Nvidia's AI Dominance: Driving Growth in 2025 and Beyond

Will 2025 Be the Year of Artificial Intelligence (AI) Agents? Nvidia's CEO Jensen Huang Thinks So. | The Motley Fool

Listening to what industry leaders say about the future of artificial intelligence (AI) is key to being a successful investor. One of the AI leaders is Nvidia's (NVDA -3.00%) CEO and founder, Jensen Huang. Because Nvidia makes the hardware that powers these AI models, Huang has a great feel for the pulse of the industry and has identified a key trend: agentic AI. This is the next step in integrating AI and using it for practical purposes. But what are AI agents, and how can investors benefit from them? Investing in Nvidia is a great place to start. Huang spoke about AI agents at the recent CES trade show in Las Vegas. During a question and answer session, he stated: "I think this year we're going to see it take off." AI agents can be deployed to do mundane work that people often do. Examples could include data entry, interacting with customers, or maintaining inventory counts. Basically, AI is moving beyond a simple chat interaction. AI agents will be able to do multistep tasks that require reasoning rather than just strict knowledge. Nvidia is offering tools for building AI agents, which it calls blueprints. When clients build these agents on Nvidia's platform, they essentially lock in as long-term customers of Nvidia, which is key in driving continuous sales. Nvidia's platform has long been the standard in the AI world, and its launch of an agentic AI platform only solidifies its position. After the dominant run Nvidia's stock has been on over the past few years, investors would be forgiven if they thought the upside of Nvidia's stock was limited. However, there is still massive growth ahead for Nvidia, and investors can still make a solid profit by investing in the stock today. For fiscal year 2026 (ending January 2026, encompassing most of 2025), Wall Street analysts expect Nvidia's revenue to increase by 52% year over year. That's incredible, considering that Nvidia is expected to grow revenue from $129 billion to nearly $200 billion. With that level of jumbo-sized growth in mind, Nvidia remains one of the top ways to invest in AI, as it doesn't require you to pick a winner. Many AI software companies will be building their models on Nvidia's hardware infrastructure. Many companies will build AI agents on Nvidia's platform. Some willcreated them for internal use, while others will build them to sell to their clients. This neutrality makes Nvidia a promising investment, even if it's had an incredible run over the past few years. From a valuation perspective, Nvidia isn't as pricey as it once was. Nvidia's business growth is catching up to the stock's valuation. At 55 times trailing earnings, Nvidia's stock isn't that expensive compared to its expected growth over the next few months. Considering that big tech peer Amazon trades at a trailing price-to-earnings (P/E) ratio of 48, Apple at a P/E of 40, and Microsoft at a P/E of 35, Nvidia's stock doesn't seem all that expensive. Nvidia will continue to see strong growth in 2025, partly due to AI agents. This will be a massive trend, and Nvidia is one of the best ways to invest in it. Investors need to continue looking to the future with Nvidia, as anchoring to a past price point won't do you any good. Nvidia is still a strong stock pick, and the AI-based growth story is far from over. Investors can still make a lot of money from it.

History Says the Nasdaq Will Soar in 2025. My 3 Top AI Stocks to Buy Before It Does. | The Motley Fool

Last year was fantastic for the markets in general, but the index that really stood out was the Nasdaq. It climbed 28%, while the S&P 500 rose 23% and the Dow Jones Industrial Average increased 12%. The Nasdaq, heavily weighted in technology companies, surged as investors piled into the industry's hottest new area: artificial intelligence (AI) stocks. Today's $200 billion AI market is forecast to top $1 trillion by the end of the decade, and investors have sought to get in early on this high-growth story. The technology has the potential to transform many industries, saving companies time and money, while boosting earnings as a result. And earnings growth often leads to positive stock performance. As 2025 gets started, it's logical to ask this question: After two years of gains, will the Nasdaq keep up the momentum this year? History says it will. If we look at the past periods of gains since 1990, in five out of six cases, the Nasdaq has climbed for three consecutive years or more. Of course, the market can surprise us and deviate from a trend, but in general, history has shown itself to be a solid guide. Now, let's look at my top AI stocks to buy before the Nasdaq takes off. You may associate Meta Platforms (META 0.84%) mainly with social media. The company owns Facebook, Messenger, Instagram, and WhatsApp -- which together have more than 3.2 billion users each day. But Meta also is becoming a giant in AI, developing its own large language model (LLM) to support tools we all can use, like the Meta AI assistant. The company made AI its biggest investment area last year and recently spoke of plans to continue increasing spending in this area. It aims to create AI that can assist all of its users with their daily tasks, work-related projects, and more. This focus and the related investment could eventually make Meta a leader in this hot growth area and boost its revenue, too. For example, the company generates most of its revenue through advertising -- and AI assistants may prompt us to spend more time on Meta's apps, encouraging advertisers to spend more to reach us there. Considering all of this, Meta shares -- trading at only 24 times forward earnings estimates even after last year's 65% gain -- look like a bargain AI buy to snap up before the Nasdaq soars. Alphabet (GOOG -1.14%) (GOOGL -0.98%), like Meta, may not be a company you automatically associate with AI. You probably know it best for Google Search, a tool many of us use daily. But it is winning in AI in two ways. First, its LLM Gemini is helping it improve search and make the experience better for those who advertise across Google. And second, Alphabet offers AI tools and services, including Gemini, through Google Cloud, its cloud computing business. The focus on AI has helped Google Cloud reach milestones in recent quarters, surpassing $10 billion in revenue and $1 billion in operating income. The company does face one risk: an antitrust case brought by the Justice Department. A U.S. district judge last year ruled Google hurt the competition in search. But the company says it will appeal -- and it may be difficult for the government to apply the strictest of sanctions. Like Meta, Alphabet stock represents a bargain today, trading for 21 times forward earnings estimates -- especially considering its long track record of growth, its market leadership, and its focus on AI. This list wouldn't be complete without Nvidia (NVDA -3.00%). Yes, it already soared 171% last year and isn't the cheapest stock on the block at 45 times forward earnings estimates. But I think it's worth the price and has room to run, in light of its position in the AI landscape. Nvidia not only is the top AI chip company, but it also has built an AI empire spanning various products and services. It has even created platforms for particular industries like healthcare and automaking. The company's chip dominance has helped it generate double- and triple-digit growth quarter after quarter in recent years, bringing revenue to record levels. Sales topped $35 billion in the latest quarter. But the momentum is far from over. The company also is set to win in the next wave of AI growth: the area of software. Its enterprise software and tools that help customers build their own AI agents -- AI that solves complex problems -- could push revenue much higher in the years to come. So Nvidia, the star of the early phase of AI, has what it takes to continue shining -- and that's why it makes a top buy before the Nasdaq soars in 2025.

3 Artificial Intelligence (AI) Stocks to Buy Hand Over Fist in January | The Motley Fool

Artificial intelligence (AI) investing isn't just for 2024. It's still going to be a massive theme in 2025. As a result, investors should examine their portfolios and see if they have proper exposure to the biggest technological shift since the growth of the internet. Three AI stocks that investors should have on their radar are Meta Platforms (META 0.84%), Salesforce (CRM -2.77%), and Nvidia (NVDA -3.00%), and all of them appear to be great buys now. These three are large players in the tech space and have massive amounts of resources to throw at AI innovation. This is key, as there are many start-ups that are working in the AI space, but they just can't compete with the leaders in some fields. Meta Platforms is one of the companies competing in the generative AI model game with its open-source model, Llama. Choosing to make its AI model open source was a unique decision, but it gives Meta some key advantages. One of the biggest factors is that it's free to use, which makes it more attractive to many developers. By default, this increases the user base and broadens the data that is fed into its AI model. This gives Meta a training advantage over some of its competitors and will help it develop one of the leading AI models. Salesforce isn't competing with Meta in the generative AI model game; it's focusing on serving its existing client base with useful AI platforms. Salesforce makes customer relationship management (CRM) software, which is used for a wide variety of purposes, including marketing and customer support. Historically, humans have done this, but AI agents may change this notion. Through Salesforce's Agentforce, its users can create AI agents that do these jobs and provide significant value to those deploying them. Lastly, Nvidia plays a key role in any AI model. Its graphics process units (GPUs) are used to train these AI models, and Nvidia's are by far the best in the business. This has provided huge growth in 2023 and 2024, but 2025 also looks to be more of the same. Wall Street analysts project 51% revenue growth during its fiscal year 2026 (ending January 2026), which indicates AI spending will stay elevated this year. Additionally, Nvidia is ramping up production of its next-generation GPU architecture, Blackwell. This technology provides massive improvements over the previous Hopper architecture, including 4 times faster training performance for AI models. Nvidia has been one of the top AI investments for a long time and will continue to be a great pick for 2025. All three of these companies have strong themes heading into 2025, but why are they great buys now? From a price-to-forward earnings perspective, these stocks are fairly attractively priced relative to their growth. Meta is clearly the cheapest stock on this list, and if you made made me choose one, I'd probably pick it as the best investment of the three. Its 24 times forward earnings valuation isn't a bad price to pay for any stock, especially one that's as dominant and innovative as Meta. Compared to the Nasdaq-100, which has a forward price-to-earnings (P/E) ratio of 26.4, the stock is cheaper than many of its big tech peers. Salesforce is a bit more expensive than this benchmark, but it also has the most to gain in terms of growth from its AI investments. Its AI agents have the potential to be a huge revenue boost for the company, something it desperately needs, as Wall Street only projects 9% growth this year. Still, Salesforce is working toward maximizing its profitability (its profit margin currently sits at 16%). Considering that some software companies can reach up to a 30% profit margin, there's still a huge boost to be realized on that front. Nvidia is the most expensive of the bunch but is also growing the fastest by far. With its revenue expected to rise by 50% this year, I think the 48 times forward earnings isn't a bad price to pay, especially considering Nvidia's dominant market position. With the stock down a bit off of its all-time highs, now looks like a great time to take advantage of the sale. All three of these stocks are slated to have a solid 2025 and, therefore, make great buys in January.

