AI Chip Market Heats Up: Nvidia Dominates as Competitors Gain Ground

Prediction: 1 Stock That Will Be Worth More Than Nvidia 10 Years From Now | The Motley Fool

Nvidia (NVDA 3.40%) has become the second-largest company in the world, with a market capitalization of $3.3 trillion as of this writing. The terrific demand for artificial intelligence (AI) chips is playing a key role in helping the chipmaker achieve this position. The semiconductor giant's impressive rise can be justified by the phenomenal increase in its revenue and earnings over the past couple of years, thanks to the dominant position it has built for itself in the market for AI chips. After all, Nvidia reportedly controls somewhere between 80% to 85% of the market for AI chips. More importantly, it has been diversifying into additional avenues so that it can keep growing at a healthy rate over the next 10 years. Nvidia's terrific share puts it in a solid position to maintain its impressive growth in the coming years, considering that the AI chip market is expected to generate $621 billion in revenue by 2032, according to market research provider SNS Insider. However, the growing competition within AI chips, and efforts being undertaken by major cloud companies to reduce their reliance on Nvidia by developing in-house chips, could pose challenges for the company in the long run. Of course, Nvidia has the potential to remain the top player in the AI chip market. It's focused on staying ahead of its rivals by building a robust supply chain and maintaining a technological advantage. At the same time, the company's expansion into additional verticals such as enterprise software, AI agents, autonomous vehicles, and cloud gaming, and the massive opportunity created by the shift to accelerated computing, indicate that Nvidia has an addressable market that's worth well over $1 trillion. Nvidia is expected to finish its ongoing fiscal year 2025 with an estimated revenue of $129 billion, which would be a 112% increase from the previous year. So, its huge addressable opportunity tells us that the chipmaker still has a lot of room for growth. However, there is another company that may be able to overtake Nvidia in the coming decade, thanks to its already-established position as a leader in multiple lucrative end-markets -- Microsoft (MSFT 2.56%). Let's take a look at Microsoft's growth drivers for the next decade to learn why its market cap could be higher than Nvidia's after 10 years. Microsoft is the third-largest company in the world, just behind Nvidia, with a market cap of $3.11 trillion. Its growth is nowhere near Nvidia's when we consider that Microsoft's revenue in the ongoing fiscal year 2025 is expected to increase by 13% to $278.6 billion (per consensus estimates), while earnings are forecast to jump by 10.5% to $13.04 per share. However, as the following chart tells us, Microsoft's growth is expected to pick up over the next couple of years. It's not surprising to see why analysts are expecting this Magnificent Seven company's growth rate to accelerate. After all, Microsoft has been investing aggressively in AI infrastructure and is building "long-lived assets that will support monetization over the next 15 years and beyond." Though there have been concerns regarding the payoff of Microsoft's AI investments, savvy investors should note that the company is serving multiple AI-focused markets that are on track to become enormous over the next decade. For instance, Goldman Sachs estimates that the global cloud computing market could generate $2 trillion worth of revenue by 2030, thanks to the deployment of generative AI-focused offerings. The investment bank forecasts a compound annual growth rate of 22% for the cloud computing market from 2024 to 2030. If we assume even a 10% annual increase in cloud spending over the next five years, the size of this market could exceed $3.2 trillion. Microsoft is the second-largest player in the cloud computing market with a 20% share, according to Synergy Research. It has been gaining ground in this market thanks to AI, with management pointing out that AI contributed 12 percentage points to the growth of its Azure cloud service last quarter. Assuming Microsoft could increase its cloud market share to 25% after a decade, it could generate $800 billion in revenue from this segment alone (based on the $3.2 trillion addressable market calculated above). That would be a massive increase over the $105 billion revenue Microsoft's Intelligent Cloud business generated in fiscal 2024. The market for AI agents is another budding area that could be a big driver for Microsoft in the coming decade. Roots Analysis estimates that AI agents could clock 40% annual growth through 2035, generating an annual revenue of nearly $217 billion. This market is currently in its early phases of growth, but it's expected to gather solid momentum in the future. That's because agentic AI systems are expected to witness widespread adoption, as they can solve complex problems autonomously. AI agents absorb huge amounts of data from several sources, and they can analyze and solve problems, execute tasks, and even construct business strategies. Microsoft is already in a nice position to capitalize on this opportunity. The company has already deployed its Copilot generative AI assistant for enterprise and individual customers, workplace collaborators, and developers. On its October 2024 earnings conference call, Microsoft management remarked that "nearly 70% of the Fortune 500 now use Microsoft 365 Copilot, and customers continue to adopt it at a faster rate than any other new Microsoft 365 suite." Though Microsoft doesn't spell out the number of Copilot users it has, third-party reports indicate that the generative AI assistant was used by 28 million active users in 2024. That's impressive considering that Microsoft started rolling out this service in November 2023. Now, Microsoft is looking to push the envelope further with Copilot Studio, a platform that will allow users to "easily create, manage, and connect agents to Copilot." The company launched autonomous agents for supply chain, sales, service, and finance professionals in October 2024, and it points out that it will be creating more agents in the future as well. Considering that Microsoft is the leader in computer operating systems globally with an estimated market share of over 67%, it already has a solid base of users to whom it can sell its Copilot offerings. All this indicates why Microsoft has the potential to become a bigger company than Nvidia in the coming decade. A massive addressable market such as cloud computing where it is capable of cornering a higher market share, along with emerging opportunities such as AI agents where it's already setting itself up for success, could power its growth for the next decade. And as Microsoft is trading at 35 times earnings, compared to Nvidia's earnings multiple of 54, it seems worth buying for the long haul based on the points discussed above.

3 Blockbuster Semiconductor Stocks to Buy for a Happy New Year in 2025 | The Motley Fool

Nvidia (NVDA 3.40%) owns a dominant share of the market for AI data center chips, so it could be one of the biggest beneficiaries of that spending. But it won't be the only winner -- Advanced Micro Devices (AMD 3.33%) has an impressive lineup of AI hardware products rolling out this year, and Micron Technology (MU 5.99%) is one of Nvidia's key component suppliers. Here's why investors could do well by adding all three stocks to their portfolio. Developing AI models requires a substantial amount of computing power, and Nvidia's graphics processors (GPUs) are the most popular chips for that purpose. Tech giants are racing to fill their data centers with as many of them as possible, not only to deploy their own AI software, but also to rent the computing capacity to other AI developers for a profit. Nvidia's H100 was the best AI GPU in the industry during 2023, and for most of 2024 until the newer H200 started shipping. But the company launched a new lineup of GPUs last year based on its more advanced Blackwell architecture, which offers a substantial leap in performance. The Blackwell GB200 NVL72 system, for example, can perform AI inference 30 times faster than the equivalent H100 system, paving the way for the most advanced AI models to date. Nvidia started sending GB200 samples to customers at the end of 2024, but shipments are expected to scale rapidly this year. In fact, Blackwell revenue could surpass Hopper revenue (the previous architecture which powers the H100 and H200) as soon as April. Nvidia's fiscal year 2025 will wrap up at the end of this month, and the company is on track to deliver a record $128.6 billion in total revenue, representing 112% growth compared to fiscal 2024. If recent quarters are any indication, around 88% of that revenue will be attributable to the company's data center segment, where it accounts for AI GPU sales. Investors will be focused on Blackwell sales during this calendar year, but reports have emerged that development of Nvidia's next-generation architecture, "Rubin," is six months ahead of schedule. That means the company could preview an entirely new set of GPUs before the end of the year, which will give investors some insight into potential revenue growth for calendar 2026 and beyond. Despite the 700% gain in Nvidia stock over the past two years, it still looks cheap, so it probably isn't too late for investors to add it to their portfolio. AMD supplies processors for some of the most popular consumer electronics in the world, from Sony's PlayStation 5 to the infotainment systems inside Tesla's electric vehicles. However, the company has also become a competitor to Nvidia in the data center. Last year, AMD started shipping its MI300X AI GPU, which was designed to compete with the H100. It has attracted many of Nvidia's top customers like Oracle and Microsoft, some of which are yielding lower costs and better performance by using it over the H100. AMD built on that success by recently launching the newer MI325X, but investors are looking ahead to the release of the MI350 series. The MI350 is built on AMD's new Compute DNA (CDNA) 4 architecture, which is designed to compete directly with Blackwell. It's expected to deliver an eye-popping performance increase of 35 times compared to the MI300X. The new GPU is expected to ship in the second half of 2025, so it's quite a ways behind Nvidia's GB200, but its incredible output should make it an attractive piece of hardware nonetheless. AMD will report its fiscal year 2024 financial results later this month. CEO Lisa Su went into the year expecting to see $2 billion worth of AI GPU sales, but her most recent forecast suggests that figure could now exceed $5 billion. During the third quarter (ended Sept. 28) alone, AMD's data center revenue soared by 122% compared to the year-ago period, so GPU sales are ramping up fast. But it gets better, because AMD is also a leading supplier of AI chips for personal computers (PCs). This could be a major growth opportunity as AI workloads begin shifting from data centers to devices, paving the way for faster user experiences. AMD's new Ryzen AI 300 Series chips deliver industry-leading performance, and the company expects more than 100 computing platforms to use them by the end of 2025, including top PC manufacturers like Microsoft, HP, Lenovo, and more. AMD has a long way to go before it's an AI juggernaut like Nvidia, but its stock looks like a great value right now. Based on Wall Street's estimate for the company's fiscal 2025 earnings, its stock trades at a forward price-to-earnings (P/E) ratio of just 16.7, which makes it far cheaper than Nvidia: Micron is a top supplier of memory and storage chips, which aren't quite as glamorous as the GPUs from Nvidia and AMD, but they are becoming just as important in AI workloads. Memory chips, for example, store information in a ready state where it can be retrieved by the GPU for processing at any moment. This is especially critical when performing AI inference, because it can drive faster responses for users of chatbot applications. Micron's HBM3E (high-bandwidth memory) solution for data centers is the best in the industry, delivering 50% more capacity while consuming 30% less energy than competing hardware. Micron's HBM3E is so good that it's already completely sold out until 2026 -- partly because Nvidia is using it in the Blackwell GB200. The market for data center HBM was worth around $16 billion in 2024, but Micron predicts it will grow to $100 billion by 2030. The company is already working on a HBM4E solution to stay ahead of the competition, and it will deliver a 50% increase in performance over HBM3E. Micron generated $4.4 billion in data center revenue during its fiscal 2025 first quarter (ended Nov. 28, 2024), which was a monumental 400% increase from the year-ago period. It was also the first time the company's data center business represented more than half of its total revenue (which was $8.7 billion for the quarter). Wall Street's consensus estimate (provided by Yahoo!) suggests Micron could deliver $8.90 in earnings per share during the current fiscal year 2025, which places its stock at a forward P/E ratio of just 11.1. In other words, it's significantly cheaper than AMD and Nvidia. If Nvidia sells a significant number of GB200 GPUs this year, then Micron will sell substantial volumes of HBM3E. Therefore, it doesn't make much sense for Micron stock to trade at such a steep discount to Nvidia stock, so investors who buy it today might be scooping up a bargain.

Missed Out on Nvidia? Billionaires Have Been Buying This Artificial Intelligence (AI) Stock for Decades

Nvidia has been one of the best-performing stocks in recent years. The company has a market cap of over $3 trillion. It is still a great option for many, but its historic run has forced many investors to look elsewhere for artificial intelligence (AI) stocks. If you missed out on Nvidia, there's one other business you should consider. Billionaires have been buying its shares for decades. Buy the company between Nvidia and its user base When investing in AI stocks, it's important to understand what makes a company like Nvidia so exceptional. It acts as a crucial supplier to AI companies. Its graphics processing units (GPUs) -- specialized processors that make developing and running modern AI applications possible -- are widely considered as the best in the industry. Management bet big on its AI GPUs many years ago, so when the current adoption craze arrived, it was better prepared than the competition. This early edge gave it the funds and reputation to out-invest the competition, maintaining a lead that continues to this day. The takeaway: When investing in AI stocks, sometimes it's best to focus on companies that provide crucial services for the technology. Without Nvidia, AI wouldn't function as well as it does today. There's a reason why AI businesses pay a big premium for Nvidia's chips versus the competition's. They enable the technology to go from the idea stage to reality. But there's another company that sits between Nvidia and its customers, a well-known business that also makes modern AI applications possible: Microsoft (MSFT 2.56%). Microsoft has become a leading AI company Microsoft has been a big tech company for decades. Throughout that time, countless billionaires bought and sold the stock. Bill Gates, one of its founders, still owns a multibillion-dollar stake in the business. But while previous investments were likely based on the company's dominant positioning in the PC market, today the focus is AI. From an internal perspective, Microsoft is a leading developer and consumer of AI technologies. Its AI Research division is one of the best-funded of its kind in all of tech. And its partnership with OpenAI, the creator of BitGPT, gives it a clear advantage in accessing and monetizing large-scale AI models. Microsoft implemented these technologies in many of its products, including its Microsoft 365 software suite and its Bing search engine. Perhaps most importantly, however, is Microsoft's dominant position in cloud computing. In order to function, AI applications rely heavily on cloud computing -- that is, on-demand, distributed, and scalable computing infrastructure. Just three companies control more than 60% of the cloud computing market. Microsoft comes in second with a 20% global market share, trailing only Amazon. This puts it at the center of the AI revolution, a position it can use to further strengthen its competitive advantages over time. John Dinsdale, chief analyst at Synergy Research Group, said, "New AI-oriented services and technology are helping the major cloud providers to ride a wave -- new capabilities lead to increased demand, which leads to increased revenues, which then enables more investment in underlying technologies." While many AI investors are focused on the next big thing, the underlying reality that made Nvidia such a success was that it supplied the industry with components it required to function. Microsoft is in a similar position, allowing it to ride AI spending tailwinds for years to come -- if not decades.

