The world of artificial intelligence (AI) these days is overwhelmingly dominated by discussions on generative AI and its implications. Simply put, generative AI is a form of machine learning through which AI software can produce text, video, images, and more. Basically, generative AI can produce any form of content on the basis of prompts. This form of AI became more widespread and renowned after the launch of ChatGPT and similar generative AI platforms, which revolutionized the AI sector while pulling in major tech companies to become part of the AI race.

This form of AI and its impact on the markets was discussed by Jim Stewart, a New York Times columnist, on CNBC's 'Squawk on the Street' on June 16. According to Stewart, big tech companies, especially those that are AI beneficiaries, have been leading the recent stock market rally. These include companies such as Microsoft Corporation ($MSFT), Alphabet Inc. ($GOOG), and NVIDIA Corporation ($NVDA). Stewart claimed that he was bullish on AI, especially considering the fact that this technology could boost productivity gains across different fields, including journalism.

AI and the US Stock Market

In May, NVIDIA Corporation ($NVDA) joined the group of companies with valuations in trillions of dollars. Many financial professionals today are attributing the gains of the S&P 500 to AI, primarily, with the focus being on NVIDIA Corporation ($NVDA) and other big tech companies that have begun incorporating AI and generative AI in their products and services.

This overwhelming focus on a select few number of companies that can successfully play the AI boom and come out victorious has led to many investors worrying that the stock market in 2023 will turn into a selection of a few winners and a lot more losers. The S&P 500 has "basically been the S&P 7," a reference to the fact that only seven major tech companies have been calling the shots so far in 2023, leading the market to heavily rely on them and their gains.

"You Are At The Starting Line Of AI"

This reality has led many professionals and corporations to realize that the AI boom is very real and may be here to stay. Companies today will be bound to figure out where they stand in this environment and how they can integrate AI into their business models to reap the benefits of this technological revolution. NVIDIA Corporation's ($NVDA) CEO, Jensen Huang, in an address at the National Taiwan University in May, stated that we are currently at "the starting line of AI" and that at this moment, we should run instead of walking. The implications of his statement are many, but perhaps the most obvious lesson to take away from Huang's speech is that companies and individuals today shouldn't be slow to join the AI race - they should try their best to become part of it and ensure they don't end up getting left behind by their competitors.

Keeping the above-mentioned market dynamics and developments in mind, I have compiled a list of the top tech stocks to consider investing in to play the AI boom. I included the obvious stock picks because of their contributions to this industry so far, but I also attempted to find other companies that wouldn't be the first to come to your mind when looking at AI beneficiaries today.

Our Methodology

To select our stocks, I looked at which companies analysts are expecting to benefit from the AI boom and shortlisted them based on the number of hedge funds holding stakes in them by using Insider Monkey's hedge fund data for the first quarter of 2023. The stocks are ranked based on this metric, from the lowest to the highest number of hedge funds long each of them.

Tech Stocks Benefiting From The AI Boom

1. Oracle Corporation ($ORCL)

On June 13, Keith Bachman at BMO Capital raised his price target on Oracle Corporation ($ORCL) from $96 to $132. The analyst also holds a Market Perform rating on the stock.

Oracle Corporation ($ORCL) is an information technology company based in Austin, Texas. The company's products and services address enterprise information technology environments across the world.

I saw 67 hedge funds long Oracle Corporation ($ORCL) in the first quarter, with a total stake value of $2.9 billion.

TD Cowen's John Blackledge expects Oracle Corporation ($ORCL) to benefit from the current AI boom because its cloud-computing platform can offer it some competitive advantages.

First Eagle Investment Management held 20.7 million shares in Oracle Corporation ($ORCL) at the end of the first quarter, making it the largest shareholder in the company.

2. CrowdStrike Holdings, Inc. ($CRWD)

CrowdStrike Holdings, Inc. ($CRWD) is an information technology company offering cybersecurity products and services. It is based in Austin, Texas.

There were 72 hedge funds holding stakes in CrowdStrike Holdings, Inc. ($CRWD) at the end of the first quarter. Their total stake value in the company was $2.4 billion.

CrowdStrike Holdings, Inc. ($CRWD) may be an interesting stock pick to play the AI boom considering the company has recently announced new AI-powered indicators of attack (IoA) models. These models can combat advanced adversary tradecraft by using machine intelligence to stop breaches.

Tal Liani at Bank of America holds a Buy rating on CrowdStrike Holdings, Inc. ($CRWD) shares as of June 16. The analyst also raised the firm's price target on the stock from $162 to $190.

3. Advanced Micro Devices, Inc. ($AMD)

Advanced Micro Devices, Inc. ($AMD) was spotted in the portfolios of 91 hedge funds in the first quarter, with a total stake value of $4.9 billion.

Based in Santa Clara, California, Advanced Micro Devices, Inc. ($AMD) is a semiconductor company that operates globally.

Joseph Moore, an analyst at Morgan Stanley, raised his price target on Advanced Micro Devices, Inc. ($AMD) shares on June 16 from $97 to $138. The analyst also holds an Overweight rating on the shares.

Advanced Micro Devices, Inc. ($AMD) is a chipmaker that TD Cowen's John Blackledge has picked as one of his tech stocks to play the AI boom. This is unsurprising considering the fact that this June, the company revealed its new AI chip in its race with NVIDIA Corporation ($NVDA). The new MI300X chip was described by Advanced Micro Devices, Inc. ($AMD) as "the world's most advances accelerator for generative AI."

Citadel Investment Group held 13.9 million shares in Advanced Micro Devices, Inc. ($AMD) at the end of the first quarter, making the fund the most prominent shareholder in the company for that quarter.

4. Adobe Inc. ($ADBE)

Adobe Inc. ($ADBE) is a diversified software and information technology company based in San Jose, California. The company's flagship product is its Creative Cloud, a subscription service offering members access to its creative products.

John Blackledge at TD Cowen sees Adobe Inc. ($ADBE) as a smart AI play because the company has begun rolling out new generative-AI content creation tools.

An Outperform rating was reiterated on Adobe Inc. ($ADBE) shares on June 16 by Kirk Materne at Evercore ISI. The analyst also raised his price target on the stock from $475 to $590.

A total of 99 hedge funds were long Adobe Inc. ($ADBE) in the first quarter, with a total stake value of $7.3 billion.

4. Apple Inc. ($AAPL)

Apple Inc. ($AAPL) may not be the first big tech company that comes to your mind when looking for AI plays, but with the company's new Vision Pro headset, some believe it may be getting involved in the machine learning space more than before.

Analysts at Bernstein hold a Market Perform rating and a $175 price target on Apple Inc. ($AAPL) shares as of June 14.

Our hedge fund data for the first quarter shows 131 hedge funds long Apple Inc. ($AAPL). Their total stake value was $165 billion.

Holding 915.6 million shares in the company, Berkshire Hathaway was the largest stakeholder in Apple Inc. ($AAPL) at the end of the first quarter.