80 Billion Reasons Why These 2 Top Artificial Intelligence (AI) Stocks Could Crush the Market Again in 2025 | The Motley Fool

The artificial intelligence (AI) trend has given big boosts to the share prices of Nvidia (NVDA -3.00%) and Taiwan Semiconductor Manufacturing (TSM 0.60%) over the past year. The two chipmakers' stocks rose by 204% and 121%, respectively, during the period, crushing the 35% gains recorded by the PHLX Semiconductor Sector index. The massive demand for powerful chips capable of handling AI workloads in data centers has played a central role in driving those share price gains, with major cloud service companies and governments deploying large quantities of the AI-specific semiconductors designed by Nvidia and manufactured by Taiwan Semi. Market research firm Gartner estimates that global public cloud spending grew by 19.2% in 2024, and forecasts that it will grow at a faster pace of 21.5% in 2025. Evidence that cloud spending will get stronger in 2025 has already started emerging. In a blog post earlier this month, Microsoft (NASDAQ: MSFT) Vice Chairman and President Brad Smith said the company "is on track to invest approximately $80 billion to build out AI-enabled datacenters to train AI models and deploy AI and cloud-based applications around the world." This news points toward a solid year for Nvidia and TSMC. When Microsoft released its results for its fiscal 2025 first quarter, which ended Sept. 30, the company revealed that it had made capital expenditures of $14.9 billion on property, plant, and equipment. As such, its plan points toward a higher level of quarterly capex spending -- around $22 billion, on average -- for the rest of the fiscal year. For comparison, Microsoft's total capital expenditure stood at $55.7 billion in fiscal 2024, so its capex is on track to increase by more than 43%. The tech giant has made it clear that the money will go toward building AI data centers. So, Microsoft's demand for the AI chips that Nvidia designs and TSMC manufactures should continue to rise in 2025. Microsoft, however, won't be the only company significantly increasing its capital outlays for AI infrastructure. Meta Platforms, for example, is expected to report total 2024 capital expenses in the range of $38 billion to $40 billion, but it's planning for "significant" growth on that front in 2025. In all, the combined spending of major cloud computing players Microsoft, Meta, Amazon, and Alphabet could reach $300 billion in 2025 from around $200 billion in 2024, according to estimates from Morgan Stanley. The addressable market for AI chips is set to expand considerably this year. More importantly, there is a good chance that both of these semiconductor giants will be able to meet the terrific demand from the major cloud providers. That's because Microsoft CEO Satya Nadella recently remarked that the tech giant isn't constrained for AI chip supply anymore. That's not surprising. During Nvidia's November earnings conference call, CFO Colette Kress said that in the current fiscal quarter, the company is "on track to exceed our previous Blackwell revenue estimate of several billion dollars as our visibility into supply continues to increase." What this means is that Nvidia is producing more of its next-generation Blackwell processors than it was originally anticipating. The reason why Nvidia now has greater visibility into its supply chain is because its foundry partner TSMC has been significantly increasing its AI chip production capacity. TSMC is expected to double its advanced chip packaging capacity in 2025 to 75,000 wafers a month. Moreover, Nvidia has reportedly been allocated 60% of this increased capacity this year. So Nvidia and TSMC are in a solid position to make the most of the impressive increase in capital spending by the major cloud providers discussed above. Analysts are expecting Nvidia's earnings to increase by 50% in its fiscal 2026 (which will begin in February) to $4.43 per share. TSMC's earnings, on the other hand, are expected to jump by 28% in 2025 to $9.06 per share. However, the combination of increased capital spending by cloud service providers on AI data centers along with Nvidia and TSMC's focus on quickly adding capacity to serve that high and growing demand should set them up for another year of terrific gains that may surpass Wall Street's current expectations.

This Artificial Intelligence (AI) Stock Could Be the Best Investment of the Decade | The Motley Fool

The best way to generate wealth is to invest while keeping the years and decades ahead in mind. Businesses that are successful have likely spent years innovating and evolving. That describes Nvidia (NVDA -0.02%) well as it originally developed leading central processing unit (CPU) computer chips used in gaming and eventually cryptocurrency mining applications. Now it's the leading supplier for artificial intelligence (AI) applications. Nvidia has been all the rage among market watches recently, but the company has been around for over 30 years. It's been publicly traded since early 1999. CEO Jensen Huang was among the founders who initially aimed to develop graphics chips for personal computers. Its CUDA (compute unified device architecture) software platform was launched almost 20 years ago, and it is now an important part of the investment case. The focus in its early years was on performance improvements in 3D graphics used in the gaming industry. But the stock performance lagged until the early 2020s when revenue began to grow from the Nvidia RTX platform that uses AI to create realistic graphics and visual effects for gaming, 3D design, and other uses. Huang's keynote speech at the recent CES conference was used to introduce the RTX 50-series chips that use Nvidia's Blackwell graphics processing unit (GPU) architecture in the company's AI accelerators. That circle of innovation is what investors need to keep in mind to see what Nvidia can do in the coming decade. And Huang gave everyone a brief introduction to what's coming in that CES keynote address. Nvidia's recent stock returns have been nothing short of phenomenal. As AI drives the need for more computing power, quarterly revenue increased by over 1,000% since 2020. Much of that came in the last two years as large tech companies spent heavily to build out data centers needed for AI applications. Those companies are still investing to boost compute power. Microsoft President Brad Smith recently said his company expects to invest $80 billion in its fiscal 2025 for AI-enabled data centers used to train models. Smith commented, "None of this progress would be possible without new partnerships founded on large-scale infrastructure investments that serve as the essential foundation of AI innovation and use." Amazon also recently announced it has plans to spend about $11 billion to expand its presence in Georgia to support Amazon Web Services' (AWS) cloud computing and AI technologies. Nvidia is arguably the biggest beneficiary of this spending and investors have poured into the stock, driving shares over 2,000% higher since 2020. Nvidia's data center segment dominated its revenue path recently, but gaming revenue is still growing and represented a meaningful 9.4% of total revenue in the recent quarter. Huang sees another avenue for growth coming. Nvidia's second-fastest-growing segment in the most recent quarter was automotive and robotics with a 72% year-over-year revenue increase. In his CES conference speech, Huang spoke a lot about robots and self-driving cars -- two real-world applications made possible by AI. Huang sees the "robotics era" coming soon, and grouped both humanoid robots and self-driving cars in that category. He said it could be the "largest technology industry the world has ever seen." Nvidia's robot operating system (ROS), Isaac, utilizes its CUDA-accelerated software packages and AI models to develop advanced AI robotics applications. He also announced Nvidia's next-generation processor for autonomous cars, called Thor. Thor processes the massive amount of sensor information from cameras, radar, and lidar (light detection and ranging) being used on vehicles. Using Nvidia's latest CPU and GPU advances, including Blackwell architecture, Huang said Thor has 20 times the processing capability of the previous generation chip, which is the standard today. The Thor processor is also used for humanoid robots. Huang described it as a "universal robotics computer." One can see how each of Nvidia's segments and innovations is interconnected. And that's precisely why Nvidia stock could still be the best investment of the next decade. Huang said he expects surprisingly rapid breakthroughs in general robotics in the next several years. And Nvidia supplies all the enabling technologies. As if it needs another growth segment, Huang also introduced an AI desktop computer at CES that incorporates Blackwell. He said, "Placing an AI supercomputer on the desks of every data scientist, AI researcher, and student empowers them to engage and shape the age of AI." That desktop supercomputer will be available in May for a price of $3,000. It's another example of the company's innovative approach that pushes the boundaries of technology. Nvidia has many ongoing projects, and somehow seems to connect them all. It should be a core holding in any growth stock portfolio for the next decade.