3 AI Chip Stocks to Consider Buying in 2025 | The Motley Fool

2024 could be dubbed the year of artificial intelligence (AI), as the latest advances involving generative AI made their way into mainstream usage and AI-associated stocks helped power the market to new heights. Some of the biggest AI winners have been in the semiconductor sector, where AI chips provide the computing power needed to train large language models and run AI inference. That said, spending on AI infrastructure looks like it will only ramp up in 2025, with Microsoft recently announcing it would spend a massive $80 billion building out AI data centers this year. Other megacap tech companies, such as Alphabet, Amazon, and Meta Platforms, have also indicated they will increase their AI infrastructure spending this year. Let's look at three AI chipmakers that could benefit from this spending push. Nvidia (NVDA -3.00%) has become the king of AI infrastructure and that helped it grow to become one of the biggest companies in the world (as measured by market cap). Nvidia makes graphic processing units (GPUs), which as the name implies were originally designed to facilitate high-level graphics rendering, particularly in video games. However, the company later designed a free software program called CUDA to allow developers to program its chips for other purposes. While it created CUDA to help sell more of its chips, the program eventually became the standard upon which developers were trained to program GPUs. Since then it has added a number of developer tools and micro libraries specifically for AI that have made the software indispensable and helped create a big moat for the company. As a result, it now controls about a 90% market share in the GPU space. As large tech companies continue to race to build new AI models, they have needed more and more computing power. More often than not, this comes from Nvidia's GPUs. Nvidia's largest customer is reportedly Microsoft, so its announcement that it would greatly increase its spending on AI data centers will undoubtedly be a big growth driver for the company in 2025. Trading at a forward price-to-earnings ratio (P/E) of just over 31 times based on next year's analyst estimates and a price/earnings-to-growth ratio (PEG) of 0.98, the stock remains attractively valued. A PEG under 1 is generally considered undervalued, and growth stocks will often have PEGs well above 1. Advanced Micro Devices (AMD -4.76%) is the distant No. 2 player in the GPU space with about a 10% market share. Nonetheless, the company still benefits from the huge AI data center buildout going on. Last quarter, its data center segment revenue surged 122% year over year to $3.5 billion led by sales of its Instinct GPUs and EPYC CPUs (central processing units). The company continually has raised its data center GPU revenue forecast for 2024. It originally expected data center GPU revenue of $2 billion, but last quarter it guided for it to exceed $5 billion. It noted that Microsoft, Meta Platforms, and Oracle are all using its MI300X GPUs. While its GPUs are used for training, the company has found more of a niche in AI inference, where its customers deploy its GPUs for narrow, well-defined use cases, according to SemiAnalysis. While AMD is riding the GPU wave as a distant secondary option, one area where it has been seeing strength is with server CPUs. Last quarter, it said it continued to gain market share with server CPUs, as cloud computing companies keep expanding the usage of its EPYC CPUs across their data center infrastructure. With its pending acquisition of ZT Systems, AMD will also look to become a data center end-to-end solution provider, as ZT designs and builds server equipment for data centers. The stock trades at a forward P/E of only 17 times, making it a solid investment option to consider. While Nvidia and AMD make mass-market GPUs, Broadcom (AVGO -2.18%) is helping customers design custom AI chips. Customized chips, called ASICs (application-specific integrated circuits) are designed for very specific tasks, and thus they tend to offer better performance and require less energy consumption to perform those tasks than GPUs. On the downside, these chips don't have the flexibility of GPUs and the designs take time and are only applicable to single customers. However, Broadcom's custom chips have been gaining traction. Alphabet was its first big customer, with Broadcom helping it develop its tensor processing units (TPUs). Alphabet has credited using its TPUs along with GPUs as a differentiator that lowers costs and reduces inference processing times. Since then, it has added several other large customers that are believed to be Meta Platforms, ByteDance (owner of TikTok), OpenAI, and Apple. The company got investors excited last quarter when it said that its three largest "hyperscaler" customers (those owning massive data centers) could deploy up to 1 million AI chips each in 2027, representing a $60 billion to $90 billion opportunity when including networking equipment. Broadcom makes specialty networking chips that help all these AI chips communicate with each other so they work more efficiently as a group. The opportunity could be even larger depending on how quickly its two new custom chip customers progress in their development. The stock currently trades at 36 times fiscal 2025 analyst earnings estimates (ending in October), which is more expensive than Nvidia and AMD. However, some of its other chip businesses are at cyclical troughs, while it has a pretty large opportunity in front of it with customer AI chips.

Now That It's 2025, It's Finally Time to Buy These 3 AI Stocks | The Motley Fool

Artificial intelligence (AI) has sparked a rally in numerous tech stocks. Thanks to this cutting-edge technology, stocks such as Nvidia and Palantir have experienced exponential increases in their stock prices. Still, not all AI stocks have responded in equal measure or simultaneously. Nvidia's stock price began accelerating in 2023 amid its support of a much-improved version of ChatGPT, while most of Palantir's gains occurred in 2024 as more investors became aware of the productivity gains from its new generative AI platform. The question now is which AI stocks will spark a similar rally this year. While it is too early to answer that question, these companies hold considerable potential to finally take off in 2025. Justin Pope (ASML Holding): 2024 wasn't pretty for ASML Holding (ASML -0.67%). Not only did the stock grossly underperform, declining by 8% to the S&P 500's 23% gain, but it has crumbled since the summer and at this writing is 32% off its highs. It's a bit puzzling, considering the AI boom sweeping the market. ASML designs and sells advanced machinery that produces tiny patterns on silicon wafers. The equipment is crucial to manufacturing chips, including the AI accelerator chips that Nvidia sells hand over fist. The most advanced chips require extreme ultraviolet lithography (EUV), a technology unique to ASML. So, why exactly is the stock struggling? The waters have become a bit choppy for ASML. The company noted strong AI momentum during its third-quarter earnings but noted that non-AI business is soft and recovering slowly. In addition, China had been over-ordering ahead of potential pressure by the U.S. on ASML to restrict its shipments to the country. It accounted for almost half of ASML's sales through three quarters of 2024, but management expects that to fall back to 20% (its historical norm) in 2025. ASML disappointed the market with its short-term outlook in Q3, fueling the stock's sell-off. Remember that the semiconductor industry can be cyclical, and ASML has not backed off its projection that global chip sales will surge to more than $1 trillion by 2030. AI remains a tremendous long-term opportunity that should fuel ASML's growth, even if it's a bit lumpy from year to year. Meanwhile, the stock trades at a forward P/E ratio of 31, the lower end of its range since the AI boom began in early 2023. This company dominates a mission-critical segment of the chip industry, which is the key to powering AI's growth over the next decade and beyond. The stock offers compelling value, with years of potential growth ahead as AI innovation drives demand for its specialty EUV machines. Yeah, it's time to buy ASML in 2025. Jake Lerch (Vertiv Holdings): Vertiv Holdings (VRT -0.26%) builds, sells, and maintains digital infrastructure assets. Most notably, the company offers power management, thermal management, and rack solutions for AI data centers. In other words, Vertiv sits at the heart of the AI boom, helping companies build the infrastructure needed to support the latest and greatest AI-powered applications. And that's big business, because tech companies are spending tens of billions to upgrade their AI infrastructure. Microsoft, for example, will invest $80 billion over the next 18 months, expanding its data center footprint. Much of that money will be spent on AI chips -- the "brains" that power AI data centers. However, Microsoft (and other hyperscalers) will also have to splurge on additional equipment to power, cool, and store those expensive AI chips. And that's fantastic news for Vertiv, which sells a lot of that equipment. Indeed, Vertiv is already profiting from the AI boom. In its most recent quarter (ended Oct. 31, 2024), Vertiv reported the following highlights: In addition, the company's CEO, Giordano Albertazzi, provided an upbeat assessment and outlook: "Vertiv's strong performance in the third quarter was driven by ... [our] unique market position in enabling artificial intelligence and other critical applications for the data center. ... There are clear indications of an acceleration in AI development that is truly encouraging, and which is driving demand across our entire AI-enabling portfolio of power, thermal, IT systems, infrastructure solutions and services." In short, Vertiv is an under-the-radar stock that will continue to benefit as AI spending ratchets up. Investors looking for an AI stock as 2025 gets underway should keep an eye on Vertiv. Will Healy (Advanced Micro Devices): AMD (AMD -4.76%) stock suffered in 2024. Its gaming and embedded segments fell into a slump. Also, despite triple-digit revenue gains for its data center segment (which designs AI accelerators), it technically lags market leader Nvidia in AI chips. That appeared to sour investors on the stock through most of 2024. However, signs of improvement are on the horizon. AMD just announced new graphics and gaming products at CES. Since gaming revenue fell 58% yearly in the first nine months of 2024, these products could help turn the sector around. Moreover, the data center segment was 48% of company revenue in the first three quarters of 2024, up from 25% in the same period of 2023. Despite not holding a technical lead in this market, Grand View Research forecasts a 29% compound annual growth rate for the segment through 2030. That rate of increase alone should solidify AI accelerators as AMD's new primary revenue source. Even if the data center segment cannot quite sustain the 107% rate of increase from the first nine months of 2024, the elevated demand for AI accelerators should keep this part of the company growing rapidly. Consequently, analysts forecast 26% revenue growth in 2025 for the company overall, well above the 13% predicted in 2024. Also, amid that improvement, its P/E ratio remains in the triple digits, though its forward P/E ratio has fallen to just 24, indicating the stock sells at a discounted valuation. That lower price, along with its accelerating revenue growth, could spark a recovery in AMD stock this year.

This AI Stock Could Be the Best Investment of the Decade | The Motley Fool

To score a stock market win, it's important to get in on a variety of quality stocks and hold onto them for the long term -- a period of five to 10 years, for example. This offers those companies the time to develop and grow, and this should translate into earnings strength and positive stock performance. At least that's the situation investors are ideally looking for as they select stocks. And if several of their investments deliver this kind of story, they'll benefit. These stories that progressively power portfolios higher are fantastic, and investors couldn't build a path to wealth without them. At the same time, though, it's a great idea to be on the lookout for that one standout stock that comes along not often -- maybe once every several years. That's the one that could supercharge your returns. This is usually a company that's an innovator and leader in a high growth field, and today that industry is artificial intelligence (AI). AI has the power to transform industries and our daily lives, and analysts forecast this market is set to grow from about $200 billion today to $1 trillion by 2030. Let's check out an AI stock that's already delivered big rewards to investors but might be just getting started. In fact, this AI player could be the best investment of the decade. Though AI stocks have soared in recent times, we're in the early days of this story. Data centers still are in the process of building out infrastructure, and companies are just getting started when it comes to applying AI to their businesses to gain in efficiency. And right now, we're at the very beginning of what may be the next huge wave of AI growth, and that's agentic AI. This refers to AI that analyzes complex problems, reasons, develops a solution, and applies it. Companies selling tools to develop agentic AI and those who use agentic AI to gain in efficiency both could score a win here. Now, the AI stock that represents a way to get in on all of this and more may be a name that's very familiar to you. It's none other than Nvidia (NVDA -1.97%). You might say, "Nvidia stock already has climbed almost 150% over the past year, so is its potential limited?" It's important to consider the company's position in the AI market, and that offers us reason to be extremely optimistic. Nvidia is the No. 1 designer of graphics processing units (GPUs), the AI chips powering some of the most critical of AI tasks like the training and inferencing of models. And wisely, the company has used this as a starting point to create an entire menu of AI offerings that make it the go-to player for anything in this area. This has helped Nvidia grow its earnings in double and triple digits to record levels -- with revenue reaching a high of $35 billion in the most recent quarter. The company's gross margin of more than 70% shows that it's highly profitable on sales, another positive point to note. Now here's why I believe Nvidia has a lot more to gain in the years to come. As mentioned, Nvidia has successfully expanded its range of products and services to encompass every stage of AI development, so customers may go to Nvidia for the basics, like GPUs, when building out a data center and for software to develop and run AI across their businesses. The company also has zoomed in on specific industries -- from healthcare to automotive -- to develop AI platforms to suit their needs. During his presentation at CES in Las Vegas earlier this month, Nvidia CEO Jensen Huang says the company is working with every major automaker in the autonomous vehicle market. And Nvidia's also ready to benefit from agentic AI, offering customers tools to build AI agents to suit their businesses. This makes me confident that Nvidia could continue to significantly grow earnings over time as it benefits from the entire AI story -- not only the initial buildout. All of this means Nvidia stock, trading at 46 times forward-earnings estimates, looks reasonably priced considering the growth opportunity and could still have plenty of room to run. Nvidia is set to play a major role in every phase of AI growth, and that's why this stock could be the best investment of the decade.

