We recently published a list of 16 Trending AI Stocks on Latest Analyst Ratings and News. In this article, we are going to take a look at where Applied Materials, Inc. (NASDAQ:AMAT) stands against the other trending AI stocks.

In recent months, the AI industry has been presenting explosive opportunities in the development and deployment of AI infrastructure. Companies that provide AI chips, cloud services, and data storage solutions are poised to benefit from the growing demand for AI capabilities. For example, NVIDIA, a leading provider of AI chips, has seen the shares rally by 160% in 2024, driven by the increasing need for powerful processing capabilities in AI applications. Similarly, cloud service providers like Amazon Web Services and Microsoft Azure are seeing a surge in demand for their AI and machine learning services, making them attractive options for investors.

Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.

However, in this buzz around the new tech, investors should also stop and consider some of the risks and challenges associated with AI. Regulatory scrutiny on AI firms is intensifying, particularly around issues of data privacy, algorithmic bias, and the ethical use of AI. Governments worldwide are beginning to implement regulations that could impact how AI technologies are developed and deployed. For instance, the European Union has proposed an AI Act that seeks to create a regulatory framework that addresses the risks associated with AI while promoting innovation. This regulatory environment could lead to increased compliance costs and slower adoption rates in certain sectors, posing a potential risk for investors.

Another critical consideration for investors is the talent shortage in the AI industry. The demand for skilled AI professionals far outstrips supply, leading to fierce competition among companies for top talent. This talent gap could slow down the development and deployment of AI technologies, particularly in smaller companies that may not have the resources to compete with tech giants like Google and Microsoft for talent. Despite these challenges, the overall outlook for the AI industry remains highly positive. The continuous advancements in AI technologies, coupled with their increasing integration into various sectors, provide a strong foundation for future growth.

Read more about these developments by accessing Billionaire Stan Druckenmiller Is Betting On AI Infrastructure, Tobacco and Industrial Stocks and 10 Tech Stocks to Monitor Amid Market Volatility According to Bernstein Analyst.

Our Methodology

For this article, we selected AI stocks based on the latest news and analyst ratings. 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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Applied Materials, Inc. (NASDAQ:AMAT)

Number of Hedge Fund Holders: 77

Applied Materials, Inc. (NASDAQ:AMAT) provides equipment, services, and software for the semiconductor industry. The company, one of the most prominent in the chip space, has historically performed better than peers in terms of financials. Over the past decade, the revenue of the company has increased by nearly 350%. Consensus revenue estimates suggest continued growth for this metric, with revenue projected to increase from around $27 billion in fiscal 2024 to over $37 billion in fiscal 2028. There is plenty of potential for further acceleration due to the AI revolution.

Applied Materials, Inc. (NASDAQ:AMAT) is one of the most followed stocks on Wall Street. JPMorgan analyst Harlan Sur recently raised the price target on the shares to $250 from $240 and kept an Overweight rating, noting that the company reported solid July quarter results driven by accelerating demand in advanced foundry/logic, DRAM, high bandwidth memory and ICAPs combined with sustained strength in services. The analyst further added that the company was well positioned to benefit from multiple upcoming technology inflections that should drive continued outperformance versus wafer fab equipment over the next several years.

Overall, AMAT ranks 14th on our list of trending AI stocks on latest analyst ratings and news. While we acknowledge the potential of Applied Materials, Inc. (NASDAQ:AMAT) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Applied Materials, Inc. (NASDAQ:AMAT) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.