3 Top Artificial Intelligence (AI) Stocks Ready for a Bull Run in 2025 | The Motley Fool

The accelerating adoption of AI has left little upside for many stocks in the space -- but others are poised to surge. If there was a single overarching theme in 2024, it was arguably artificial intelligence (AI). Businesses scrambled to adopt these game-changing algorithms, cloud providers spent billions of dollars to bring their data centers up to snuff, and chipmakers went back to the drawing board, working feverishly to bring their best AI-centric semiconductors to market. One of the unfortunate by-products of this mad dash was that some investors piled recklessly into any company even remotely related to AI. While some of those bets paid off, others crashed and burned, leaving shareholders holding the bag. There was another unintended consequence: Many AI-related stocks, from star performers to rank imposters, ended up with lofty valuations and little room for upside. Despite those circumstances, there are still AI stocks that have a long runway ahead. In no particular order, here are three AI growth stocks ready for a bull run in 2025. While it's true that Nvidia cornered the market for data center GPUs, this hasn't stopped rival Advanced Micro Devices (AMD -4.76%) from developing compelling alternatives to Nvidia's premium-priced processors. In fact, AMD has experienced record demand for its Instinct series AI GPUs and Epyc CPU. "We believe we gained server CPU share in the quarter as enterprise wins accelerated," according to CEO Lisa Su. She went on to say that numerous big-name cloud and AI customers expanded their use of AMD's MI300X AI-centric accelerators. AMD's recent results help provide context. In the third quarter, AMD's revenue grew 18% year over year to $6.8 billion, while its diluted earnings per share (EPS) surged 161% to $0.47. But that only tells part of the story. The company delivered record data center revenue of $3.5 billion, up 122% year over year and 25% sequentially, thanks to strong and growing demand for its AI-centric data center chips. Weakness in the gaming market was a drag on results as revenue for the segment of $462 million plunged 69%. So even as Nvidia stock has soared 168% over the past year, AMD shares are down 17%, and therein lies the opportunity. AMD is working to "chip" away at Nvidia's dominance in the data center market, and any progress in that regard could send the stock soaring. Some on Wall Street seem to agree. Rosenblatt Securities analyst Hans Mosesmann recently named AMD a "Top Stock for 2025," with a buy rating and $250 price target. That represents potential upside of 105% compared to Wednesday's closing price. Coincidentally, the analyst cites the opportunity in the data center GPU market, suggesting the adoption of AMD chips could increase significantly. It also doesn't hurt that AMD shares are currently selling for 24 times forward earnings, making it a relative bargain. When it comes to scope in the technology sector, Broadcom (AVGO -2.18%) is among the top contenders. The company's stunning collection of semiconductors and infrastructure software solutions reach into every corner of tech, supplying the cable, broadband, mobile, and data center industries. The company boasts that "99% of all internet traffic crosses through some type of Broadcom technology." Perhaps more importantly, many of Broadcom's products are key components to the operation of data centers, where the majority of AI processing takes place. This makes the company a critical provider to the AI ecosystem. The surging demand is evident in the company's results. In its fiscal 2024 fourth quarter (ended Nov. 3), Broadcom generated revenue that jumped 51% to $14 billion, while its adjusted EPS climbed 31% to $1.42. As impressive as these results are, this is likely just the beginning. Management updated its long-term forecast and is guiding for AI revenue in a range of $60 billion to $90 billion by fiscal 2027. That works out to growth of between 391% and 638%, compared to its 2024 revenue of $12.2 billion. There's even more good news for investors. Several Wall Street analysts recently raised their price targets on Broadcom to $300, which represents potential upside of 31% compared to Wednesday's closing price. Jefferies analyst Blayne Curtis, who maintains a buy rating on the stock, said demand for Application Specific Integrated Circuits (ASICs) is skyrocketing, and Broadcom is "uniquely positioned with AI ASICs rapidly growing in complexity and volumes." While Broadcom is currently selling for a premium at 36 times forward earnings, the company's track record of performance and growing opportunity illustrated why the stock is deserving of a premium. Another unsung hero in the AI playbook is Micron Technology (MU -0.07%). The company is one of the world's largest suppliers of memory (DRAM) and storage (NAND) chips, which are vital to the AI processing that occurs in data centers. Last year, the company expanded its offerings, entering the highly competitive high-bandwidth memory market with its HBM3e chip. By all accounts, this was a resounding success. Early last year, Micron began volume production of the HBM3e after Nvidia announced the chip would be integrated into its H200 Tensor Core GPUs, providing "advanced memory to handle massive amounts of data for generative AI and high-performance computing (HPC) workloads," according to the press release. Micron quickly sold out of its entire supply of HBM3e for 2024, while most of its supply for 2025 was already allocated. Just this week, Nvidia revealed that Micron's HBM solutions would power its new GeForce RTX 50 Blackwell GPUs -- another key win for the company. These strategic moves have fueled robust results. For Micron's fiscal 2025 first quarter (ended Nov. 28), it generated record revenue of $8.71 billion, which jumped 84% year over year and 12% sequentially. The results were driven by data center revenue that soared 400% and accounted for 50% of sales. This helped the cyclical chip company swing to a year-over-year profit, with EPS of $1.67. CEO Sanjay Mehrotra said the company is "exceptionally well positioned to leverage AI-driven growth to create substantial value for all stakeholders." Don't just take my word for it. Rosenblatt Securities analyst Hans Mosesmann is the company's biggest bull, maintaining a buy rating and $250 price target, which suggests potential upside of 151% compared to Wednesday's closing price. The analyst called this "one of the largest memory cycles in history." Despite its blowout results and unprecedented opportunity, Micron is still attractively priced at just 28 times earnings -- all the more reason the stock is a buy.

My Top 5 Artificial Intelligence Stocks to Buy for 2025 | The Motley Fool

Excitement over the hot technology of artificial intelligence (AI) helped the stock market soar last year -- and the movement may be far from over. This is because we're still in the early stages of AI development. Companies have invested in data centers and building AI platforms, but there's much more work to be done there. Nvidia (NVDA -0.02%) chief executive officer Jensen Huang has said about $1 trillion in outdated computers exist and must be updated for accelerated computing. On top of this, the actual use of AI to improve efficiency at businesses or develop new game-changing products is in its early stages. That suggests there's plenty of room for AI-driven revenue growth ahead, meaning 2025 could be another great year for AI stocks. Let's check out my top five to buy at this stage of the AI race. I'm mentioning AI chip giant Nvidia for one important reason: Some investors have worried that, after gaining 800% over the past two years, performance may stall. It's impossible to guarantee or predict with 100% certainty that a particular stock will advance during a given time frame. But it's reasonable to be optimistic about Nvidia's potential this year and over time -- for a couple of reasons. First, Nvidia is the AI chip leader, has built an entire ecosystem of AI products and services, and to ensure its leadership, the company has committed itself to annual innovation. This along with the fact that Nvidia is launching a major new product right now -- the Blackwell architecture -- are positive points for the near term. Second, we're now heading into a new AI growth phase: The development of agentic AI, or the use of AI to handle complex, multi-step tasks. Nvidia offers developers tools to build these AI agents. So, moving forward, Nvidia should benefit from accompanying its customers all they way along the AI path -- from training models to applying AI in the real world. SoundHound AI (SOUN -16.44%) specializes in voice AI, and its technology of translating voice directly to meaning -- bypassing the usual text step -- has helped it to stand out. The company has delivered incredible growth in recent times -- for example, in the recent quarter, revenue soared 89%. But much potential lies ahead. This is because SoundHound is in the early days of tackling a total addressable market of $140 billion. Just a year ago, about 90% of revenue came from automotive customers. In the recent third-quarter report, five industries each contributed 5% to 25% of revenue. This is a positive sign, showing that SoundHound is winning over customers across industries -- and won't depend on just one. And SoundHound is another company that could benefit from the AI agent boom, offering opportunities for companies in industries such as healthcare, insurance, and travel to gain in efficiency -- for example, managing appointments or bookings or responding to coverage questions. SoundHound shares have surged over the past year, but the good times may not be over for this potential agentic AI winner. If you're looking to invest in AI, but you want to minimize risk, Amazon (AMZN 0.01%) may be the perfect choice for you. The company doesn't depend uniquely on AI for its success and has delivered a long track record of growth -- well before AI started picking up momentum. This is because Amazon is a leader in two high-growth businesses: e-commerce and cloud computing. And these businesses continue to offer the company bright long-term prospects. In addition to this, Amazon also is benefiting from its investment in AI. The company uses AI to improve efficiency in its warehouses, for example, and sells AI products and services through its Amazon Web Services (AWS) cloud business. And Amazon's investment already has started to bear fruit. Thanks to its AI offerings, AWS has reached a $110 billion annualized revenue run rate. Amazon may not deliver triple-digit share price gains, but this solid, profitable player has what it takes to help investors progressively grow wealth -- and that makes it a great buy now. Meta Platforms (META -1.16%) is another company that's invested heavily in AI -- but isn't completely dependent on it for revenue. Instead, Meta generates most of its revenue through advertising. Advertisers flock to reach us where they know they'll find us -- using Meta's popular social media apps Facebook, Messenger, WhatsApp, and Instagram. This has helped the company grow revenue over time into the billions of dollars and even reward shareholders by offering a dividend. So, where does AI fit in the Meta picture? The company has built its own large language model (LLM), which it's trained to support its own AI assistants and offers as an open-source tool to others. Meta aims to create AI assistants for all of its users, and this could prompt us to spend even more time on the social media apps we already love. Importantly, that could strengthen advertisers' commitments to Meta. The investment in AI also could help Meta develop other products and services down the road and its commitment to making its LLM available to all developers could set it on the path to becoming an AI leader. Palantir Technologies (PLTR -2.52%) had an explosive 2024, reporting its highest profit ever, joining the S&P 500, and seeing its shares surge 340%. But the stock may have farther to go, possibly this year but particularly over the long term. This is because two growth drivers should help boost revenue well into the future. Palantir helps its customers aggregate their data and make better use of it. In the past, its biggest customer was the government, but these days it's been seeing double-digit growth in commercial customer revenue. And U.S. commercial customers -- totaling only 14 four years ago -- have reached about 300. Palantir also launched its Artificial Intelligence Platform (AIP) a little more than a year ago, and demand has taken off. So, the commercial customer and AIP could drive significant gains in revenue in the quarters to come, and all of this may translate into more share price gains for Palantir in 2025 and beyond.

