Top AI Stocks to Buy Ahead of 2025

As artificial intelligence (AI) continues to grow, three stocks stand out as strong investments heading into 2025. AI is still developing, and these companies are well-positioned to capitalize on the technology’s advancements.

Start Your Mornings Smarter! Wake up with Breakfast News in your inbox every market day. Sign Up For Free »

Nvidia’s Continued Dominance

Despite a recent dip in stock price, Nvidia (NASDAQ: NVDA) remains a leader in the AI space. The company has benefited significantly from the growing demand for AI infrastructure, as its graphic processing units (GPUs) are essential for training large language models (LLMs) and AI inference.

Nvidia’s success is fueled by its CUDA software program, which has established strong market presence and contributed to its impressive 90% market share in GPUs. The company recently reported a remarkable 94% revenue growth last quarter. Demand for GPUs is expected to rise, especially as companies like OpenAI and xAI focus on building their AI capabilities.

The stock currently has a forward price-to-earnings (P/E) ratio of under 29, with a price/earnings-to-growth (PEG) ratio near 0.9. This suggests that the stock remains attractively valued as it continues to grow.

Image source: Getty Images.

TSMC’s Strategic Positioning

Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC, is another key player in the AI ecosystem. It has emerged as the leading semiconductor contract manufacturer, thanks to the rising demand for AI chips and its commitment to expanding production capacity.

TSMC’s revenue surged by 36% last quarter, driven by its strategic partnerships with major clients like Apple, Nvidia, and Broadcom. The company now holds nearly 65% market share in the semiconductor space, with even higher percentages for advanced chips. This dominant position gives TSMC substantial pricing power, allowing it to increase prices, further boosting gross margins.

Valued at a forward P/E ratio just above 22 and a PEG ratio around 1.16, TSMC appears to be a solid investment considering its consistent performance and market position.

Alphabet’s Cloud Innovations

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has made significant strides in AI through its Google Cloud unit. Last quarter, Google Cloud’s revenue grew by 35% to $11.4 billion, with operating income jumping from $266 million to $1.95 billion. This growth highlights the scalability of cloud computing, a business model with high fixed costs but great profitability.

Alphabet attributes its success to using GPUs and customized tensor processing units (TPUs). These technologies lower inference times and allow customers to develop their own AI models. Recently, the company has showcased advancements in quantum computing and launched new AI tools, further solidifying its reputation for innovation.

Despite its prowess in search and video services like YouTube, Alphabet remains one of the most economically valued tech giants, trading at a forward P/E of 22, making it an appealing option for investors.

Make the Most of Your Investment Opportunities

If you have ever felt like you missed out on profitable investments, consider this your chance to catch up.

Our expert team has identified several companies that may soon see a surge, and now is an excellent time to explore these “Double Down” stocks:

• Nvidia: If you had invested $1,000 when we endorsed it in 2009, you could be sitting on $338,855!
• Apple: A $1,000 investment in 2008 would now be worth $47,306!
• Netflix: Investing $1,000 back in 2004 could have grown to $486,462!

Don’t miss these “Double Down” alerts on promising companies that may not present another opportunity like this soon.

Explore 3 “Double Down” stocks »

*Stock Advisor returns as of December 16, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.