is the catalyst for innovation across major industries. Ignite your portfolio—get the names of the top companies driving the AI revolution in this exclusive Forbes report, 12 Top AI Stocks to Buy Now.
Alphabet (GOOGL)
Google and its CEO, Sundar Pichai, believe that AI is one of those inevitable disruptive deeper shifts much like the advent of personal computers, the internet or smartphones. According to Pichai, the company has “invested so deeply in AI for a while, and we have clarity of not just building AI in our products, clearly providing it to the rest of the world.” With AI, now poised to power almost all of Google’s product and service offerings, how can investors remain at bay?
With 78% of Alphabet’s Class A stock (GOOGL) held by institutional investors and the top ten 13F filers with GOOGL stock holding onto a good 32% of it, Google appears to be an attractive AI bet to institutional investors.
The number of funds holding GOOGL in their 13F portfolios has been rapidly rising over the past few years. While Vanguard Group (8.1%), BlackRock (7%) and State Street (3.6%) remain the top institutional holders, others, such as FMR, T. Rowe Price, Morgan Stanley, Norges Bank and Northern Trust, also feature among the top ten institutional holders of GOOGL stock. At the hedge fund level, Geode Capital and Wellington Management Group have been actively trading the stock.
As expected, the new buys–250 as of May 18 according to Nasdaq–exceed the sold out positions (146) by good measure.
Next up, Micron.
Micron Technologies (MU)
This largely held by institutional investors’ stock with 82.3% institutional ownership, doesn’t appear to be attracting more institutional money at the pace of its peers. Notable investors such as Vanguard Group, State Street, PrimeCap Management, Sanders Capital, Geode Capital and Capital International Investors have all recently decreased their stake in Micron. The top ten 13F holders of MU stock on aggregate account for about 40% of MU outstanding and 6 of 10 of them have shed stake as of last reported (except the likes of BlackRock with 7.8% and Capital Research Global Investors with about 6% stake).
The number of 13F funds holding MU stock has declined over the past year and a half. Though the company is optimistic about AI helping it boost sales in 2025, recent revenue drops and large reported losses are surely making the investing community wary about the stock at present.
Let’s move on to one of the pioneers in AI technology – Tesla.
Tesla (TSLA)
Apple cofounder Steve Wozniak recently slammed Tesla saying its self-driving AI will “kill people.” Now, this isn’t the first time Wozniak issued an AI warning. For years now, Tesla has been investing to develop and “deploy autonomy at scale in vehicles, robots and more.” However, the Street seems divided in its opinion as to whether this would bear fruit for Tesla stock.
While 13F funds holding Tesla have been on the rise, who is to say that this is driven by its foray into AI? After all, Tesla has made big strides (and announcements) as key steps to expand its reach and market share, and EVs remain the more prominent theme for investing in the company.
Institutional activity has been net positive on Tesla stock with CEO Elon Musk holding the lion’s share of stock at 22.8%, followed by Vanguard Group (7%), BlackRock (5.7%) and State Street (3.2%). Consequently, the top ten institutional holders account for more than 40% of Tesla stock, with Citadel Advisors, Geode Capital Management and Citadel Advisors among the active hedge funds trading in the stock recently. Of the outstanding Tesla stock in the market, about 45% is currently owned by institutional investors, with more investors now buying (429 new positions) into Tesla stock than selling out (189 positions) of it.
Takeaway
With more and more companies joining the AI bandwagon and increasing spending and future allocations toward AI development initiatives, the market for artificial intelligence and its offerings is poised to grow. The aggregate market is estimated to reach more than $1,591 billion by 2030, according to Precedence Research.
Gartner projects augmented intelligence and decision support to surpass other AI initiatives, and to account for 44% of the global AI-derived business value by 2030. With businesses increasingly investing in this growing space, Wall Street would expect institutional activity to remain robust as well.
While no one can guarantee that Microsoft, Amazon, Nvidia, C3.ai, Google, Micron and Tesla will continue to invest in AI and to garner institutional interest, there is no reason to think that they will change course. Keep them on your AI portfolio watchlist.
From healthcare to retail, finance to education… AI is the catalyst for innovation across major industries. Ignite your portfolio—get the names of the top companies driving the AI revolution in this exclusive Forbes report, 12 Top AI Stocks to Buy Now.