Prediction: 1 Unstoppable Artificial Intelligence (AI) Stock Will Lead the "Third Wave" of AI Development and Be Worth More Than Nvidia by 2030 | The Motley Fool

Nvidia (NVDA -0.02%) has been among the best-performing stocks of 2024, and it's easy to see why. The company provides the graphics processing units (GPUs) that quickly became the gold standard for powering artificial intelligence (AI) systems. The wave of demand for its chips has pushed the company's market cap to nearly $3.7 trillion as of this writing, currently making it the world's second most valuable company. Yet some investors are already looking ahead, as advances in AI these days are coming fast and furious. The first wave of AI was characterized by strict rules-based systems that were limited to specific tasks. The second wave saw the development of machine learning, which ushered in the ability of AI to detect patterns buried within massive datasets and draw conclusions. Generative AI represents the third wave of AI development, and many believe it will be characterized by AI "agents." These next-generation systems will have more contextual understanding and will be able to act independently of human intervention to perform a wide variety of tasks. Microsoft (MSFT 0.52%) is leading the charge in agentic AI, and I predict the stock will be worth more than Nvidia by 2030. Many investors are already familiar with the concept of chatbots, or AI-powered programs best known for their ability to answer questions and have conversations with humans. The novelty of these systems took the tech world by storm over the past few years, as they could provide basic information within defined parameters very quickly. The next phase of generative AI was exemplified by Microsoft Copilot. This suite of AI assistants was designed to increase productivity in a work setting, prioritizing and drafting emails, creating outlines and presentations, debugging code, creating images, and much more. However, the holy grail of AI research -- according to Microsoft -- is the development of AI agents that can go far beyond these simple tasks, with the ability to "reliably complete complex, multi-step tasks across a wide range of scenarios people encounter in their daily lives." To that end, the company recently introduced Magentic-One, which it says is "designed to solve such tasks." The system ties together multiple AI agents -- with Magentic-One as the lead agent or "Orchestrator" -- to enable it to coordinate the tasks of the other agents, track their progress, and recalibrate when there's a problem. These individual agents can perform tasks such as operating a web browser, writing or executing code, or searching local files for data. This comes on the heels of Microsoft's announcement that customers can create autonomous agents within its Copilot Studio. The company also debuted 10 prebuilt autonomous agents for Dynamics 365. For example: Since Microsoft introduced AI agents to Copilot Studio in November, the company has attracted more than 100,000 organizations that are creating or editing AI agents. Furthermore, its platform integrates with more than 1,400 third-party systems while giving users access to 1,800 large language models that underpin generative AI. In fact, Microsoft has the "largest AI agent ecosystem -- and no one else is close," according to Venture Beat. Microsoft has provided testimonials from customers using AI that resulted in savings of $50 million annually or generated productivity gains equivalent to "adding 187 full-time employees." This helps illustrate the value of agentic AI. Finally, as part of its Copilot Control System, Microsoft has debuted tools that help IT departments measure return on investment for their AI spending, removing a key hurdle that has kept some businesses from taking the plunge. Make no mistake, AI has been a boon to Microsoft, as the company has been working feverishly to capitalize on the potential windfall. In its fiscal 2025 first quarter (ended Sept. 30), Microsoft said that 12 points of its Azure Cloud growth was the result of AI services. It went on to note that "Demand continues to be higher than our available capacity." To meet that demand, Microsoft is on track to spend $80 billion on additional data centers this fiscal year. Furthermore, while the company doesn't break out its AI revenue, CEO Satya Nadella said, "Our AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone." Many believe that's just the beginning, with Microsoft's AI strategy generating as much as $100 billion in incremental revenue annually by 2027. If the company comes anywhere close to that benchmark, the stock will likely soar. To be clear, I'm not betting against Nvidia, particularly given its place in the AI revolution. It's also one of my largest positions, so I'm rooting for the company to succeed. However, given its meteoric rise -- up more than 900% over the past couple of years -- I expect Nvidia's stock to grow at a more moderate pace over the next few years. At the same time, I think Microsoft's growth will accelerate thanks to its efforts with agentic AI, a strategy that will likely pay dividends for years to come. It also doesn't hurt that Microsoft is selling for 33 times forward earnings compared to 51 times forward earnings for Nvidia, so it's also a cheaper AI stock. Taken together, this is why I predict Microsoft will be worth more than Nvidia by 2030.

Got $3,000? 3 Artificial Intelligence (AI) Stocks to Buy and Hold for the Long Term | The Motley Fool

Artificial intelligence (AI) was one of the driving themes in the market in 2024, powering a number of stocks to new highs. While there remains a lot of hype, AI is looking less like a fad and more like a huge technological shift. Investors who want to profit from it should consider buying these three AI stocks and holding them for the long term. Nvidia (NVDA 4.45%) originally developed its graphics processing units (GPUs) to speed up the rendering of video game graphics. GPUs make use of parallel processing -- breaking complex computational tasks down into many, many smaller tasks that they solve simultaneously. That's precisely the sort of power that producing high-resolution graphics quickly demands. But most calculations that computers perform don't benefit from that approach. That's why central processing units (CPUs) -- general-purpose chips that can handle most varieties of calculations, and which are fast and powerful when it comes to tackling sequential tasks -- still sit at the heart of most PCs and devices. When Nvidia recognized that there could be uses for its chips beyond graphics rendering, it created a free software platform called CUDA that customers could use to program its GPUs for other tasks. Eventually, CUDA became an industry standard that developers trained on and grew accustomed to using, enhancing the wide moat Nvidia enjoys today. Meanwhile, its powerful GPUs found uses in more applications. For a time, their use by cryptocurrency miners in particular added to the demand for the fastest GPUs. It turns out that training and powering AI models involves the types of computations and big data processing that can only be handled efficiently with a parallel processor. So large tech companies began using Nvidia GPUs to train AI models as early as 2015, but after OpenAI introduced ChatGPT to the public in 2022, the AI race was on. Nvidia's GPUs became the backbone of AI infrastructure, and its revenue soared. Nvidia still has a huge runway for growth in front of it, as the number of GPUs needed to advance AI models continues to rapidly increase. Meta Platforms and Elon Musk-backed xAI are developing new software models using 10 times as many GPUs as they did to develop their prior versions. With the stock trading a forward price-to-earnings (P/E) ratio of less than 31 based on analysts' 2025 estimates, Nvidia is an attractively valued AI stock that should be a profitable pick to buy now and hold for the long term. Microsoft (MSFT 1.14%) was one of the first big tech companies to commercially embrace AI through its large investment in and partnership with OpenAI. Since Microsoft initiated that relationship, the tech giant has moved quickly on the AI front. Its cloud computing unit, Azure, has seen strong revenue growth. Azure revenue rose 33% year over year in its fiscal 2025 first quarter (ended Sept. 30), an acceleration from its 29% growth in its fiscal 2024 Q4. Moreover, Azure still faces some capacity constraints given the level of demand from customers that want to build their own AI agents. Management expects Azure's growth to accelerate in the second half of its fiscal 2025 when more capacity comes online. Microsoft has also been embracing AI in other areas of its business. GitHub, which helps programmers develop software, has seen a huge boost in large part due to the GitHub AI Copilot, which can complete coding tasks or make suggestions to programmers as they type. Meanwhile, the company has also added various Copilots to its productivity suite. At a current cost of $30 per person per month for enterprise users, the Microsoft 365 Copilot has the potential to be a big revenue growth driver. These tools can do such things as prioritize users' inboxes in Outlook; create PowerPoint presentations based on natural language prompts; suggest rewrites in Word; and allow non-programmers to use Python in Excel using only natural language prompts. Trading at a forward P/E of 32 times fiscal 2025 estimates, the stock is reasonably priced and looks poised to be a long-term winner. Alphabet's (GOOGL 1.25%) (GOOG 1.31%) cloud computing unit, Google Cloud, has also been seeing accelerating growth: It went from 29% year-over-year growth in Q2 to 35% in Q3. More importantly, the business has reached an important inflection point where its profits have started to grow rapidly. Last quarter, its segment operating income soared to $1.95 billion from $1.2 billion in Q2 and $266 million a year ago as the company leveraged the high fixed-cost nature of this business. However, it was Alphabet's recent technological advancements that caught investors' attention and powered its stock upward late in 2024. The surge started with the announcement of a big breakthrough in quantum computing with its new Willow chip. Quantum computing systems thus far have proven error prone, and the more quantum bits (qubits) one uses, the more mistakes it tends to make. However, the new quantum error correction technology on Willow actually reduces the number of errors as it scales up and uses more qubits. The commercial use of quantum computing is still far away, but it's a huge long-term opportunity, and the breakthrough in error reduction excited investors. Meanwhile, the company continued to show its technological prowess with its introduction of the AI video generation platform Veo 2. The products of its early demos far outperformed those of OpenAI's Sora, which was launched just a few weeks earlier, in terms of realism and quality. Alphabet also introduced its newest Gemini model, which it will look to incorporate throughout its products this year. Alphabet continues to be the dominant player in online search, and with Gemini and its AI Overviews, it should be able to create new ad formats to start monetizing queries that it previously hasn't. Historically, Google has only served ads in connection with about 20% of its search results, so the opportunity in monetizing those other queries is huge. Trading at 18.5 times next year's estimated earnings, Alphabet's stock looks like a bargain.

