The artificial intelligence (AI) boom isn’t slowing down, and the biggest hedge funds know it, that is why institutional investors are diving into AI stocks at the fastest pace since 2021, signalling strong confidence in the sector’s future.

Despite many AI giants trading at 52-week highs, hedge funds are betting that there’s still significant upside left. Today, we’re looking at three key stocks riding this wave: NVIDIA (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), and Taiwan Semiconductor Manufacturing (NYSE: TSM). These companies form the backbone of AI’s supply chain, making them prime targets for investors seeking high-conviction plays.

NVIDIA: The AI King That Just Won’t Slow Down

Stock Price Forecast:
📈 12-Month Target: $168.21 (24.79% Upside)
📊 Analyst Ratings: Moderate Buy (42 Analysts)
🔼 High Forecast: $220.00
🔽 Low Forecast: $87.00

NVIDIA’s dominance in AI chips is undisputed, and hedge funds are taking notice. UBS Asset Management increased its stake by 11.4% last quarter, bringing its total holdings to $26.9 billion. This signals institutional confidence in NVIDIA’s trajectory.

The company is set to report earnings on February 26, 2025, with analysts forecasting a major jump in earnings per share (EPS) to $3.28, up from $0.81 last quarter. This explosive growth is why the market is willing to pay a premium valuation—with NVIDIA’s price-to-book ratio soaring to 80.8x, far beyond the sector average of 7.0x.

Despite its steep valuation, NVIDIA remains a key stock to watch in the AI-driven market.

Advanced Micro Devices: The Undervalued AI Play

Stock Price Forecast:
📈 12-Month Target: $155.83 (41.80% Upside)
📊 Analyst Ratings: Moderate Buy (32 Analysts)
🔼 High Forecast: $250.00
🔽 Low Forecast: $110.00

For investors looking for AI exposure without NVIDIA’s premium valuation, AMD is gaining attention. The stock currently trades at a significant discount, despite its strong positioning in the AI chip race.

Wall Street sees potential upside in AMD’s stock, with Benchmark analysts maintaining a $170 price target, which would represent a 50.2% gain from today’s levels. With AI demand soaring, AMD is expected to remain a major player in the sector.

Taiwan Semiconductor: The Backbone of AI Manufacturing

Stock Price Forecast:
📈 12-Month Target: $220.00 (13.12% Upside)
📊 Analyst Ratings: Moderate Buy (5 Analysts)
🔼 High Forecast: $255.00
🔽 Low Forecast: $170.00

AI chipmakers like NVIDIA and AMD rely on Taiwan Semiconductor (TSMC) for production. As the world’s leading chip manufacturer, TSMC plays a critical role in the AI revolution.

The company’s monthly revenue grew 5.4% in January, with a 12-month growth rate of 35.9%. With analysts forecasting 18% EPS growth, TSMC remains a key supplier in AI’s supply chain.

As AI continues to reshape industries, hedge funds have increased their positions in NVIDIA, AMD, and TSMC, reinforcing their belief in the sector’s long-term growth. However, with valuations running high and market conditions evolving, investors should carefully weigh potential risks and opportunities before making any decisions.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

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