Best AI Stocks to Hold in 2025 | Investing.com UK

Owing to a stronger-than-expected jobs report for December, at 256,000 job gains vs 160,000 expected, the Fed's interest cuts are no longer a certainty for 2025. Likewise, if inflation is reheating, this would further make the case for the central bank to halt loosening financial conditions. Otherwise, cheaper borrowing would spur more consumer and business spending, adding to inflation. For December, the latest consumer price index (CPI) data shows a slight decline, at the core 3.2% annual rate reported vs the 3.3% forecast. Nonetheless, this is a 0.2% monthly inflation increase, which is still far from the Fed's 2% target. Consequently, before the FOMC meeting in two weeks on January 28/29th, fed fund futures show high probabilities, above 60%, for only two rate cuts in 2025. In addition to the looming threat of global AI/GPU export restrictions, this could damper companies' capex plans. AI stocks could have fewer gains than in 2023 and 2024. But with these factors in mind, which AI stocks are worth holding for the long haul (outside the obvious Nvidia (NASDAQ:NVDA))? Although not an AI company per se, no computing endeavor could exist without high-bandwidth memory. Micron Technology Inc (NASDAQ:MU) is not only one of the top three memory suppliers, alongside Korean Samsung (KS:005930) and SK Hynix, but also the memory supplier in Nvidia's latest RTX 50 series unveiled at CES 2025. This was the main reason why MU stock went up 18% year-to-date. Currently priced at $103.21, MU shares are still far from the all-time high of $153.14 in June 2024. Yet, exposure to an AI-supporting company like Micron is a safer bet, given that it is not beholden to new chip export restrictions. As semiconductor companies reshape their plans, Micron could fill in the gaps as demand for chips not restricted by export controls is increased. As a US company, Micron could also benefit from reshoring and friend-shoring if the Trump admin follows through on domestic industry revitalization. In December, Micron reported $1.79 per share (EPS), exceeding the $1.60 EPS forecast. The company's revenue of $8.71 billion increased 84% year-over-year, leaving it with a net income of $1.87 billion and operating cash flow of $3.24 billion. This is all the more impressive as Micron's capital expenditures (capex) amounted to $3.13 billion. In the latest investor presentation, Micron also noted that its HBM (high-bandwidth memory) sold out for calendar 2025, as cutting-edge HBM4E is heading to "introduce a paradigm shift in the memory business." Although JPMorgan Chase (NYSE:JPM) lowered the MU price target from $180 to $145, this still represents solid gains vs the current price of $103.21 per share. Per WSJ forecasting data, the average MU price target is $131.37, with a high ceiling estimate of $250 per share. Although perceived mainly as an e-commerce/logistics company, this only scratches the surface. Alongside Google (NASDAQ:GOOGL) Cloud and Microsoft's Azure, Amazon Web Services (AWS) is one of the top cloud infrastructures for AI workloads. Therefore, Amazon.com Inc (NASDAQ:AMZN) is the intermediary layer for businesses as it provides Nvidia's AI/GPU chips at scale. On the AWS platform, the company provides a streamlined suite of AI services, with SageMaker being the centerpiece that unifies data analytics with AI and machine learning (ML). As of November, AWS holds the leading 31% market share in cloud infrastructure, according to Synergy Research Group, which is far ahead of the nextrunner Azure at 20% and Google at 11%. In addition to AWS dominance, AMZN investors can count on the company to keep taking advantage of brick-and-mortar retail vulnerabilities, such as rampant shoplifting. Amazon's discounted cash flow (DCF) valuation is presently at $235.96 against the current AMZN stock price of $227.28 per share. The average AWS price target is $248.04, making it a good option for value investors in the long run, despite Amazon's recognition as the top dog in the stock world. Qualcomm Incorporated (NASDAQ:QCOM) stock price returned to the early 2024 price range, at $164.22 per share, after leaving the all-time high of $224.73 in June 2024, just like Micron. Over the last three months, QCOM stock is down 7%, owing to the poor sales of Microsoft-pushed Snapdragon X Series PC. In the first quarter of shipments, these laptops achieved less than 1.5% of the market share. However, in the latest Q4 2024 earnings, Qualcomm reported a 9% revenue increase for the full year 2024 to $38.96 billion and a net income increase of 40% to $10.14 billion. Qualcomm CDMA Technologies (QCT) remains the company's dominant segment in the automotive sector, IoT devices and mobile phones owing to the system-on-chip (SoC) solutions. As of Q4 2023, Qualcomm held 23% of global SoC shipments, ahead of Apple's 20% but trailing behind MediaTek's 36% market share. The company's sales of mobile chipsets increased by 12%, while automotive solutions increased by 68% compared to the year-ago quarter. Featured in flagship smartphones from OPPO, Xiaomi (OTC:XIACF), and OnePlus, Qualcomm's Snapdragon 8 Elite is highly performant, even outperforming iPhone 16's A18 Pro chip in multicore applications. Likewise, Qualcomm's new Snapdragon chips significantly improved its neural engine for AI tasks, clocking 45% faster performance than the previous series. Based on these results, it is safe to say that Qualcomm will continue to power the world's mobile/AI computing needs, regardless of lackluster sales results for Snapdragon X laptops/tablets. Per WSJ forecasting data, the average QCOM price target is significantly above the current price of $164.22, at $200.86 per share, making this a great entry point for AI exposure in smartphone form. ***

A Once-in-a-Decade Investment Opportunity: 1 Artificial Intelligence (AI) Semiconductor Stock to Buy Hand Over Fist and Hold for the Next 10 Years (Hint: It's Not Nvidia) | The Motley Fool

When it comes to semiconductor stocks, it seems like all anyone can talk about is Nvidia. With the launch of the company's new Blackwell graphic processing unit (GPU) architecture underway, I'm not particularly surprised that Wall Street remains largely bullish on Nvidia. But in the background, Advanced Micro Devices (AMD 1.10%) is quietly gaining some ground on Nvidia in GPUs -- the high-powered chips used in many artificial intelligence (AI) applications -- despite the incumbent's dominating presence. Below, I'm going to analyze the full picture at AMD and make the case for why I think the stock is a better buy than Nvidia during the next 10 years. The table below breaks down revenue and gross profit growth figures for both AMD and Nvidia during the third quarter. Data source: AMD and Nvidia investor relations. Not only is Nvidia a much larger business than AMD, but its sales and profit margins are growing at a much faster pace. Although this may imply that AMD is far behind its rival, I see the growth figures above as a bit of an illusion. If you look at the segmented results in the chart below, it becomes clear that AMD's data center business is thriving. Unfortunately, the company's gaming and embedded segments are declining across sales and gross profit -- thereby dragging down the company's overall results. What's even more encouraging is that AMD's data center revenue is now growing at nearly the same rate as Nvidia's. In other words, growth from Nvidia's data center GPU operation is decelerating at the same time AMD's is beginning to show signs of scaling. According to data compiled by Jon Peddie Research, Nvidia controls a staggering 90% of the AI GPU market. Coming in at a very distant second is AMD, which boasts an estimated 10% market share. Similar to the growth figures I analyzed above, I see Nvidia's tight grip on the GPU market as somewhat misleading. For much of the past two years, Nvidia did not have any competition in the data center GPU sector. This first-mover advantage played a huge role in the company's ability to grab significant market share. However, in December 2023, AMD introduced its MI300 series of AI accelerators in an effort to start competing more directly with Nvidia's GPUs. In just one year, AMD has been able to scale its own data center GPU operation and acquire just enough incremental market share to make a dent in Nvidia's growth. Considering AMD already has a line of successor GPU architectures scheduled to release between this year and 2026, I think the company is well on its way to becoming a challenger to Nvidia. To me, an investment in AMD shouldn't revolve around whether you think the company will surpass Nvidia or become a larger player in the GPU realm. Rather, by taking a hard look at the trends explored throughout this article, I think there is a valid case to be made that AMD is in the early stages of exponential growth whereas Nvidia's trajectory during the next decade could slow. Nevertheless, the market appears to be discounting this narrative entirely. As I write this, AMD is trading at a forward price-to-earnings (P/E) multiple of 23 -- its lowest level in a year. In my eyes, AMD's data center business will eventually reach a point at which its accelerating growth takes over and washes out any sluggish activity in other non-core segments such as gaming. At the same time, wider adoption of AMD's accelerators should help the company continue acquiring incremental market share in the GPU landscape. Should this play out, the narrative surrounding AMD could quickly change and the shares could begin to witness some revival as investors flock toward a new growth opportunity beyond Nvidia. I think now is a lucrative time to take advantage of the current price action and buy the dip in AMD stock.

3 Artificial Intelligence (AI) Stocks to Buy in 2025 and Hold for the Rest of the Decade | The Motley Fool

These AI winners remain strong buys for their impressive growth outlooks over the next three to five years. It's only been two years since artificial intelligence (AI) hit center stage on Wall Street. However, think about the internet and how, a few decades since its earliest years, it's still growing and creating new investing opportunities. The odds are high that AI will evolve and grow into the 2050s. Fortunately, you don't need to think that far ahead. There are compelling investment opportunities right now in companies proving critical to AI's development. These AI stocks have tremendous growth trajectories for the next three to five years, and their current valuations should allow them to translate much of that growth into investment returns. Consider buying and holding these AI winners in 2025; by 2030, you'll be glad you did. Nvidia (NVDA -3.00%) needs little introduction. Its remarkable ascension in AI (due to its immensely popular Hopper AI accelerator chips) has produced staggering growth and investment returns. But as I said, AI remains in its early chapters, as does the company's growth story. Nvidia is transitioning to its next-generation chip design, Blackwell. The immense computing and energy requirements for operating AI models are an underrated story in the field. AI developer OpenAI recently disclosed that it's still losing money on its most expensive subscription plan ($2,400 annually). Accumulating the raw computing power to enhance AI is important, but AI must also be economically feasible. Therefore, energy efficiency is a big deal. Nvidia's Blackwell chips will perform better than Hopper while operating as much as 25 times more cost-effectively. That has made it a no-brainer for the hyperscalers building out the vast data centers to power AI models. Nvidia has reportedly sold out its Blackwell capacity for 2025 already, and CEO Jensen Huang believes Blackwell's launch will be Nvidia's best ever. That sets the table for continued growth over the coming years. Analysts estimate that Nvidia will grow earnings by an average of 38% annually for the next three to five years. Today, Nvidia trades at a forward P/E ratio of 51, a rock-solid value for its anticipated growth. Amazon (AMZN -1.44%) could be among the biggest AI winners. Its cloud computing platform, Amazon Web Services (AWS), is the global leader, accounting for approximately 31% of the market. Today, enterprises increasingly rent computing power from cloud companies instead of building their own. Most modern software, including AI, operates on the cloud. That positions the company as a direct beneficiary of the impact AI could have on cloud growth. According to Goldman Sachs, AI's tailwinds could push the market to $2 trillion by 2030. The global cloud market was worth roughly $500 billion in 2023, so that's a tremendous opportunity. Amazon, as the market leader, will undoubtedly benefit from that. That should be music to your ears because AWS is Amazon's largest profit center. Amazon's business goes far beyond AI and even cloud computing. It's known for being the leading e-commerce company in the United States (by a wide margin) and has built its Prime subscription into a formidable business. Analysts anticipate the company's bottom line growing by 22% annually over the next three to five years. That's enough to warrant buying the stock at its current forward P/E ratio (37) despite shares trading near all-time highs. Social media titan Meta Platforms (META 0.84%) remains a digital advertising powerhouse. It generates tens of billions of dollars in free cash flow annually from advertising to the 3.29 billion daily active users on Facebook, Instagram, WhatsApp, and Threads.CEO Mark Zuckerberg has been a longtime proponent of AI and has influenced the company's push into AI and virtual reality. Meta has a dedicated business unit (Reality Labs) that is spending massive amounts of capital to build out the data center capacity needed for Meta to be a leading player in AI. Meta's capital spend topped $9 billion last quarter, while Reality Labs posted a $4.4 billion operating loss. However, Zuckerberg has stated that realizing a meaningful return may take until the 2030s. It's a massive gamble on the future, but Zuckerberg's foresight has paid off for Meta in the past, and the potential upside of being an AI leader over the coming decade and beyond is worth swinging for. Generative AI alone could be worth over a trillion dollars. Ultimately, don't let the AI investments distract you from the fact that Meta is a fantastic business right now, even without contributions from Reality Labs. Analysts estimate the company will grow earnings by an average of nearly 18% annually over the next three to five years. Such a strong outlook makes it difficult for investors to pass up the stock at just 25 times forward earnings.