2 Artificial Intelligence (AI) Stocks That Can Have Their Nvidia Moment in 2025 | The Motley Fool

Artificial intelligence (AI) stocks have soared over the last couple of years as optimism about the technology and its capabilities continues to grow. As most investors know, one of the more notable success stories is Nvidia, which is up more than 11-fold from its bear market lows in late 2022. However, with Nvidia in a battle with Apple for the world's largest market cap, investors will likely have an easier time earning higher returns in smaller stocks. To that end, smaller stocks like the two discussed below may have positioned themselves for an Nvidia moment in 2025. A closer look shows why. The No. 1 and No. 2 companies are often the best investments in a given industry, and 2025 could be the year Advanced Micro Devices (AMD -4.31%) stands out as Nvidia's leading competitor in the AI accelerator market. Although Nvidia took an early commanding lead in the AI accelerator market, AMD has a history of catching up to (and sometimes surpassing) competitors, which could be the case with AI accelerators. Admittedly, AMD's ROCm is far behind Nvidia's CUDA, a software platform that helps developers speed up application development. Such an advantage continues to reinforce Nvidia's competitive lead. Nonetheless, Grand View Research forecasts a compound annual growth rate (CAGR) of 29% through 2030. With Nvidia's inability to meet demand amid that rate of increase, AMD has an opportunity to compete. Moreover, AMD remains a leading company in the PC, gaming, and embedded chip markets. While these segments have not grown as fast as the data center segment that designs the AI accelerators, they remain critical parts of the chip giant. Still, those segments have likely held back the company's growth. In the first nine months of 2024, revenue of $18 billion grew 10% yearly. Massive revenue slumps in the gaming and embedded segments held this growth rate back. Still, the data center segment increased revenue by 107%, while revenue in the client segment (which makes PC chips) rose 48% during this period. Some of this sluggishness likely played a role in AMD's 10% decline over the last year. And while its P/E ratio is more than 110, optimism about improved earnings has taken its forward P/E ratio to 25, its lowest level in two years. That lower forward earnings multiple could provide an opportunity for buyers. As the data center segment continues with massive revenue gains, it could spark a recovery that takes the chip giant to all-time highs and beyond. Under normal circumstances, a company like Shopify (SHOP 0.80%) would likely never experience an Nvidia moment. Numerous e-commerce platforms exist, leaving most of Shopify's peers without a significant competitive moat. However, Shopify has become the largest e-commerce platform in the U.S., according to Oberlo. It accomplished this by creating a fast, highly customizable site that entrepreneurs can build without prior coding knowledge. That approach eases the development process and makes Shopify a viable option for more online sellers. Moreover, it includes a merchant services segment that provides many of the ancillary services sellers need. This includes payments, inventory management, online marketing, and numerous other services. Additionally, customers owe much of that simplicity and versatility to AI. Through its Shopify Magic AI tool, the company can provide personalized support for online store design, product placement, marketing, customer support, and handling back-office tasks. Such tools reinforce the company's competitive advantage, making Shopify an obvious choice for merchants. Also, since changing platform providers is a highly disruptive process, customers tend not to switch, a factor that should work to Shopify's advantage. Furthermore, Grand View Research projects a CAGR of 19% through 2030. In comparison, Shopify's revenue in the first three quarters of 2024 was $6.1 billion, a 23% increase from year-ago levels that shows it outperforms industry averages. Most of that revenue came from its merchant services segments, indicating an added potential to increase revenue from existing customers. Those gains also helped the stock rise by nearly 50% over the last year. Indeed, with a P/E ratio more than 100 and a price-to-sales (P/S) ratio of 17, investors may question whether to buy this stock. However, its sales multiple remains well below where it was in 2021, and with its current growth, Shopify stock is in a strong position to inspire an Nvidia moment that drives massive stock gains.

Here Are the Top 5 "Magnificent Seven" Stocks to Buy in 2025, According to 1 Wall Street Analyst | The Motley Fool

Dan Ives is the managing director and global head of technology research at Wedbush Securities. He is a frequent contributor on financial news programming and actively posts his latest stock predictions on social media. Recently, Ives published his top picks among megacap technology stocks for 2025. Unsurprisingly, many of his choices are among the "Magnificent Seven." Below, I'll explore individual catalysts that each of these companies contains and make the case for why 2025 could be a great opportunity to buy these stocks hand over fist. Tesla (TSLA -0.05%) is probably the most interesting name on Ives' list. For much of 2024, shares of Tesla underperformed the broader market. But beginning in early November, shares started going parabolic. All told, Tesla stock gained 62% in 2024 -- nearly triple that of the S&P 500 and more than double the gains seen in the Nasdaq Composite. The catalyst that fueled Tesla's rebound? The outcome of the U.S. presidential election. During the final months of Donald Trump's campaign, Tesla CEO Elon Musk emerged as a steadfast surrogate for the Republican candidate. Following Trump's victory in early November, Ives made it clear that he sees Musk's relationship with the president-elect as a major tailwind for the future of Tesla. Specifically, Ives thinks that the incoming Trump administration could fast-track Tesla's autonomous driving and robotaxi plans. While I think Ives' outlook makes sense, it's important to note that a lot of upside has already been factored into Tesla's share price following the election results. Is it really surprising to see Nvidia (NVDA -3.00%) listed as a top idea for 2025? Last year, Nvidia was the top-performing Magnificent Seven stock -- with shares climbing 171% and the company's valuation gaining more than $2 trillion! Despite this unprecedented move, Ives is calling for significantly more upside in the chip darling. This year, Nvidia's biggest tailwind stems from its newest GPU lineup, known as Blackwell. With industry analysts calling for surging demand for Nvidia's new architecture, 2025 is already looking like another milestone year for the semiconductor leader. With a $4 trillion valuation within reach, investors may want to consider scooping up shares of Nvidia now -- before the company begins reporting official stats on Blackwell and its impact on the business. I see Microsoft (MSFT -1.32%) as one of the safest AI opportunities in big tech. Over the last two years, the company has invested billions into AI infrastructure -- namely through a critically important partnership with OpenAI, the developer of ChatGPT. Microsoft has benefited greatly from ChatGPT, primarily by integrating the service into its Azure cloud computing ecosystem. Despite intense competition from the likes of Amazon, Alphabet, and Oracle, Microsoft has been able to command respectable growth tied directly to its AI initiatives -- a trend that I think is only just beginning to bear fruit. In addition, Microsoft also has an early lead in one of AI's next big megatrends, agentic AI. The company's agentic AI virtual assistant, called CoPilot, is used by almost 70% of the Fortune 500. To me, Microsoft has demonstrated an ability to maneuver around the competitive landscape and deserves to be a top choice for AI investors. While Ives has remained bullish on Apple (AAPL -2.41%) for some time, I have my concerns. According to Ives, Apple's new iPhone 16 equipped with Apple Intelligence should inspire customers to upgrade their devices en masse. Although the idea of an iPhone supercycle makes sense, I question how it will play out in reality. Apple was late to the AI game, and I'm not sure if Apple Intelligence provides enough value add to cause users to upgrade their phones. Remember, Apple's consumer hardware devices are a bit of a luxury. If your old iPhone is still manageable, Apple's AI features might not be enough of a selling point to assume a higher-cost device. While I'd love to be proven wrong on this one, Apple is the one stock on this list that I'm hesitant about right now. To me, Alphabet (GOOG -1.14%) (GOOGL -0.98%) is the biggest bargain among the five AI stocks I've explored. Similar to Microsoft, Alphabet has a deep ecosystem in which it can integrate all sorts of AI-powered services -- from cloud computing to workplace productivity tools, advertising, streaming, consumer hardware, and more. Alphabet is an extremely diversified business, and the company's revenue and profit growth are both headed in the right direction. Yet, despite the company's impressive growth and lucrative AI opportunities, Alphabet only trades at a forward price-to-earnings (P/E) multiple of 21.9 -- that's lower than the average forward P/E of the S&P 500. I think investors are remaining overly cautious when it comes to Alphabet, given the intense competition in the cloud space from Microsoft and Amazon, as well as rising competitive forces in advertising from social media platforms offered by Meta Platforms and TikTok. While I understand these concerns in theory, I think Alphabet's financial results depicted above speak for themselves. To me, an investment in Alphabet will continue to outperform that of the broader market for years to come. I think Alphabet stock is an outright bargain right now and see an opportunity for long-term investors to buy the stock hand over fist.

