AI Stocks Show Promise Despite Recent Market Challenges

In 2023, artificial intelligence (AI) stocks emerged as the leading contenders in the financial arena, helping propel the Nasdaq, S&P 500, and Dow Jones Industrial Average to double-digit gains. Investor enthusiasm surrounded the technology’s potential to revolutionize tasks ranging from company automation to accelerated drug discovery. This sentiment boosted companies’ revenue growth and stock performance.

Investors eager to capitalize on the AI narrative heavily invested in AI stocks, resulting in many experiencing significant double- and triple-digit gains going into 2024. However, recent concerns regarding the economy and President Donald Trump’s tariffs on imports from Canada, China, and Mexico have negatively impacted the overall stock market, particularly affecting growth stocks like those in the AI sector.

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However, there is positive news for AI investors. The fundamental story of AI remains intact. Companies continue to funnel billions into AI infrastructure and platforms, with analysts projecting that the current $200 billion AI market could grow to $1 trillion by the end of the decade. Following recent price declines, investors now have the chance to acquire these stocks at attractive levels.

Two Strategic AI Stocks to Consider

Let’s explore two compelling stock options to tap into the potentially lucrative AI market.

Image source: Getty Images.

1. Nvidia

Nvidia (NASDAQ: NVDA) initially focused on providing graphics processing units (GPUs)—the essential chips responsible for AI tasks like data training and inference. However, the company has expanded significantly, creating a comprehensive AI ecosystem that serves clients throughout their AI implementations.

This growth has led to impressive earnings, with revenue rising dramatically. In its latest fiscal year, Nvidia’s revenue skyrocketed by 114%, reaching an all-time high of $130 billion. Notably, this growth occurs at a high profitability level, with gross margins consistently above 70%.

Nvidia caters to major tech players, including Meta Platforms and Microsoft, as they enhance their AI infrastructures. These companies possess the financial capacity to sustain investments, and their commitment to succeeding in the AI sector indicates they will rely on Nvidia’s powerful products. With a strong emphasis on innovation and annual GPU updates, Nvidia is well-positioned to maintain its market leadership.

Currently, Nvidia trades at 24 times earnings estimates, a decrease from around 50 just weeks ago, making it an essential buy for AI-focused investors.

2. Amazon

Many associate Amazon (NASDAQ: AMZN) primarily with e-commerce; however, the company is also making significant strides in the AI sector. Amazon leverages AI to enhance e-commerce efficiency and offers AI products and services through its Amazon Web Services (AWS) unit.

AI has streamlined operations within its e-commerce segment, optimizing delivery routes and improving customer experiences through features such as Rufus, Amazon’s AI shopping assistant. These enhancements are crucial for retaining customer loyalty.

Amazon’s AWS has recently reached an impressive $115 billion annual revenue run rate, bolstered by its AI offerings. The company provides a variety of tools for customers on their AI journeys—ranging from premium Nvidia chips to its proprietary affordable chips and an integrated AI service called Amazon Bedrock for developing generative AI applications. As the leading cloud services provider, AWS has access to an expansive customer base.

Amazon stock currently trades at 31 times earnings estimates, down from over 45 late last year. Given Amazon’s successes and strong market positioning in AI, it is a solid choice for investors looking to ride the potential trillion-dollar AI wave.

Seize the Opportunity Before It’s Past

Have you ever felt you missed out on investing in successful stocks? Now might be your chance.

Our expert analyst team frequently issues a “Double Down” Stock recommendation for companies believed to be on the brink of considerable growth. If you’re concerned about having missed your opportunity, now is an opportune moment to invest before prices rise. The data supports the potential:

• Nvidia: A $1,000 investment made in 2009 could have grown to $282,016!*
• Apple: A $1,000 investment made in 2008 could have reached $41,869!*
• Netflix: A $1,000 investment made in 2004 could have swelled to $482,720!*

We are currently issuing “Double Down” alerts for three exceptional companies, and this could be a rare opportunity.

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*Stock Advisor returns as of March 10, 2025.

Randi Zuckerberg, a former director at Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is on The Motley Fool’s board of directors. John Mackey, the former CEO of Whole Foods Market, an Amazon subsidiary, is also on the board. Adria Cimino has investments in Amazon. The Motley Fool holds equity in and recommends Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool encourages long-term positions like January 2026 $395 calls on Microsoft and short positions on January 2026 $405 calls on Microsoft. The Motley Fool abides by strict disclosure policies.

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