3 Best Artificial Intelligence (AI) Stocks to Buy in January | The Motley Fool

One of the biggest themes in the stock market in 2024 was artificial intelligence (AI), which is showing signs of becoming a breakthrough technology. That said, AI still appears to be in the early innings, with 2025 still promising a lot of opportunities in the sector. Let's look at three AI stocks to buy this month. Nvidia (NVDA -3.00%) has arguably been the biggest winner from AI, as its revenue absolutely skyrocketed the past two years. In fiscal year 2024, ended in January of last year, its revenue grew 125%, while in fiscal year 2025, its revenue is set to more than double once again. The company's graphic processing units (GPUs) are the backbone of the AI infrastructure build-out due to GPUs' impressive processing speed, which is needed to handle large language model (LLM) training and AI inference. Meanwhile, it amassed a whopping 90% market share in the GPU space over rival Advanced Micro Devices due to its superior software platform CUDA, which includes developer tools and micro-libraries that easily allow its chips to be programmed to handle various AI-related tasks. Spending on AI infrastructure only continues to accelerate, as LLMs need more and more computing power to be trained on. Meanwhile, Nvidia's largest customer Microsoft (MSFT -1.32%) announced it would spend around $80 billion this calendar year on AI data centers. Typically, about half that spending goes toward servers with GPUs. By comparison, for its last fiscal year ended in June, Microsoft spent $44.5 billion in capital expenditures (capex). With other large customers also ramping up capex spending on AI infrastructure this year, Nvidia still has a lot of growth ahead. Despite its strong stock performance, Nvidia trades at a forward price-to-earnings ratio (P/E) of about 31.5, based on 2025 analyst estimates, and a price/earnings-to-growth ratio (PEG) of 0.98. A PEG under 1 is generally view as undervalued, and growth stocks will often trade with PEGs well above 1. Microsoft is planning to spend big on AI infrastructure this year, and for good reason. The company's cloud computing unit Azure has been a big AI winner, showing revenue growth of 33% last quarter, while its Azure OpenAI usage doubled in the past six months. Azure is a consumption model, and customers are using its services to help built out their own AI agents and applications. This is also leading to more usage of its data and analytics services. While Azure has been showing strong growth, it could be even more robust if not for capacity constraints. It has already forecast that Azure revenue will begin to accelerate in the second half of its fiscal year as more capacity comes on from past capex spending. Meanwhile, it is pouring a ton of money into building out data centers across the world to try and keep up with demand. In addition to cloud computing, the company also has a big opportunity on the AI software side with its AI assistant copilots for its Microsoft 365 suite of productivity tools. For $30 a month per enterprise use, Microsoft provides AI copilots for its variety of productivity tools that can do such things as organize and prioritize emails, create PowerPoint presentations using only natural language, and even use the Python programming language in Excel using only natural language prompts. These AI copilots can save workers a lot of time and should be a big growth driver for the company moving forward. Trading at a P/E of 32.5 current fiscal year estimates, the stock is reasonably valued. Salesforce (CRM -2.77%) is looking to become the leader in agentic AI, which is believed to be the next evolution of AI beyond generative AI. With generative AI, users can create content via a prompt, such as asking ChatGPT to create a vacation itinerary. Agentic AI would take that to the next level by going out on its own and booking everything needed for that vacation, such as flights, hotels, dinner reservations, and tour guides. Long the leader in customer relationship management (CRM) software, the company launched its agentic AI platform Agentforce in October, with an improved version announced in mid-December. The platform offers a variety of out-of-the-box agents that users can customize through its no-code and low-code tools, while customers will be able to build their own agents from scratch as well. Out-of-the-box agents are available in such areas as sales, marketing, recruiting, and customer service, among others. Salesforce has seen early rapid adoption of Agentforce, with the company saying in early December that it had closed 200 teams, while in mid-December it said it had closed more than 1,000. It has projected it will have 1 billion Agentforce AI agents deployed by the end of its fiscal 2026 (ending January 2026). Agentforce is a consumption product that costs $2 per conversation, so this is a big opportunity moving forward for the company. The stock currently trades at a reasonable value of 29 times fiscal 2026 earnings and a PEG of 0.8.

2 AI Chip Stocks That Could Soar in 2025 | The Motley Fool

Artificial intelligence (AI) promises to bring significant advances to the global economy, which could result in higher worker productivity, faster product development, and more efficient supply chains. The lure of these benefits is creating tremendous demand for leading semiconductor companies that provide cutting-edge processors to enable AI. Despite sizable gains for top chip stocks in 2024, here are two that still trade at reasonable valuations that could support attractive returns in 2025, and potentially for years to come. Every computer needs memory and storage to transfer and use data. This is as much a need for AI-optimized data centers as your phone or PC. As demand for AI grows, it is driving strong growth for Micron Technology's (MU -0.07%) advanced memory and solid-state storage (SSD) products used for high-performance computing. Micron achieved record revenue in the most recent quarter, and the company's operating leverage is also allowing a lot of that additional revenue to generate higher profits. An 84% year-over-year increase in revenue last quarter turned a year-ago loss of $1.12 into net income of $1.67 per share. These strong results have sent the stock sharply higher since 2022, but the recent dip is a great buying opportunity, given management's outlook for more growth in 2025. Micron operates in a competitive market that can be susceptible to inconsistent financial results, but it is currently enjoying an upswing. Revenue from products sold to data centers grew more than 400% year over year and 40% over the previous quarter. Micron spent years investing in data center SSD products, and it's now reaping the rewards. The company's outlook calls for record revenue this year, with growth in earnings and positive free cash flow. Long term, management expects the market for high-bandwidth memory to grow from $16 billion in 2024 to over $100 billion by 2030. Investors shouldn't expect smooth sailing for Micron, as swings in selling prices for memory and storage can lead to lumpy revenue performance, but the long-term demand curve looks favorable and could drive profitable growth over the next decade. Weighing the near-term risks and long-term opportunities, the stock trades at a fair forward price-to-earnings (P/E) ratio of 14, which could support more gains in 2025. Taiwan Semiconductor Manufacturing (TSM 0.60%) is one of the best chip stocks to hold for the long term. As the world's leading foundry, it makes chips designed by other companies, and its customer list includes Nvidia, Advanced Micro Devices, Qualcomm, and Apple. The soaring demand for advanced processors doubled the share price over the last year, but it still trades at a reasonable 23 times 2025 earnings estimates -- an attractive discount to the S&P 500 (^GSPC -1.54%) average P/E of 30. TSMC is well-positioned to capture the growing demand for AI chips due to its manufacturing expertise and diverse customer base. Because it focuses exclusively on making chips, not designing them, the company has been able to spend decades investing all its available capital in building the most sophisticated manufacturing processes to serve customers. TSMC expects 2024 revenue to be up nearly 30% in U.S. dollars. Management has guided for revenue from AI server chips to triple. While AI server chips represent only a mid-teens percentage of revenue, the strong demand is also leading to improving margins and earnings growth prospects. Moreover, TSMC has a long history of generating high returns on capital, so when it raises capital spending, it signals more profitable growth ahead. The company is expanding its global manufacturing footprint across the U.S., Japan, and Europe, to support demand for advanced chips in the coming years. These plans reflect management's view that demand for AI-related applications is just beginning. With the consensus Wall Street estimate calling for earnings to grow 31% on an annualized basis, the stock's valuation is more than reasonable. At the current 23 forward P/E, investors should expect the stock to deliver annual returns that are consistent with the company's earnings growth. That could lead to outstanding returns for TSMC shares if analysts' estimates are on the money.

3 Top Bargain Stocks Ready for a Bull Run | The Motley Fool

The market is coming off two strong years in 2023 and 2024, and that has led to a lot of expensive valuations for the better-performing stocks. But there are still some bargains to be had, even in the tech sectors. You just have to know where to look and pay closer attention to the numbers, especially the forward-looking ones. Let's look at three stocks trading at attractive valuations given the opportunities in front of them. Nvidia (NVDA -1.10%) has been one of the best-performing stocks over the past few years. Nonetheless, the stock still trades at an attractive valuation. On a forward price-to-earnings (P/E) basis, the company is valued at 29.5 based on 2025 analyst estimates while its price/earnings-to-growth ratio (PEG) is 0.91 times. A PEG below 1 is typically viewed as undervalued, and growth stocks will often trade with PEGs well above 1. Meanwhile, the company grew its revenue by 94% year over year last quarter and analysts are projecting more than 50% revenue growth in 2025. Nvidia has established itself as the dominant leader in graphic processing units (GPUs) through its CUDA software platform, which makes it easy for developers to program GPUs for various tasks related to artificial intelligence (AI). GPUs have become the go-to chips upon which to train AI models and run inference given their superior processing power over other mass-produced chips. The company has greatly benefited from the early AI infrastructure buildout, but this buildout still appears to be in its early innings. Nvidia's largest customer, Microsoft, just announced it would spend a whopping $80 billion on AI data centers this year, while AI models need exponentially more GPUs to be trained on as they become more advanced. There is currently talk that AI models will be trained on 1 million AI chip clusters in the near future, which is up substantially from recent models such as Llama 4, which was trained on 160,000 GPUs. Given Nvidia's valuation and opportunity, this is a great time to pick up the stock. Trading at a forward P/E of under 18.5 times 2025 analyst estimates, Alphabet (GOOGL -0.71%) (GOOG -0.65%) is one of the cheapest megacap tech stocks out there. However, the company has still been demonstrating strong growth. Last quarter, it grew its overall revenue by 15% year over year and its earnings per share by 37%. Its strong growth is being led by its cloud computing unit, which saw its revenue climb 35% last quarter while its operating income skyrocketed from $266 million to $1.95 billion. Alphabet has credited its strong cloud computing growth to customers adopting its AI platform to build and customize AI models and applications. The company notes that its use of customized TPUs (tensor processing units) with GPUs has been a differentiator, allowing it to reduce inference processing times and lowering costs. Of course, Alphabet is best known for its Google search engine, which has made it the dominant global search leader with nearly a 90% market share. Alphabet has a big opportunity with AI in this area, as historically it has only served ads to about 20% of its search results. By developing new ad forms, it should be able to monetize some of this traffic that benefits from its AI Overviews. The company is also looking to push its Gemini chat app, as well as other AI tools such as Veo 2, its text-to-video AI generator. In addition to cloud computing and search, Alphabet also owns the most viewed video service in YouTube, a huge adtech platform, as well as businesses focused on autonomous driving (Waymo) and quantum computing. This gives investors a great combination of leading and emerging businesses at an attractive valuation. Another inexpensive stock in the tech space is Taiwan Semiconductor Manufacturing (TSM 0.04%), or TSMC. The stock trades at a forward P/E of only 19.2 times 2025 analyst estimates and a PEG of 0.64. TSMC is the world's leading semiconductor contract manufacturer, making chips for some of the largest semiconductor chip designers in the world, including Apple, Nvidia, and Broadcom. Through its scale and technological expertise, the company has become the go-to chip manufacturer for advanced chips, such as those used for AI. While its competitors have struggled, TSMC has thrived, as evidenced by its growing revenue and expanding gross margin. Last quarter, the company grew its revenue by 36% year over year while its gross margin improved by 460 basis points to 57.8%. TSMC has been increasing its capacity to meet the growing demand for high-end chips, while also seeing strong pricing power. According to Morgan Stanley, it is set to raise prices by up to 10% for AI semiconductors and chip-on-wafer-on-substrate products this year. Increased capacity along with prices is a nice combination that will drive revenue and earnings growth this year and into the future. Given its valuation and the opportunities ahead of it, TSMC is an attractive stock to consider picking up.

3 Reasons Nvidia Stock Is a Forever Buy and Hold | The Motley Fool

Artificial intelligence (AI) has unleashed a technological revolution, and one company sits at its very core. Nvidia (NVDA -1.97%) powers nearly every major AI breakthrough, from autonomous vehicles to drug discovery to advanced robotics. The company's technological dominance in this revolutionary field has driven its stock price up an astounding 2,127% over the past five years. At first glance, Nvidia's valuation might cause investors to pause. The company's shares trade at an eye-catching 31.7 times forward earnings, well above the S&P 500's 23.5 multiple, which also happens to be on the high side, historically speaking. Yet this premium reflects something extraordinary: Nvidia's commanding position in computing's next great transformation. As we enter the age of intelligent machines, here are three compelling reasons why Nvidia deserves a permanent place in long-term portfolios. According to a report from Markets and Markets, the global data center chip market is set to reach a mind-boggling $390.65 billion by 2030, growing at 13.5% annually from 2025. According to industry analysts, Nvidia controls around 80% of the AI chip market, with its chief rival in the space, Advanced Micro Devices, holding approximately 11% of the segment. This market dominance stems from Nvidia's early lead in parallel computing architecture. The company's graphics processing units (GPUs) process multiple calculations simultaneously, making them vastly more efficient than traditional processors for AI workloads. Furthermore, Nvidia's Compute Unified Device Architecture software platform has become the industry standard for AI development across financial services, healthcare, and retail. This entrenched ecosystem creates high customer switching costs, making it increasingly difficult for competitors to gain meaningful traction. With an insurmountable lead in key hardware and software segments, Nvidia's grip on the AI chip market appears unshakeable for years to come. Nvidia's latest chip designs demonstrate its expanding technological capabilities beyond traditional graphics processing. The company continues to set new performance benchmarks while making AI computing more accessible to developers and businesses. The expansion into developer-focused products opens new revenue streams without cannibalizing high-end data center sales. This multitiered strategy allows Nvidia to capture value across the entire AI computing spectrum. The company's innovation pipeline extends into AI-powered gaming, self-driving vehicles, and advanced robotics. These initiatives showcase Nvidia's ability to leverage its core technology into entirely new markets. Its technological leadership has created multiple growth engines that reduce reliance on any single market. With breakthroughs spanning multiple industries, Nvidia's impact on computing extends far beyond its gaming origins. Nvidia's investment portfolio targets companies at the forefront of AI applications. Recent investments include Applied Digital (NASDAQ: APLD), a data center provider specializing in AI infrastructure; Serve Robotics (NASDAQ: SERV), a leader in autonomous delivery robots for last-mile delivery; and Recursion Pharmaceuticals (NASDAQ: RXRX), which uses AI to revolutionize drug discovery. These strategic stakes give Nvidia early insight into emerging AI applications. Serve Robotics demonstrates AI's potential in automation, while Recursion shows how AI can accelerate pharmaceutical research. Applied Digital's focus on AI-optimized data centers strengthens Nvidia's position in computing infrastructure. Each investment targets a distinct market where AI promises disruption. Recursion aims to reduce drug development timelines from decades to perhaps weeks or even days, while Serve Robotics seeks to transform last-mile delivery through autonomous robots and drones. These forward-looking investments position Nvidia to capitalize on AI adoption across multiple industries. By backing innovators in robotics, drug discovery, and computing infrastructure, Nvidia gains valuable insights into how these nascent markets are developing while simultaneously expanding its technological moat. Nvidia's dominance in AI computing extends far beyond its current core area of expertise in chip design. The company has built an ecosystem of hardware, software, and development tools that makes it essential to AI advancement. While the tech stock's valuation reflects high expectations, Nvidia's expanding competitive advantages and massive growth opportunities justify its premium. For investors seeking exposure to this ongoing technological revolution reshaping modern society, Nvidia represents a foundational holding built to compound value for decades to come.