Prediction: Nvidia Will Be the Biggest Winner in Microsoft's $80 Billion AI Spending Spree | The Motley Fool

Microsoft (MSFT -1.32%) made headlines late last week when it announced it would spend $80 billion this year building data centers that would train artificial intelligence (AI) models and handle AI and cloud-based applications around the world. More than half of the investment will be in the U.S. To put the amount Microsoft is spending on AI infrastructure in perspective, that is more than the gross domestic product (GDP) of many countries, including Croatia and Lithuania (to name just two). Microsoft's Azure cloud has been a big AI winner, with the unit growing its revenue by 33% year over year last quarter and Azure OpenAI use doubling in the last six months. However, the company has said growth could be even greater if it were not for capacity constraints, as demand for its AI services has outstripped capacity. There were certainly clues that the company was about to go on a big building spree in data centers; it had $108.7 billion in finance leases for data centers whose construction had not yet commenced. These leases were set to go into effect between fiscal 2025 and 2030 with lease terms from one to 20 years. I think Microsoft will benefit from its increased data center spending given the strong demand its cloud business is seeing. And I believe Nvidia (NVDA -3.00%) will be the ultimate winner from this spending. Not all of that $80 billion will go toward graphics processing units (GPUs) and AI accelerator chips (Nvidia specialties), but a significant portion will. For perspective, for its fiscal 2024, ended in June, Microsoft had $44.5 billion in capital expenditures (capex), most of which went toward data centers and cloud computing. The company has said that about half of its capex goes toward assets with long practical lives, while the other half goes toward central processing unit (CPU) and GPU servers. Microsoft was Nvidia's largest customer in 2024, buying a reported 485,000 of its GPUs, more than twice the amount of its second-largest customer, Meta Platforms. Taken all together, it looks like Nvidia's largest customer is about to spend significantly more on GPUs in 2025 than it did in 2024 -- a huge win for the company. Even more so, Microsoft's finance leases that have not yet commenced still indicate that it does not plan on stopping its data center spending this year. If $40 billion of its capex is going toward long-life assets like leases, that means less than half of those leases will commence this year. In addition, the announcement of the huge spending spree could very well spur more AI infrastructure spending from other Nvidia customers. Large tech companies such as Alphabet and Meta Platforms have both stressed the importance of AI and how the biggest risk is underspending, not overspending. Meanwhile, I think it is safe to say there are some pretty big egos in the tech world, and many execs want to win the AI race. As such, I wouldn't be surprised to see other large hyperscalers (companies with huge data center operations) also ramp up spending. Nvidia remains the king of GPUs, holding about a 90% market share in the space. Its CUDA software platform, which lets developers program its chips for different tasks, has proved to be a big differentiator and created a wide moat for the company. With competitor Advanced Micro Devices still trailing behind with its software, Nvidia looks poised to continue to be the biggest AI infrastructure winner. The company's toughest competition may come from custom AI chips that companies like Broadcom and Marvell Technology help clients develop. These chips are designed to perform very specific tasks and thus can perform them better than GPUs, which have more flexibility. But these chips are also customer-specific. And for mass deployment at scale, Nvidia and its GPUs are still the quickest and easiest ways to build out large AI infrastructure projects, and as such will continue to hold a large market share. Nvidia still has a large opportunity with companies continuing to pour money into AI infrastructure. The fact that its largest customer is greatly ramping up its investment in this area is a great sign that the chipmaker will continue to see outsize growth in 2025. Nvidia's stock continues to trade at an attractive valuation, with a forward price-to-earnings ratio (P/E) of only about 31.4 based on 2025 analyst estimates, and a price/earnings-to-growth ratio (PEG) of 0.98. A PEG below 1 is generally view as undervalued, and growth stocks will often command PEGs well above 1. With the company looking to be the biggest beneficiary of Microsoft's $80 billion data center build-out, and its stock still attractively priced, Nvidia remains a solid option for investors.

2 No-Brainer Artificial Intelligence (AI) Stocks to Buy in 2025 | The Motley Fool

Spending on artificial intelligence (AI) infrastructure has been solid over the past couple of years, and that trend is expected to continue in 2025 as well, with market research firm IDC forecasting that the total outlay on AI could hit an impressive $227 billion in the new year. The good part is that AI spending is expected to rise impressively through 2028, surpassing $749 billion at the end of the forecast period. As a result, now would be a good time to take a closer look at a couple of AI stocks that look like solid buys as 2025 begins because of their attractive valuations and the ability to deliver robust growth in the new year, as well as in the long run. Microsoft (MSFT 1.14%) may have had a forgettable 2024, as shares of the tech giant have appreciated just 14% in the past year, underperforming the 31% gains clocked by the Nasdaq Composite over the same period. However, investors shouldn't ignore the massive AI-driven growth potential of the company. From cloud computing to personal computers (PCs) to workplace productivity, Microsoft is well placed to capitalize on multiple AI-centric end markets. This tells us why CEO Satya Nadella remarked on the company's October 2024 earnings conference call that its "AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone." There is a good chance that this revenue run rate could scale up remarkably in the long run, considering the AI-specific markets that Microsoft serves. For instance, the company's cloud business is already reaping the benefits of the growing adoption of AI services in the cloud. Microsoft's Intelligent Cloud revenue increased 20% year over year in the first quarter of fiscal 2025 to $24.1 billion, driven by a 23% increase in revenue from the Azure cloud service. AI accounted for 12 percentage points of Azure's growth during the quarter, proving that this technology is already having a significant influence on Microsoft's cloud business. That growth could have been stronger if Microsoft had been able to meet all the demand for its cloud AI services. Another thing worth noting is that Microsoft Azure's share of the cloud infrastructure services market increased to 20% last quarter, as it grew at a slightly faster pace than the 23% growth in cloud infrastructure spending. This impressive market share in cloud infrastructure, which is second to Amazon, should set the stage for terrific long-term growth in Microsoft's cloud business. That's because global cloud spending is expected to hit $2 trillion by 2030, according to Goldman Sachs, driven by the growth in spending on generative AI offerings. A 20% share of the cloud infrastructure market at that time would send Microsoft's cloud revenue to a massive $400 billion, a big increase over the $105 billion revenue the company generated from this segment in fiscal 2024. These huge catalysts explain why analysts are expecting Microsoft's growth to accelerate going forward following an estimated 10% increase in earnings in fiscal 2025 to $13.04 per share. More importantly, investors won't have to pay a hefty valuation to get their hands on Microsoft stock. That's because it is trading at 35 times earnings, which isn't all that expensive when compared to the Nasdaq-100 index's earnings multiple of 33 (using the index as a proxy for tech stocks). Buying Microsoft at this valuation looks like a no-brainer, considering the potential improvement in its bottom-line growth over the next couple of years. Lam Research (LRCX 3.69%) is another stock that has underperformed the market in the past year, losing 2% over the past year. The stock's underperformance can be attributed to the weakness in the memory market in the past couple of years, but things are looking bright for 2025. Market research firm TrendForce is forecasting a 25% increase in capital spending for dynamic random-access memory (DRAM) in 2025, along with a 10% increase in spending on NAND flash storage. The firm adds that there is scope for upward revisions in these estimates. That's not surprising, as the deployment of AI servers and the launch of generative AI-capable devices such as smartphones and PCs are driving an increase in memory compute and storage needs. For instance, smartphones that support on-device large language model (LLM) based-features are likely to require 7 gigabytes of additional DRAM. Memory manufacturers such as Micron Technology are witnessing a similar trend. Now, you may be wondering how the favorable prospects of the memory market are going to positively impact Lam Research. After all, the company gets 35% of its revenue from selling its semiconductor manufacturing equipment to memory makers. This potential turnaround in the memory market is the reason why Lam's results for the first quarter of fiscal 2025, which were released in October 2024, point toward a turnaround in its fortunes. Lam's revenue jumped 20% year over year during the quarter to $4.17 billion, along with a 25% increase in earnings to $0.86 per share. The recovery in the memory market explains why analysts are expecting Lam's growth to pick up in the current fiscal year following a poor performance in fiscal 2024, when its top line fell 14% to $14.9 billion, followed by double-digit growth in the next fiscal year as well. Meanwhile, Lam's earnings are expected to jump 17% in both the current and the next fiscal year. All this makes Lam Research a no-brainer AI stock to buy in 2025, as it is trading at just 24 times earnings, a nice discount to the Nasdaq-100 index's earnings multiple of 33. The potential improvement in Lam's growth could lead the market to reward the stock with a higher valuation, leading to more upside. Not surprisingly, Lam's 12-month median price target of $95 points toward a 32% jump in its stock price from current levels, giving investors another reason to consider adding this stock to their portfolios in the new year.