2 Artificial Intelligence (AI) Stocks That Could Go Parabolic | The Motley Fool

The adoption of artificial intelligence (AI) technology is set to continue at a rapid pace in 2025: Market research firm IDC estimates that investments in data center infrastructure, AI agents, and efforts taken by organizations to embed AI capabilities into their operations will add up to outlays of $227 billion this year. What's worth noting here is that IDC expects 67% of that total to go toward businesses' efforts to integrate AI into their operations. So 2025 could be a year of solid growth for both AI hardware and software companies. That's why now would be a good time to take a closer look at two AI companies that could win big from the massive spending on AI infrastructure and solutions, and potentially see parabolic increases in their share prices. A parabolic move refers to a sharp increase in the stock price of a company in a short period, tracing a path that resembles one side of a parabolic curve. Micron Technology (MU -0.07%) seems to be on that path -- its stock price has risen 20% in 2025 already. Snowflake (SNOW 0.89%), too, has experienced a sharp jump in its stock price in recent months, and could very well maintain its momentum. The memory market is expected to enjoy another year of solid growth in 2025 thanks to the AI trend. Market research firm Gartner estimates that unprecedented demand for high-bandwidth memory (HBM), which is used in AI accelerators to enable faster data transmission speeds and impart more computing power, along with increases in prices, could boost dynamic random access memory (DRAM) sales this year by 28% to $115.6 billion. Micron is already making the most of the AI-driven opportunity in its core market. The memory specialist got a jump on larger rival Samsung, as it was Micron's HBM chips that were selected for use in Nvidia's graphics cards for both gaming and AI workloads. More specifically, Nvidia's upcoming GeForce RTX 50 series gaming graphics cards will use Micron's HBM. Meanwhile, Micron management announced on the company's December earnings conference call that Nvidia's Grace server CPU (central processing unit) is also using its HBM. Meanwhile, Nvidia picked Micron's fastest HBM chip for use in its next-generation Blackwell AI systems. Samsung, on the other hand, has reportedly struggled to get its chips qualified at Nvidia, paving the way for Micron to keep making the most of the HBM market's potential. That bodes well for Micron, which forecasts that the size of the HBM market will grow from $16 billion in 2024 to more than $100 billion by 2030. At the same time, investors should note that Micron's growth is set to pick up remarkably in its fiscal 2025 (which began Aug. 30). Revenue in the first quarter of the fiscal year increased by an impressive 84% year over year to $8.7 billion. It also reported an adjusted profit of $1.79 per share as compared to a loss of $0.95 per share in the prior-year period. Analysts expect a 39% increase in Micron's revenue in the current fiscal year to $35 billion, followed by another solid jump of 28% in fiscal 2026 to just under $45 billion. Additionally, Micron's earnings are expected to jump to $8.90 per share in fiscal 2025 from just $1.30 per share in fiscal 2024, followed by a 44% increase in fiscal 2026 to $12.83 per share. Based on these earnings estimates, Micron's stock price could take off big time if it starts trading in line with the Nasdaq-100 index's average forward earnings multiple of 26 (using the index as a proxy for tech stocks). Right now, Micron trades at just 13.6 times forward earnings. Investors, therefore, can get a great deal on this AI stock. Consider grabbing this opportunity before Micron soars higher. Snowflake (SNOW 0.89%) saw impressive share price momentum since it released the results for its fiscal 2025 third quarter in November. Share prices jumped more than 23% since its quarterly report was released. The company provides a data cloud platform that allows customers to securely consolidate data, which they can use to derive business insights and build applications. It also allows clients to share their data. For the period that ended Oct. 31, its revenue shot up by 28% year over year to $942 million. More importantly, Snowflake raised its guidance. It now expects its product revenue to rise by 29% to $3.43 billion in fiscal 2025. However, don't be surprised if Snowflake clocks even stronger growth in the new fiscal year (beginning next month). The company is seeing "significant adoption" of its AI-centric products, as management pointed out on the last earnings conference call. Management says more than 3,200 customers now use its AI and machine-learning features, which help employees perform tasks such as writing code and extracting data from documents. Given that Snowflake finished its last reported quarter with just over 10,600 customers, it still has a large opportunity to cross-sell its AI-focused offerings into its established user base. Snowflake should be able to win a bigger share of its clients' wallets from here -- a pattern it has already established. In its latest reported quarter, its net revenue retention rate stood at an impressive 127%. This means that, on average, Snowflake's existing customers spent 27% more on its offerings than they did in the year-ago period. The stronger spending by existing customers, as well as a 20% year-over-year increase in its overall customer base, explains why Snowflake's remaining performance obligations jumped by an impressive 55% to $5.7 billion. A company's remaining performance obligations are the total value of its unfulfilled contracts, so the fact that this metric grew faster than revenue last quarter suggests that Snowflake's future could be even brighter. Moreover, analysts' consensus estimates are for a 42% jump in Snowflake's earnings in fiscal 2026 to $0.99 per share, and that's expected to be followed by even better growth in the following year. As such, Snowflake is likely to remain a top growth stock in the long run, and its accelerating earnings growth should help it sustain its recent momentum.

Got $1,000? Here Are 2 AI Stocks to Buy Hand Over Fist in 2025 | The Motley Fool

Although artificial intelligence (AI) has been a popular investing theme over the past two years, there is still plenty of room for more growth in 2025. The tech world is just getting started with some of the most important parts of AI implementation, which means that many companies with significant AI exposure are far from done realizing their potential gains. If you have $1,000 to commit to your portfolio now, two stocks that are no-brainer picks to buy with it right now are Nvidia (NVDA -1.10%) and Meta Platforms (META -2.31%). Both of these have been wildly successful picks over the past two years, and I think 2025 will also be another successful year for this duo. Nvidia has been the go-to AI investment for a while, and I think it still deserves a place at the top of the pecking order. The reason? It's actually making money from the AI trend. Many of the biggest tech players are pouring billions of dollars into AI infrastructure, and a huge chunk of that money is going to Nvidia. Because Nvidia's graphics processing units (GPUs) -- and its CUDA software, which supports them -- have become the industry standard, it has established itself as the leader in this field. As AI hyperscalers continue to spend more on computing power in 2025 -- as many of them have indicated they will do -- Nvidia will profit. For its fiscal 2026, which ends in January 2026, Wall Street analysts on average project that Nvidia will grow its revenue by 52%. That's not bad for a company whose revenue is on track to double in its soon-to-end fiscal 2025. Powering next year's growth trajectory will be its next-generation Blackwell-architecture chips. These chips outperform its previous top-of-the-line Hopper chips significantly on tasks like AI training. In fact, Blackwell chips are reportedly four times faster in training AI models than Hopper chips. Investors can be sure that the biggest players in the tech space will be clamoring to obtain these cutting-edge GPUs as they become more readily available. There's a notion that Nvidia's stock is incredibly expensive now and should be avoided. I don't think that's true, as Nvidia trades for a reasonable (considering its growth) 47 times forward earnings. Other big tech stocks like Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) trade at 33 and 36 times forward earnings, respectively. However, neither of them is growing nearly as quickly as Nvidia, so this premium makes sense, as Nvidia's earnings are more likely to "catch up" in future years and justify a higher earnings multiple today. Nvidia is still one of the top ways to invest in AI, and investors shouldn't let it slip away. Meta is dumping billions of dollars into AI research. However, it's doing that to make sure that its social media platforms stay relevant. Meta's primary revenue streams come from ad sales on its "family of apps": Facebook, Instagram, Threads, WhatsApp, and Messenger. It also has made significant investments in augmented reality (AR) and virtual reality (VR) that haven't begun to pay off yet, but they might if Meta can deliver a consumer product that integrates top-tier AI at a competitive price point. Regardless, those investments are years away from paying off, if they ever do. But in Meta Platforms' current business state, they're still an attractive investment. Meta is projected to grow its revenue by 15% next year, which isn't as fast as Nvidia, but you also don't have to pay a huge premium to own the stock. At 24 times forward earnings, Meta is reasonably priced for a big tech stock. This is especially true if you consider the upside that Meta has if one of the products it's developing eventually hits it big. The stock is only being valued for its social media advertising business, which is still a fantastic reason to invest in it. Meta is a huge AI player, but it still has a strong base business to pay its bills while we wait for AI to become fully integrated into its operations.

Interested in Artificial Intelligence (AI) Stocks in 2025? You Might Consider Buying This Top-Performing ETF. | The Motley Fool

Nvidia (NVDA -3.00%) stock was the best-performing stock in the S&P 500 index in 2023 and the third-best performer in 2024. The stock's fantastic run is driven by powerful demand for the company's graphics processing unit (GPU) chips and related technology to enable artificial intelligence (AI) capabilities. The AI revolution had been gaining steam for several years but hit a big inflection point in late 2022 with OpenAI's launch of its ChatGPT chatbot. This event showcased generative AI technology, which opened up many more use cases for AI. The global AI market is estimated to reach over $630 billion by 2028, nearly tripling its 2024 size, according to IDC. This equates to an almost 30% compound annual growth rate (CAGR). Moreover, AI is poised for robust growth over the longer term. Nvidia stock is still a great way to invest in AI. However, some investors might prefer to gain exposure to the AI space by buying an exchange-traded fund (ETF). These funds are bought and sold like stocks, but their diversification makes them less risky than individual stocks. Of course, it's not an either-or thing. Buying an AI stock or two and an AI-focused ETF can make good sense. The best AI-focused ETF, in my opinion, is not one with artificial intelligence or AI in its name; it's the VanEck Semiconductor ETF (SMH -2.00%). Semiconductors, or chips, are the building blocks of AI infrastructure, such as servers in data centers and the electronic items AI is "smartening" up, from smartphones to cars. Data source: YCharts. Data as of Jan. 10, 2025. ETF = exchange-traded fund. VanEck Semiconductor ETF, which began trading in 2011, is an index fund designed to track the performance of the MVIS US Listed Semiconductor 25 index. This index comprises a portfolio of global companies involved in the entire semiconductor value chain. Its methodology favors larger companies. The fund has 25 stock holdings, all of which are listed on a major U.S. stock exchange. The ETF uses modified market cap weighting, capping its maximum weighting for any holding at 20%. Its total expense ratio is 0.35%, which is reasonable for an ETF focused on a particular industry or theme. Data sources: VanEck Semiconductor ETF, finviz.com, and YCharts. EPS = earnings per share. *Portfolio weights and total net assets value as of Jan. 8, 2025. All other data as of Jan. 10, 2025. The 10 top holdings fall into these categories: Wall Street projects Nvidia, Taiwan Semiconductor Manufacturing (TSMC), and AMD to have particularly strong five-year average annual earnings growth. Like Nvidia, AMD makes GPUs. It's the second-largest producer of discrete GPUs and a relatively new entrant into the rapidly growing space that Nvidia dominates: AI chips for data centers. TSMC also benefits from the incredible demand for chips that enable AI capabilities. It manufactures chips for many of the larger semiconductor companies, including Nvidia, and big tech companies, such as Apple, that have designed some of their own chips for AI and other applications. In short, the VanEck Semiconductor ETF is poised to continue to benefit from the growth of artificial intelligence and has a longer-term track record, unlike many of the new entrants into the AI ETF category.

2 AI Semiconductor Stocks to Consider Buying in 2025 | The Motley Fool

With Microsoft recently announcing its intentions to spend $80 billion on building data centers across the globe this year, there appears to be no let-up in spending on artificial intelligence (AI) infrastructure. Meanwhile, as companies advance their AI models, they need exponentially more chips for these models to be trained on. Both Nvidia and Broadcom have talked about customers deploying AI chip clusters of 1 million or more in the near future, which is a huge jump from what recent AI models have been trained on. Let's look at two semiconductor stocks that should nicely benefit from the continued proliferation of AI chips. Today, most chipmakers, such as Nvidia and Broadcom, just design chips while leaving the manufacturing to a third party. Manufacturing semiconductors is a complex task that requires a lot of technological know-how, and there is always a push for manufacturers to shrink chip size in order to increase processing power and reduce power consumption. At the same time, building foundries (chip manufacturing facilities) is a capital-intensive business (in other words, they cost a lot of money to build), and the foundries need to run near full capacity to be profitable. How difficult it is to run a third-party foundry business can be seen with Intel, which has poured a ton of money into building foundries only for this segment to be a big money loser. Samsung's foundry business has also greatly struggled, with the unit reporting a big loss last quarter and the company announcing plans to lay off 30% of the unit's workforce and to shut down half its production lines. However, there is one semiconductor contract manufacturer that has emerged as the clear winner in the space: Taiwan Semiconductor (TSM 0.60%), or TSMC for short. The company has seen revenue and profits booming, spurred by the AI chip boom. Last quarter, it saw its revenue climb 36% to $23.5 billion, while its earnings per ADR soared 50% to $1.94 from $1.29 a year ago. The company has been the go-to contract manufacturer for advanced chips, given its scale and technology advantages. As its rivals have struggled, this has also given the company tremendous pricing power, which helped push up its gross margin to 57.8% last quarter from 54.3% a year ago. There have been reports that the company has raised its prices for 2025 as well. Meanwhile, it has also been expanding its capacity by building new foundries. TSMC is one of the companies best positioned to benefit from the continued chip boom, and its stock is attractively valued, trading at a forward price-to-earnings (P/E) ratio of 19.5 and a price/earnings-to-growth ( PEG ) ratio of 0.65. A PEG ratio below 1 is generally viewed as undervalued, but growth stocks will often have PEG ratios well above 1. While TSMC manufactures semiconductor chips, ASML Holdings (ASML -0.67%) is the company that makes the equipment that it and other foundries use to manufacture those chips. ASML is the clear-cut leader in extreme ultraviolet (EUV) lithography, which is the technology used to create these advanced chips. Its EUV machines can cost upwards of $200 million. Meanwhile, it has recently introduced its next-generation high-NA EUV technology, with these machines costing around a whopping $380 million a piece. Despite its struggles, Intel has been the first company to invest in these next-generation machines, while TSMC received its first machine for trial use toward the end of 2024. However, wider adoption of these machines is likely years away. TSMC has indicated it doesn't currently need high-NA EUV technology to manufacture current-generation high-end chips. ASML executives are reportedly set to meet TSMC execs very soon to discuss TSMC's road map over the next few years. However, according to reports, TSMC may not need these high-NA EUV machines for mass production until at least 2030. Nonetheless, with TSMC still needing to increase production and build more foundries, it will still need more EUV machines. ASML basically has a monopoly in the EUV space and should continue to benefit even if its newest technology does not start to bear fruit for several years down the line. Meanwhile, Intel is looking to use high-NA EUV technology in production in 2027. It will be interesting to see if TSMC is willing to give Intel such a big head start in using high-NA EUV technology, even with its struggles. Intel still plans to invest $100 billion in adding chip manufacturing capacity in the U.S. over the next several years and has received nearly $8 billion in direct funding from the government, along with a 25% tax credit. Interestingly, Intel being late to EUV technology in order to maximize profits while TSMC embraced the technology is part of the reason why the two companies are where they are today. That's why there is still a pretty good chance that TSMC will adopt high-NA EUV tech sooner than 2030 unless it wants to risk the script being flipped. ASML has been going through a bit of a transition with the new technology as well as dealing with Chinese companies pushing through orders of older technology on fears of even harsher export bans around semiconductor technology. Nonetheless, as the only maker of EUV and high-NA EUV machines, it should ultimately be a long-term winner. Trading at 24 times forward earnings, the stock is reasonably priced.

The Top AI Cloud Computing Stocks for 2025 | The Motley Fool

One of the areas that has most benefited from the advent of artificial intelligence (AI) has been cloud computing. As organizations look to customize AI models and applications to fit their needs, they have been increasingly turning to these companies to help them. Let's look at the three big companies that dominate this industry. Amazon (AMZN -0.32%) created the cloud computing industry back in 2006 when it launched Amazon Web Services (AWS). It was a way to help partners and affiliates get their server infrastructure up and running more quickly in order for them to launch their own e-commerce platforms. Today, the company holds about a 31% market share in the cloud computing space and AWS is the company's largest business by profitability. AWS has been Amazon's fastest-growing business as well, with revenue growth of 19% last quarter to $27.5 billion. Meanwhile, the segment's operating income soared nearly 49% to $10.4 billion. It noted that AI-related revenue soared by triple-digit percentages. The company has been seeing success with its Bedrock and SageMaker solutions. Bedrock provides customers with an array of foundational AI models they can use as a starting point, while SageMaker lets them build and train their AI models and then helps move them into production. Amazon also has developed its own custom AI chips for AI training and inference. Outside of cloud computing, Amazon is the leading e-commerce and logistics company in the world. Its e-commerce continues to be a solid growing business, while it is using AI to help run the business more efficiently. The stock currently trades at a forward price-to-earnings (P/E) ratio of just under 29 times next year's analyst estimates, which is a discount to where it has traded in past years. The company has always shown a willingness to spend money to win, and with AI and cloud computing it should be no different. Microsoft (MSFT -0.36%) was one of the first big tech companies to embrace generative AI through its large investment and partnership with OpenAI. The unit that has most benefited from this partnership has been Azure, which is the No. 2 leading cloud computing company with a 20% market share. Last quarter (fiscal Q1), Azure revenue climbed 33%, with Microsoft saying Azure OpenAI usage doubled in the past six months. The company has credited its strong growth to customers building their own AI agents and copilots on the Azure platform, with growth accelerating as it helped move customer apps from test to production. In addition, this is leading to more usage of its data and analytics services, Azure Cosmos DB and Azure SQL DB. Microsoft said Azure's revenue growth could have been even more if not for capacity constraints, and it expects revenue to accelerate in its fiscal second half as more capacity comes online. The company is aggressively investing in adding AI infrastructure, recently saying it would spend approximately $80 billion on new AI data centers in 2025. Beyond the cloud, Microsoft is the leader in workplace productivity software with programs such as Word, Excel, and Outlook, as well as in personal computer (PC) operating systems with Windows. The company has a large opportunity with its AI assistant Copilots, which it sells as a $30 per month per enterprise user add-on to its Microsoft 365 subscription. These Copilots can greatly help increase worker efficiency and save time. The stock currently trades at a forward P/E of just under 32 times this year's fiscal (ending June 2025) analyst estimates, which is a reasonable valuation given the opportunities in front of it. While Alphabet's (GOOGL -0.71%) (GOOG -0.65%) Google Cloud is the smallest of the big three cloud computing companies with a 12% market share, it has been the fastest growing. Last quarter, the unit grew revenue by 35% to $11.4 billion. More importantly, the business has seen a profitability inflection point, with its segment operating income soaring from $266 million a year ago to $1.95 billion last quarter. Similar to the other big cloud computing companies, Alphabet said its cloud computing growth is being driven by customers using its AI platform to build and customize their own AI models and applications using both Gemini and third-party foundational models. It noted that Gemini application programming interface (API) requests have surged 14x over the past six months. It also called out the traction it was seeing with AI in its BigQuery data platform and AI-powered cybersecurity solutions. It has also been able to lower costs and reduce processing times through its use of combining its customized tensor processing units (TPUs) with graphic processing units (GPUs). On its last earnings call, it highlighted that one customer was able to lower its costs by 72% and processing times by 50%. Outside of cloud computing, Alphabet is the leader in digital advertising through its Google search engine and YouTube streaming platform, which is the most viewed video platform in the world. The company also is helping lead the way in a variety of fields, including autonomous driving (Waymo), AI video generation (Veo 2), and quantum computing (with its Willow chip). The stock is attractively priced, trading at a forward P/E of just under 18.7 times next year's analyst estimates. Given the opportunities in front of the company, that looks like a bargain.

5 AI Stocks to Load Up On in 2025 | The Motley Fool

The artificial intelligence (AI) revolution promises to reshape the global economy in unprecedented ways. Recent research from McKinsey & Co suggests generative AI could add between $2.6 trillion and $4.4 trillion in annual value across 63 analyzed use cases. This potential impact could double when factoring in AI integration into existing software applications. Market valuations reflect this economic transformation in real time. Tech giants focused on AI development have seen their market caps soar dramatically. Nvidia (NVDA -1.10%), the chipmaker driving the AI revolution, has delivered over 2,000% returns to shareholders in just five years. To catch the next big wave of AI-based innovations, savvy investors might want to consider buying the following five AI stocks, which all show tremendous promise for 2025 and beyond. Applied Digital Corporation (APLD 9.98%) transforms the high-performance computing landscape through its next-generation digital infrastructure. The company recently secured a game-changing $5 billion funding partnership with Macquarie Asset Management to fuel its expansion. This strategic alliance provides Applied Digital with powerful growth capital for its ambitious plans. The first phase includes $900 million for a 400-megawatt facility at its Ellendale campus, which positions the company to meet exploding demand for AI processing power. With this capital infusion, Applied Digital stands ready to capitalize on the AI computing boom. Serve Robotics Inc. (SERV 11.03%) revolutionizes autonomous sidewalk delivery through its innovative robotics platform. The company's third-generation system integrates enhanced AI capabilities powered by Nvidia's cutting-edge computing modules. Moreover, a groundbreaking partnership with Uber and plans to deploy 2,000 new units in 2025 underscore the company's market momentum. Serve's technological advantages in speed, range, and safety position it to capture a significant market share in autonomous delivery. This emerging robotics leader thus deserves attention from growth-focused investors. Oklo Inc. (OKLO -0.31%) develops next-generation nuclear solutions for energy-intensive AI infrastructure. The company's groundbreaking agreement with data center operator Switch to supply 12 gigawatts of clean power signals strong market interest in its developing technology. The company's advanced nuclear reactor designs target the growing power demands of AI data centers. Oklo's site-use permit from the Department of Energy and commercial partnerships create a foundation for future growth in clean energy. This early-stage player offers investors unique exposure to the intersection of nuclear innovation and AI infrastructure needs. Alphabet Inc. (GOOG -0.65%) is strengthening its AI dominance in retail through agentic AI deployment. The company is rolling out AI agents that autonomously handle product searches, recommendations, and customer inquiries for online merchants. Alphabet's strategic partnerships with e-commerce stalwarts like Shopify and BigCommerce extend its agentic AI capabilities to millions of online retailers. Furthermore, its best-in-class machine-learning algorithms process billions of shopping interactions daily, continuously improving how AI agents assist with product discovery and customer support. The tech behemoth's deep integration into e-commerce infrastructure positions it to capture significant value from retail's AI transformation, making its stock a must-own in the era of intelligent machines. Tesla Inc. (TSLA -1.72%) is pursuing a comprehensive approach to AI development. The company's strategic investments encompass custom AI chips, the Dojo supercomputer, and the Optimus humanoid robot platform that aims to revolutionize manufacturing. Best of all, the automotive pioneer's vertical integration across AI hardware and software creates formidable competitive barriers. Tesla's vast real-world driving data and proprietary training infrastructure ought to rapidly accelerate the development of autonomous vehicles and humanoid robotics. What's the bottom line? Tesla's unique combination of AI expertise, manufacturing scale, and robotics ambitions make it a cornerstone holding in autonomous systems and human-AI collaboration. The AI revolution presents a once-in-a-generation opportunity for investors. These companies offer broad exposure across the AI value chain, from core infrastructure to practical applications and enabling technologies. Their strong market positions and clear growth trajectories make them compelling candidates for investors seeking to capitalize on AI's transformative potential.