2 No-Brainer AI Stocks to Buy Right Now | The Motley Fool

Artificial intelligence (AI) is being touted as a technology that could bring significant increases in productivity and exponentially grow the global economy. The latest developments in AI are still in the early stages, making this a once-in-a-generation opportunity. But it's important to invest in the right companies that can successfully monetize and profit from where AI is going. Here are two companies with excellent earnings growth prospects that can deliver attractive returns for years to come. AI adoption is not only bringing major improvements to how businesses operate but also creating opportunities for emerging leaders in hardware and software. Advanced Micro Devices (AMD -4.31%) has seen tremendous sales growth for its advanced processors used in high-performance computing markets, such as data centers. The recent dip in the share price offers the chance to invest in this fast-growing semiconductor company at an attractive valuation. Revenue from AMD's data center business exploded in 2024, growing 122% year over year in Q3. But AMD is also seeing robust demand for PC processors, where its client segment posted a revenue increase of 29% year over year last quarter. AMD is now generating more data center revenue than Intel, which shows a changing of the guard in the semiconductor industry. AMD generated $24 billion in trailing-12-month revenue, but management estimates that the market size for data center graphics processing unit (GPU) could reach $500 billion within the next three years. After launching a year ago, AMD's data center GPUs are expected to bring in $5 billion in revenue. AMD also just launched its fifth-generation Turin EPYC central processing units (CPUs) designed for AI and cloud computing, which offer better performance and lower cost of ownership over previous generations. Alphabet's Google and other large cloud service providers are expected to adopt Turin this year. According to Yahoo! Finance, analysts' estimates call for earnings to be up 25% in 2024 and another 54% in 2025. Given this, you would think the stock would trade at a high multiple of earnings, but at the current $130 share price, investors can buy AMD stock at a reasonable 25 times 2025 estimates. Amazon (AMZN 0.01%) is the leading cloud service provider, with its Amazon Web Services (AWS) business benefiting from growing demand for AI services. Because AWS generates most of the company's operating profit, the stock could offer more long-term upside than investors realize. AWS has grown rapidly since Amazon first created it in 2006. But corporate migration to cloud services is still in the early innings, and the opportunities companies have to move data over to AWS and use AI services in the cloud seem to be accelerating the shift. Revenue from AWS grew 19% year over year on a currency-neutral basis in Q3, and trailing-12-month revenue reached $103 billion. It controls about one-third of the $300 billion cloud market, which itself is growing quickly. AI chip leader Nvidia has chosen AWS for its AI supercomputer dedicated to research and development, a huge endorsement of AWS' capabilities in performance and security. Amazon's investments in AI capabilities in AWS could benefit the entire company. For example, Amazon has launched AI shopping assistants for Amazon.com, which could benefit sales in its retail business. Amazon is a solid growth stock that can help investors profit from the AI boom. While AWS is growing, management is also focusing on lowering costs on the retail side, which is boosting the company's profitability. This powerful combo is fueling the stock to new highs and could send it higher in 2025 and beyond. With analysts expecting earnings to grow at an annualized rate of 22%, Amazon investors could potentially double their money in the next five years.

2 Brilliant AI Stocks to Buy in January and Hold for the Long Term | The Motley Fool

The exponential growth of artificial intelligence (AI) in multiple sectors of the economy is expected to add trillions to the world's gross domestic product. Investors can already see this playing out, with top AI hardware and software companies reporting strong expansion in their businesses and their revenues over the past few years. To help you profit from this opportunity, you might want to consider two stocks that are well-positioned to supply the growing need for AI infrastructure in the years to come. Here's why. One of the best stocks to profit from the growing investment in AI technology is the leading supplier of graphics processing units (GPUs), Nvidia (NVDA 3.43%). Data centers need GPUs for AI training and inferencing. Nvidia sees a $1 trillion opportunity for its business, as data centers upgrade legacy computing systems to AI-optimized hardware. AI is completely changing how businesses operate. Nvidia has called it the next industrial revolution, and the company is certainly growing like it. Nvidia's annual revenue has quadrupled over the last three years. Analysts expect the company to report $129 billion in total revenue for fiscal 2025 (ending in January), representing a year-over-year increase of 112%, according to Yahoo! Finance. Over 80% of its revenue is driven by demand for data center chips and networking products. The $1 trillion opportunity represents annual spending on data center infrastructure of about $250 billion per year. However, the opportunity could be bigger, considering the expected growth in the number of data centers. McKinsey estimates that the demand for data center capacity could triple by 2030. This would significantly benefit Nvidia, which is estimated to control over 70% of the AI chip market. The important thing about Nvidia is that it is rock-solid financially. Over the last four quarters, it generated $56 billion in free cash flow on $113 billion of revenue. The company can outspend competitors on GPU technology to maintain a steady cadence of new product launches to drive growth. Management noted on the last earnings call that demand for its upcoming Blackwell computing platform is "staggering." While investors shouldn't expect Nvidia's revenue to continue doubling every year, it should remain a rewarding investment that compounds in value with the growth of the business. The market for AI technology is so strong that it is propelling Dell Technologies (DELL 3.96%) back to growth stock status. About half of its business comes from sales of PCs, workstations, and branded peripherals, which have struggled to grow due to a weak PC market. The other half of Dell's business is booming, with strong demand for AI-optimized servers fueling growth in its infrastructure solutions group. Dell's infrastructure business posted Q3 revenue growth of 34% compared to the year-ago quarter. Consistent with McKinsey's estimate for data center capacity to continue growing, the momentum in AI servers is not slowing down. Dell reported a strong AI server backlog of $4.5 billion, with its five-quarter pipeline growing 50% over the previous quarter! Beyond selling a server, Dell offers several services that help pad the bottom line, including power management, cooling solutions, networking switches, and other maintenance and professional services. Management calls these add-on sales opportunities "profit pools," which should continue to benefit Dell's margins over time as it sells more servers. Analysts expect earnings to be up 10% for 2025 before accelerating to 20% in 2026. A recovery in the PC market would obviously present another growth catalyst. The launch of AI PCs is anticipated to drive higher sales, especially from enterprise customers. The end of support for Windows 10 could create an upgrade cycle for PCs and fuel even stronger revenue growth for Dell. Dell stock is trading at a reasonable valuation of 15 times this year's earnings estimate. It also offers a dividend yield of 1.5%, reflecting management's confidence in the long-term growth of the business. It seems like a solid buy just based on the AI server opportunity, with a PC recovery adding extra juice to the stock's upside potential.

These 2 Artificial Intelligence Stocks Could Grow Earnings 178% and 140% in 2025, According to Wall Street. Should You Buy Them? | The Motley Fool