2 Custom AI Chipmaker Stocks for 2025 (Hint: Not Nvidia or AMD) | The Motley Fool

In the early days of the artificial intelligence (AI) infrastructure build-out, graphic processing units (GPUs) have been the go-to chips for companies to train AI models and run inference. GPUs are powerful chips that were originally designed to speed up graphics rendering in video games, but later became used for other applications after Nvidia created a software platform to allow developers to program its chips for other purposes. However, a number of large tech companies have also started to use custom AI chips, or ASICs (application specific integrated circuits). ASICs are custom chips designed for very specific purposes. As such, they tend to perform better and be more efficient at these tasks compared to a GPU, but aren't as flexible in how they can be used. Let's look at two companies that are helping lead the way with custom AI chips. When it comes to custom AI chips, Broadcom (AVGO -2.18%) has been the leader in the space. Alphabet was its first AI chip customer, with Broadcom helping to design its tensor-processing unit (TPU) called Trillium. This chip was created to specifically work within Google Cloud's TensorFlow (a software library for AI and machine learning). Alphabet has said these custom chips have several features that make them better than GPUs for AI training and inference. These include having matrix multiply units (MXUs), which are components used to efficiently perform large matrix multiplications, and SparseCores, which are "data flow processors that accelerate models relying on embeddings found in recommendation models." Last quarter, Alphabet credited using a combination of GPUs and TPUs as a differentiator for its cloud computing segment. It said its TPUs helped lower costs while also reducing inference time. Since then, Broadcom has added more custom AI customers, which are believed to be Meta Platforms, ByteDance, OpenAI, and most recently, Apple. Braodcom saw strong growth from AI chips in its fiscal 2024 ending early November, with its AI revenue topping $12 billion, well above its expectations of around $7.5 billion going into the year. The company excited investors last quarter when it indicated each of its three initial AI customers could deploy up to 1 million AI chips in 2027, which it said would represent a $60 billion to $90 billion revenue opportunity in 2027 alone. It added that if its two new customers were able to get their chips into development by that time, that this opportunity would be even greater. While Broadcom isn't likely to win all this business, with some going toward GPUs, it shows the strong customer AI chip opportunity the company has in front of it. The stock, meanwhile, trades at a forward price-to-earnings (P/E) ratio of 35.5 based on 2025 analyst estimates, which is attractive if it can capture a good share of the 2027 opportunity it has talked about. Broadcom is not the only company that is helping customers design custom chips. Marvell (MRVL -3.26%) is also in the custom silicon game as well. It's best known for helping Amazon with its Trainium chip that is used to help train large language models (LLMs). While Broadcom is believed to have completely designed chips for Alphabet based on its needs, Marvel is primarily providing some intellectual property around high-speed SerDes (Serializer-Deserializer), with Amazon doing most of the work, according to analysts at Morgan Stanley. On its fiscal Q3 earnings call in December, Marvell said that it recently signed a five-year multigenerational deal with Amazon's cloud unit AWS for custom AI products, as well as various other data center switches and components. It said the deal should lead to a significant ramp-up in volumes between the two companies. Amazon is not Marvell's only AI customer, Marvell said it has a range of design wins for both AI accelerators and compute and that other programs would go into production in 2025. It also said it will have a third large customer soon. At its AI day, the company said it sees custom AI chips as a $40 billion market opportunity, and that it thinks it can take a 20% market share, or $8 billion. Marvell said it was on track to exceed $1.5 billion in AI revenue this fiscal year, with more growth expected in fiscal 2026. It said much of this will come from its custom silicon program. Outside of custom AI chips, Marvell is very tied to the data center market. Its data center revenue soared 98% year over year last quarter to $1.1 billion. Data center revenue now accounts for 73% of the company's total revenue, up from it being 39% of its total revenue a year ago. However, overall revenue rose just 7% due to weakness in other end markets. Overall, with data center spending continuing to ramp up, Marvell should see strong growth in this area. The stock currently trades at 42 time next year's earnings estimates, which is a bit on the high side.

2 AI Stocks I'm Buying in January 2025 | The Motley Fool

Heading into 2025, I didn't have a ton of AI exposure in my portfolio. Sure, I own a few stocks that should benefit from long-term AI tailwinds, but as far as direct artificial intelligence plays, there aren't many. One of my 2025 investing New Years resolutions is to increase my exposure to the massive opportunity in AI, and in January, I plan to buy two stocks in particular, one of which I already own, and another that could be an excellent long-term investment regardless of who the winners in the AI chip race are. Sea Limited (SE 3.34%) was the best-performing stock in my portfolio in 2024, and it wasn't even close. Shares were up by more than 160% for the year, a stunning turnaround after profitability concerns sent them plunging more than 90% from its 2021 peak. The strong performance was well deserved. All three sides of Sea's business looked fantastic. The Shopee e-commerce business grew gross merchandise volume by 25% year over year in the third quarter, expanded its take rate, and achieved adjusted EBITDA profitability for the first time ever. The Sea Money digital finance platform grew its loan portfolio by 70% while simultaneously lowering its percentage of non-performing loans. And finally, the Garena digital entertainment business grew both daily active users and bookings by 25%. Overall, Sea's revenue grew by 30% over the third quarter of 2023 and the company went from negative-$144 million in net income to a profit of more than $150 million. However, there is still plenty of room to grow margin and scale all three parts of the business. Sea also has tons of AI potential, especially when it comes to optimizing its e-commerce business. With about $10 billion in cash on the balance sheet, Sea Limited has plenty of firepower to pursue opportunities as they arise. Much of the attention surrounding the AI revolution is focused on chipmakers such as Nvidia, and for good reason. But there are some excellent behind-the-scenes companies that could also be excellent investments, and Applied Materials (AMAT 1.63%) is one in particular that I have my eye on. If you aren't familiar, Applied Materials produces the equipment that allows Nvidia, Intel, and other chipmakers to manufacture their products. As AI chips get more complex, the equipment needed to make them becomes more specialized, and Applied Materials is the leader in this industry. The global semiconductor manufacturing equipment market is expected to more than double in size by 2032 and Applied Materials could be the biggest winner from this trend. In addition to selling its equipment, Applied Materials also generates a nice revenue stream from servicing its equipment, and this has been a fast-growing component of the business in recent years. After all, the more complex and specialized manufacturing equipment is, the more specialized maintenance it requires. Applied Materials is a highly profitable business and has been for years, and management has a solid history of prioritizing capital return to shareholders, both as buybacks and dividends. With shares about 35% below their 52-week high and close to their lowest price-to-sales ratio in a year, I'm planning on adding this AI winner to my portfolio in January. To be clear, I plan to add to my portfolio's AI exposure throughout 2025, and these are probably not the last two AI stocks I'll be purchasing this year. And that's especially true if the recent market turbulence persists and top AI stocks start trading at more attractive valuations.

1 Artificial Intelligence (AI) Stock That Could Rocket Higher in 2025 | The Motley Fool

Considering how well artificial intelligence (AI) stocks have done over the past two years, it's hard to imagine some of them going even higher. However, this industry still has significant tailwinds as we have barely scratched the surface of what is possible with AI. However, picking which companies will emerge as the victors in the AI arms race isn't easy. That's why I'm focusing more on the companies selling the tools needed to participate in this AI arms race. One of the top companies in this realm is Taiwan Semiconductor (TSM 0.04%). Although the stock was up 90% in 2024, it still has plenty of room for upside in 2025. Although many companies design chips and use them in their own products -- think Nvidia (NASDAQ: NVDA) or Apple (NASDAQ: AAPL) -- not all of them have the manufacturing infrastructure to actually churn out those chips. Instead, they outsource this work to foundries like Taiwan Semiconductor. This puts Taiwan Semiconductor in a neutral position in the AI arms race. As the world's largest foundry operator, it often fabricates chips for competitors. One market segment where this is evident is the graphics processing unit (GPU) space. GPUs have long been used for specific types of arduous computing tasks that can be best handled by parallel processors, and training AI models creates just this type of workload. Nvidia has dominated this market. However, it does have competition, such as AMD (NASDAQ: AMD). And TSMC also fabricates AMD's GPU chips. This makes TSMC a top AI investment for me, as it allows me to invest in a fairly low-level company that provides products to many of the top AI players. It's expected to report that its AI-related revenue tripled in 2024, and there are no indications that its growth will plateau anytime soon. Furthermore, Taiwan Semiconductor will introduce a new fabrication technology later on in 2025 that will drive further sales growth. Its 2-nanometer (nm) process node will set a new performance benchmark over its current top-of-the-line 3nm process node. The biggest advancements for the chips made using this process won't be in processing power but in energy efficiency. Management estimates that these 2nm chips will be 25% to 30% more energy efficient than the current generation when each is configured for the same power level. That's a massive benefit, and will be a key feature for chips in products like smartphones (where they will enable longer battery life) and data centers (where GPUs consume a ton of power). There's a clear case for owning Taiwan Semiconductor stock, but do the financials support the premise that it could rocket higher in 2025? Taiwan Semiconductor produced strong growth in Q3, with revenue rising 39% year over year in New Taiwan dollars. While we'll hear more about TSMC's Q4 performance on Jan. 16 when it reports its next set of results, we already have an idea of its revenue growth. Taiwan Semi reports monthly revenues to investors, and the results for the last three months of the year were fantastic. Data source: Taiwan Semiconductor. YOY = year over year. Current exchange rate is approximately $1 U.S. to NT$33. Revenue growth is clearly strong, and these numbers indicate 39% year-over-year revenue growth from a New Taiwan dollar standpoint. Wall Street analysts expect this strength to continue throughout 2025, as they project 26% growth. If the stock is priced right today, it could therefore see strong appreciation driven by its business growth. Trading at 23 times forward earnings, TSMC isn't really that expensive. Taiwan Semiconductor is a massive player in a key industry, and its leadership position will make it a worthwhile investment. The stock is well priced and the company is showing promising growth, so I have no doubt that it will rocket higher in 2025.

3 AI Software Stocks to Consider Buying | The Motley Fool

The build-out of artificial intelligence (AI) has been the first big wave for AI, leading to huge surges in revenue for companies like Nvidia. However, the second wave of AI could come from the software space, as organizations begin to implement AI into their businesses. Let's look at three stocks that could continue to benefit from a boom in AI software. Perhaps the stock investors are most excited about when it comes to AI is Palantir Technologies (PLTR -2.52%). While a number of big tech companies have been rushing to create the best AI models, Palantir has been taking a different approach. In fact, management has said it thinks AI models will eventually be pretty similar, and as such, commoditized. Instead, Palantir is aiming to become the AI operational system for organizations by focusing on the applications and workflow layers of AI. By mapping things like data sets and models to their real-world counterparts, it is looking to help customers use AI to solve real-world problems. Palantir has been drawing in customers through its use of AI workshops, called boot camps, to show how its AI platform can address potential use cases while helping with training. This has led to a surge in both U.S. commercial customers and revenue. The next growth driver for the company will be moving these commercial customers from proof-of-concept work into production. While the company's growth has been accelerating, this has the potential to kick it into overdrive. It should also benefit from the U.S. government, which is the company's largest customer, also beginning to embrace AI. While the stock has a lot of potential, it is pricey, trading at this writing at a price-to-sales (P/S) multiple of 41 times 2025 analyst estimates. That is double peak software-as-service (SaaS) multiples from a few years ago for stocks with similar growth, so Palantir won't have a lot of room for error. Microsoft (MSFT 0.52%) was one of the first large tech companies to embrace AI when it greatly increased an earlier investment it made in OpenAI and formed a partnership with the AI start-up. Early on, the company has seen the biggest benefit in its cloud computing unit Azure, which has grown rapidly as it helps customers create their own AI models and Copilots. However, the company has a big opportunity within its software business as well. GitHub, which is a platform that helps developers create code, has been one of its fastest-growing software segments since the launch of its GitHub AI Copilot that will suggest and help programmers finish coding. The bigger opportunity, though, is with its Microsoft 365 Copilots. These AI assistants can do such things as prioritize and summarize emails and meeting notes, tell managers which tasks are completed or outstanding, share documents among workers, create PowerPoint presentations using natural language, and even let programmers use the Python programming language in Excel through only natural language prompts. Workers are still in the early days of learning and using this technology, but it can save a lot of time and creates a lot of efficiencies. At the cost of $30 per month per enterprise user, this should be a nice revenue driver for Microsoft. The company said last quarter that 70% of the Fortune 500 have been using Copilots, but there is likely a large expansion opportunity within these customers as more departments adopt the technology. Trading at a forward price-to-earnings (P/E) of under 33 times this fiscal year's analyst estimates, the stock appears reasonably valued. While the company may have a quirky name, AppLovin's (APP -0.24%) fortunes completely changed with the launch of its AI-powered adtech solution Axon-2. Gaming app companies use the software platform to help them attract and better monetize users. Using predictive machine learning, the platform has become a hit with customers. Since the launch of Axon-2 in the summer of 2023, AppLovin's software platform revenue has skyrocketed, including the segment seeing 66% revenue growth to $835 million last quarter. The company's gross margins have also been expanding nicely, including improving a whopping 820 basis points year over year to 77.5%. That's doubly good, as not only is revenue growing rapidly, but more of that revenue is flowing to the bottom line as profit. The company thinks it can see steady 20% to 30% software platform revenue growth from gaming customers in the years ahead through self-learning and market growth. Apparently, the more the platform is used, the more it learns, and the better it becomes at targeting gamers. The big opportunity for AppLovin, though, is expanding beyond its core gaming customers. The company has already piloted Axon-2 with e-commerce customers, and it thinks this vertical could be a meaningful contributor in 2025. If it's right, that's a big opportunity. While its forward P/E is more than 40.5 times 2025 analyst estimates, the company's price/earnings-to-growth (PEG) ratio is only 0.65. A PEG ratio under 1 is generally view as undervalued, and growth stocks quite often have multiples well above 1.

If I Could Buy Only 1 Semiconductor Stock Over the Next 10 Years, This Would Be It | The Motley Fool

For the last two years, technology stocks have generated some pretty generous returns. Since ChatGPT was commercially released on Nov. 30, 2022, the Nasdaq Composite and S&P 500 indexes have boasted total returns of 70% and 47%, respectively. Among some of the technology sector's biggest gainers have been semiconductor stocks. Semiconductors play a critical role in the development of generative AI -- running complex algorithms on graphics processing units (GPU), training and inferencing models, from providing memory and storage for data workloads. Given this array of features, you might be wondering which area in the chip realm is the best to invest in. In my opinion, Taiwan Semiconductor Manufacturing (TSM -3.36%) is the best-positioned name in semiconductors over the next decade. Below, I'll detail what makes TSMC such a compelling long-term opportunity and assess if shares are worth a buy right now. As I alluded to above, there are many different pockets of the chip realm. Companies such as Nvidia and Advanced Micro Devices focus on designing GPUs, whereas Broadcom plays an integral role in providing networking equipment for data centers. Moreover, Micron's chips specialize in data and storage management for data workloads. Indeed, there are legitimate arguments to be made for investing in any of these companies. However, none of the businesses outlined above is immune to the cyclicality of the semiconductor industry nor the rising competitiveness among various aspects of the chip landscape. While Taiwan Semiconductor may not be completely immune to these factors, I see the company as far more insulated and less vulnerable. The reason is that Taiwan Semiconductor's fabless manufacturing processes play an important role in a variety of chip applications and AI systems. According to the company's filings, TSMC makes products for Nvidia, AMD, Broadcom, Amazon, Qualcomm, Sony, and many more. Furthermore, considering TSMC has an estimated 90% share of chip production, I think this underscores how essential the company is to the world's largest semiconductor players. This year, Nvidia is launching its long-awaited Blackwell GPU infrastructure. Industry analysts are reporting that Blackwell is already sold out for the next year; meanwhile, Nvidia is already developing a successor GPU called Rubin, which could launch sometime in 2026. In addition, AMD is scheduled to launch two new GPUs called MI325X and MI400 between 2025 and 2026. To me, Nvidia and AMD represent TSMC's two most obvious near-term tailwinds. However, there are some other subtle clues that indicate why TSMC is positioned well for the long haul. Hyperscalers such as Microsoft, Amazon, Alphabet, Oracle, and Meta Platforms have all indicated that rising spend in AI infrastructure is going to be a theme over the next several years. I see these investments in capital expenditures (capex) as a major catalyst for TSMC as more AI data centers and GPU architectures begin to enter the market. Over the last 12 months, shares of TSMC have gained 107%. And yet despite this market-beating performance, the company trades at a modest forward price-to-earnings (P/E) multiple of just 23. To put this into perspective, this is identical to the average forward P/E of the S&P 500. While TSMC has witnessed a high degree of valuation expansion over the last year, the company's earnings are accelerating at a faster rate than the share price. Given how important TSMC is going to be as AI infrastructure spending continues to rise over the next several years, I think the company's earnings power is positioned to compound in a material way. To me, Taiwan Semiconductor Manufacturing is a stock to buy hand over fist and one to hold on to for years to come as the AI story continues to unfold.

3 Artificial Intelligence (AI) Software Names to Buy in 2025, According to Dan Ives | The Motley Fool

Software is expected to have another great year in 2025 fueled by ongoing and rising investment in artificial intelligence (AI). Dan Ives is one of the most closely followed personalities on Wall Street. Ives leads global technology research for Wedbush Securities, and can often be found touting bullish narratives and forecasts about artificial intelligence (AI) on financial media outlets such as CNBC or Bloomberg. In late December, Ives took to social media platform X (formerly Twitter) to highlight his top 10 AI picks for 2025. Below, I'm going to explore three of his software picks and assess if now looks like a good opportunity to scoop up shares. It should come as no surprise that Palantir Technologies (PLTR -1.42%) earned a position on Ives' list of top ideas. The primary tailwind fueling Palantir boils down to one thing: the company's newest software suite, dubbed the Palantir Artificial Intelligence Platform (AIP). Since launching in April 2023, AIP has helped Palantir make a splash in the private sector and remain a competitive option alongside many other data analytics tools flooding the software market. Moreover, AIP has also helped Palantir form a number of strategic alliances with big tech and consulting firms including Oracle, Meta Platforms, Microsoft, Amazon, and Booz Allen Hamilton. Many of these partnerships are focused specifically on integrating AIP across cloud infrastructures within the Department of Defense (DOD) and other military-related agencies. In turn, Palantir has unlocked new ways to accelerate its historically lumpy government business. While I am personally bullish on Palantir's long-term potential, I must also admit that the stock has gotten overwhelmingly expensive. Last year, Palantir was the top-performing stock in the S&P 500 index (^GSPC -1.54%) after the company's shares soared 340%. Although I think 2025 should be another terrific year for Palantir, I'd caution investors against buying into the stock during a pronounced period of momentum. The next company I'll be exploring is Salesforce (CRM -2.77%). While Salesforce is primarily known for its sales and marketing tools, the company also owns and operates several other platforms that span across areas such as data analytics and workplace productivity. Over the last couple of years, large language models (LLMs) and machine learning have garnered a lot of the chatter surrounding AI. However, during the company's latest earnings call, Salesforce CEO Marc Benioff made it clear that the company's next growth wave revolves around agentic AI. Agentic AI will utilize generative AI protocols such as LLMs and machine learning applications, but will not require a human to operate as these digital agents become "smarter" and more independent over time. Salesforce's agentic AI platform is aptly called Agentforce, and right now it's already being used by some of the world's largest enterprises including IBM, FedEx, and Accenture. At the moment, Microsoft's CoPilot is the most mainstream agentic AI offering on the market. Given the limited competition and increasing spending on AI infrastructure, I'm bullish on Salesforce's ability to acquire incremental market share in the agentic AI space and think the company has robust prospects ahead. Data infrastructure company Snowflake (SNOW 0.89%) went public around the same time as Palantir back in 2020. Yet unlike Palantir, investors cheered on Snowflake's public debut in historic fashion. Moreover, when AI began to emerge as the next megatrend back in late 2022, it was natural to think that Snowflake would be an obvious beneficiary. However, reality clashed with lofty expectations, and eventually investors began to question if the narrative surrounding Snowflake was rooted in hype. Ultimately, poor investor sentiment around Snowflake resulted in Frank Slootman resigning as the CEO, leaving the company with very little to say about its AI chops and if the technology would ever become a core focus in the business. While the last year has been a tough one for Snowflake, the company is gradually beginning to turn things around. Product revenue is growing 29% year over year, and the company boasts an astounding net revenue retention (NRR) rate of 127% -- indicating that customers are not only remaining on the Snowflake platform, but also spending more. According to the company's CFO Mike Scarpelli, Snowflake's core AI platform, Cortex, is "still very much in the early innings." The way I interpret Snowflake's current situation is that the company has been able to improve key performance indicators without AI being a major contributor yet. To me, this implies that as AI becomes more of a selling point for Snowflake, the company's financial profile should continue to strengthen. Although Snowflake is not yet out of the woods, I am cautiously optimistic about an investment in the stock.

Should You Forget Palantir and Buy These 3 Artificial Intelligence (AI) Stocks Right Now? | The Motley Fool

Palantir Technologies (PLTR -2.52%) was one of the hottest artificial intelligence (AI) stocks in 2024, and for good reason. Growth accelerated as U.S. commercial clients began adopting the company's Artificial Intelligence Platform while its largest customer, the U.S. government, also began to increase spending. The company still has a lot of opportunity in front of it, as much of its early AI success with commercial clients has come from proof-of-concept work. As it moves these customers to production, revenue will accelerate even more. Against that backdrop, let's look at three cheaper AI stocks that investors could consider. Like Palantir, Nvidia (NVDA -0.02%) has been a big AI winner. However, its stock trades at a much more attractive value, with a forward price-to-earnings (P/E) ratio of 32 based on 2025 earnings and and a price/earnings-to-growth (PEG) ratio of 1. A PEG ratio below 1 is typically viewed as undervalued, but growth stocks will often have PEG ratios well above 1. Nvidia has been the biggest beneficiary of the AI infrastructure buildout as its graphic processing units (GPUs) have become the backbone of the computing power needed to train AI models and run inference. If there was any thought that spending of AI infrastructure was about to slow, Microsoft's announcement that it planned to spend $80 billion this year on data centers to handle AI workloads should put that to rest. That's an enormous amount of money being poured in AI infrastructure by a single company. To put that in perspective, that's more than the gross domestic product (GDP) of Panama or Croatia. While not all of this spending will go toward GPUs, a meaningful portion will. Meanwhile, mega-cap tech companies typically don't like to be outshined. A number of large tech companies have called AI a generational opportunity, so expect other hyperscale companies (those with huge data center operations) to also look to ramp up their AI data center spending. With an approximate 90% market share in the GPU market, Nvidia looks like it will continue to be an AI winner. GitLab (GTLB 1.77%) is growing at similar rate to Palantir, but trades at a much cheaper valuation. The company operates a DevSecOps platform that helps software developers create software while also integrating cybersecurity throughout the process. Last quarter, GitLab produced revenue growth of 31%. It was its sixth consecutive quarter with revenue growth between 30% and 40%. This growth is being fueled by its GitLab Duo offering, which is its suite of AI-powered tools that help programmers write code through automation and suggestions. GitLab Duo is an add-on option to its Ultimate and Premier platforms. Last quarter, the company booked five new six-figure deals that included Duo. In addition, the product seems to be a hit with existing customers. It had a strong net revenue retention of 124% last quarter, while also seeing the best churn and contraction numbers as a percentage of renewals in the past three years. The company is also seeing strong adoption of its GitLab Dedicated solution. This is similar to Ultimate but gives customers additional features such as data isolation and regional data residency. Dedicated is also driving demand for Ultimate, as users must first be on Ultimate to gain access to Dedicated. Currently, about 48% of its customers are on Ultimate. The company also recently announced a deal with Amazon, so that Amazon Web Services (AWS) customers using Ultimate will be able to deploy secure code faster on AWS. Trading at a forward P/S of 10.5 next year's estimate with more than 30% revenue growth, the stock is an attractive high-growth stock. AppLovin (APP -0.24%) has been an even hotter stock than Palantir over the past year, but it trades at a much more reasonable valuation with a forward P/E ratio of 37 times 2025 estimates with a PEG of only 0.59. The adtech company for video game apps has seen explosive growth come from its AI powered adtech tool Axon-2, which helps target new potential game users. Meanwhile, Axon-2's predictive machine learning only gets better at targeting gamers the more it is used, which helps drive further growth. Last quarter, its software platform, home to Axon-2, saw its revenue grow 66% to $891 million, while overall revenue climbed 39% to $1.2 billion. Software platform revenue rose by 50% or more over the past seven quarters. The company thinks it can achieve 20% to 30% platform revenue growth just within its gaming customers over the long term through overall gaming market growth and advancements in the algorithm as it learns. However, it is looking to now expand Axon-2 to the broader e-commerce vertical. It has seen success with e-commerce customers in early tests and thinks the e-commerce vertical can become a meaningful revenue contributor this year. If AppLovin is able to successfully move Axon-2 beyond gaming, there could be a lot of upside still in the stock.

1 Vanguard Index Fund to Buy Before It Soars on AI Tailwinds in 2025, According to a Wall Street Analyst | The Motley Fool

The S&P 500 entered its current bull market in October 2022 and has since advanced 65%, led by a 130% gain in the technology sector. But equity analyst Dan Ives at Wedbush says the bull market will run for another two to three years, and he believes technology stocks could soar 25% in 2025. Ives sees tremendous investments in artificial intelligence (AI) as the driving force behind that momentum. He recently told CNBC that the consensus among Wall Street analysts likely underestimates AI spending by 30% to 40%. Investors can position their portfolios to benefit from that upside by owning the Vanguard Information Technology ETF (VGT -2.13%). Here are the important details. The Vanguard Information Technology ETF measures the performance of 316 stocks in the technology sector. Those companies fall into three categories: (1) chipmakers and semiconductor equipment manufacturers, (2) cloud services and software companies, and (3) hardware and equipment manufacturers. The five largest holdings in the index fund are listed by weight below: The Vanguard Information Technology ETF returned 158% during the last five years, equivalent to 20.8% annually. Comparatively, the S&P 500 returned 96% in the same period, compounding at 14.4% annually. The Vanguard ETF may continue to beat the broader market as spending on artificial intelligence (AI) increases. Consider the five largest holdings: Apple has added AI features to newer devices that could drive a massive iPhone upgrade cycle. Nvidia graphics processing units (GPUs) are the chips of choice for accelerating AI applications in data centers. Microsoft's AI sales are on pace to hit $10 billion faster than any product category in company history. Broadcom is the leader in custom AI chips. And Salesforce recently introduced AI-powered digital workers. The last item of consequence is the expense ratio. The Vanguard Information Technology ETF has an expense ratio of 0.1%, meaning the annual fees will total $10 for every $10,000 invested in the fund. That is well below the average expense ratio of 0.48% for index ETFs, according to Morningstar. Some investors may worry that technology stocks are expensive. With a forward price-to-earnings (PE) ratio of 29, technology is the most richly valued of the 11 stock market sectors. But that premium is justified. Technology companies, in aggregate, are expected to report 23% earnings growth in 2025, which exceeds the forecast for every other sector. Moreover, that trend has persisted for over a decade. Goldman Sachs analysts recently wrote, "The global tech sector's earnings per share have risen about 400% from its peak before the great financial crisis, while all other sectors together have risen 25% during that span." So, technology stocks have premium valuations because they have consistently led the market in earnings growth. Here is the bottom line: The Vanguard Information Technology ETF provides cheap and easy exposure to many of the most influential technology stocks in the world. Incidentally, it also provides concentrated exposure to the market sector that generated the best returns over the last three, five, and 10 years. And that momentum may persist for many more years as AI unlocks new revenue streams for technology companies. In that context, the technology sector may return 25% in 2025, as Dan Ives forecasts. But investors should only buy a position in the Vanguard Information Technology ETF if their time horizon is at least three to five years.