2024 was quite a year for the market, with the S&P 500 index notching a 23% gain. The broader market rose by over 53% over the last two years. A big reason for this incredible gain is artificial intelligence (AI). However, many AI stocks now trade at tall valuations because investors only see an expanding market for AI and expect AI companies to grow earnings handily in 2025. When evaluating stocks, investors always look at future earnings projections, which impact valuations. Stocks large enough and of interest to the broader investor community usually get covered by at least a handful of analysts who specialize in a sector and do their best to project future earnings. The average of these earnings projections is called consensus. Here are two large chipmakers that Wall Street analysts think can increase their earnings by 178% and 140% year over year. Should you buy them? Marvell Technology (MRVL 4.07%) rode the AI hype to a 90% gain in 2024. According to estimates provided by Visible Alpha, analysts expect the company to post a loss of $1.08 in diluted earnings per share for its fiscal year 2025, which ends on Feb. 3, and then generate earnings of $0.84 in its fiscal year 2026 for 178% earnings growth. This growth may explain why at this writing Marvell trades at 71 times forward earnings. Marvell provides semiconductor infrastructures for data services including AI. The company targets data centers, enterprise networks, carrier infrastructure, consumers, and the auto industry. Marvell generated about 40% of its revenue in fiscal 2024 from supplying infrastructure to data centers, which, as many know, is a key part of the AI food chain. Another 22% of revenue came from enterprise networking, and 19% from carrier infrastructure. The growth of AI is expected to lead to much more demand for data centers and associated computer infrastructure, which is why investors see a bright future for Marvell. According to TipRanks, 28 analysts have issued research reports on the company in the last three months, and 26 rate Marvell as a buy. However, the average price target only implies 11.4% upside. Despite the company's strong potential and the growing market it operates in, I think investors can probably find better risk-reward propositions elsewhere. Launched in 1969, Advanced Micro Devices (AMD 3.93%) is another AI stock Wall Street is bullish on this year. The company also builds key AI infrastructure including graphics processing units, accelerated processing units, and data processing units. Interestingly, AMD didn't have the same dream year as most of its peers, with its stock falling about 13% in 2024. One issue AMD has is that it's a direct competitor of the AI chip king Nvidia. Nvidia's dominance can be seen in its reported market share of 80% in the AI processor market and 90% in the GPU market, according to Forbes. Nvidia's gross margin was nearly 75% in its fiscal third quarter of 2025, ended Oct. 27, 2024, while AMD's gross margin was 50% in its most recent quarter. While AMD is unlikely to ever compete with Nvidia, simply being in the fast-growing AI market may eventually turn AMD into a winner. In recent months, experts have cautioned about a shortage of servers and AI accelerators, which could last for a few years and place great importance on any company that can provide this kind of infrastructure. Some analysts are concerned that Advanced Micro Devices' AI revenue guidance is below investors' expectations. However, analysts still expect the company to grow earnings by 140% from a projected $1.41 diluted earnings per share in 2024 to $3.38 in 2025, according to Visible Alpha. According to TipRanks, 31 analysts have issued a research report on AMD over the last three months, and 23 assigned the company a buy rating. The average price target suggests more than 50% upside. A positive surprise to earnings or guidance this year could get the stock moving, so it's worth a look.

Investing $7,000 in Each of These 3 Artificial Intelligence Stocks a Year Ago Would Have Created a Portfolio Worth More Than $120,000 by the End of 2024 | The Motley Fool

Many artificial intelligence (AI) stocks have generated fantastic gains for investors over the past couple of years. Even if you didn't invest early in this trend, you still could have made good returns last year by investing in some top performing AI stocks. For instance, Palantir Technologies (PLTR -2.52%), SoundHound AI (SOUN -16.44%), and Nvidia (NVDA -0.02%) all proved to be tremendous investments in 2024. If you had invested $7,000 into each of these stocks at the start of last year, you would have a portfolio worth more than $120,000 by the end of the year, a near five-fold increase in pre-tax wealth. Here's a look at how well each of these stocks did, and whether or not it's too late to invest in them today. Data analytics specialist Palantir Technologies has been leveraging AI to enhance its products and services. It's a big name in counterterrorism and intelligence, with governments clients around the world. It has also been experiencing a lot of growth on the commercial side, developing solutions that can help a wide range of businesses make better decisions. The company has held hundreds of boot camps to introduce potential customers to the Palantir Artificial Intelligence Platform (AIP) and help those businesses understand the use cases for that software. The results have been terrific. CEO Alex Karp has described the resulting demand for AIP as "unrelenting," and sales continuing to accelerate. While Palantir's growth rate was declining in recent years, the tide turned in 2024. PLTR Operating Revenue (Quarterly YoY Growth) data by YCharts. Now, with Palantir consistently profitable and a newly minted S&P 500 component, investors remain extremely bullish about the stock. An investment of $7,000 into the business a year ago would be worth more than $33,000 by the end of 2024. The danger in buying or holding this AI stock today, however, is that it trades at around 118 times next year's expected profits -- a massive premium. Unless you're incredibly bullish on the stock and are comfortable with the risk of a possible correction this year, you may want to consider cashing out. I'd be surprised for the stock to offer up a repeat performance in 2025. The smallest company on this list is voice AI specialist SoundHound AI, which has a market cap of around $5.5 billion. Late last year, its stock price took off after the company delivered strong quarterly results and kept rising as it announced deals with several restaurant chains. In early December, it said that Torchy's Tacos, a popular regional taco chain, had rolled out the company's AI Smart Ordering service at all of its 130 locations. Later that month, it also announced that Church's Texas Chicken would give its customers the option to use SoundHound's AI in drive-thrus to help expedite the ordering process. Given that SoundHound's business that is still in the early stages of growth and that it faces a lot of competition, news of more companies adopting its technology can have a real impact for its business and, in turn, enhance the market's confidence that this may be the real deal. The business isn't profitable yet, but SoundHound reported 89% revenue growth in the third quarter to $25.1 million. Its net loss grew by 8% to $21.8 million, but investors appear to be willing to be patient with the business given its attractive growth opportunities in not just the fast-food industry but in the automotive sector and other areas. Driven by SoundHound stock's strong rally toward the end of last year, a $7,000 investment in its shares a year ago would've been worth nearly $70,000 b the end of 2024. But as with Palantir, I'd be concerned that SoundHound's valuation has become a bit too rich, so it may not be able to do nearly as well this year. The first week of 2025 has been volatile for this stock, but it's too early to assess where the stock might be headed. Currently, the stock trades at 68 times its trailing-12-month revenue. Nvidia's presence on any list of 2024's great AI stocks should surprise no one. The chipmaker has been providing the processing power for a lot of AI-powered initiatives with its cutting-edge graphics processing units (GPUs). With a market cap now in excess of $3 trillion, Nvidia is one of the most valuable companies in the world, and has been a top growth stock to buy and hold in recent years. What's truly impressive about Nvidia is that it continues to post impressive top- and bottom-line growth. During the nine-month period ending Oct. 27, its revenue totaled $91.2 billion -- a 135% increase from the same period last year. And it achieved that while maintaining an exceptionally high profit margin of 56% as its bottom line soared from $17.5 billion to $50.8 billion. To just grow revenue is one thing, but Nvidia's profits are also taking off. That's why of these three companies, it's the most reasonably valued one and the investment which may still have more near-term upside. it's trading at 35 times next year's estimated profits and its price-to-earnings growth ratio is right around 1, signifying that it's a good value for long-term investors. If you invested $7,000 into Nvidia's stock a year ago, your shares would've been worth over $19,000 at the end of 2024. Combined with the other stocks on this list, $7,000 invested across all these companies would have created a portfolio worth approximately $122,000 entering the new year.

Better AI Growth Buy for 2025: Nvidia vs Broadcom | The Motley Fool

Artificial intelligence (AI) stocks led the market higher last year as investors bet on the potential of this technology to revolutionize many industries -- and our daily lives. The S&P 500 index climbed 23% and the Nasdaq advanced 28%, led by AI players. Even the Dow Jones Industrial Average, which isn't heavily loaded with tech stocks, benefited from excitement about AI -- its newest member, Nvidia (NVDA -0.02%), posted the biggest gain in the benchmark. And the good news for investors is the AI momentum is likely to continue since this technology still is in the early days of its growth story. Data centers are building out infrastructure -- Nvidia chief Jensen Huang says $1 trillion of outdated computers worldwide need to be updated for accelerated computing. Companies also are in the initial stages of applying AI to improve their efficiency. This should translate into more growth ahead for key AI players such as Nvidia and another popular AI player: networking giant Broadcom (AVGO 0.29%). So there's still plenty of time to get in on the AI growth story. But if you could only choose one of these AI growth stocks for 2025, which one should you go for? Let's find out. Nvidia has been the go-to company for AI customers and the go-to stock for AI investors. And for good reason. The tech giant has built an AI empire, not only selling the world's fastest graphics processing units (GPUs) to power key AI tasks, but also offering a full range of AI products and services. This has resulted in double- and triple-digit revenue gains in recent quarters and record earnings. In the most recent quarter, revenue reached a high of more than $35 billion. The company is likely to stay in its leadership position for one key reason: Nvidia is greatly focused on constant innovation, promising to update its GPUs annually. This should make it very difficult for a rival to unseat this player. And in the coming months, one particular thing may push Nvidia's shares higher even after last year's huge gain. The company now is launching its much-awaited Blackwell architecture, a customizable platform offering seven different chips, various networking options, and more. Demand has surpassed supply so it's clear this new product is on its way to becoming a success. Nvidia even predicts several billion dollars in revenue during this first quarter of commercialization. Broadcom is the name behind thousands of products used everywhere from data centers to your smartphone. A statistic to show just how big this company is in the networking space: More than 99% of all Internet traffic passes through a Broadcom technology. The company has greatly benefited from the AI boom as we can see through recent earnings figures. AI revenue, driven by demand for custom AI accelerators and networking, soared 220% in the latest fiscal year to more than $12 billion. And this, representing 41% of Broadcom's semiconductor revenue, pushed semiconductor revenue to a record of $30 billion. In the recent quarter, AI networking revenue accounted for 76% of total networking revenue and climbed 158% thanks to demand for Tomahawk and Jericho Ethernet switches. Now in the current quarter, Broadcom expects this strength to continue thanks to demand from big cloud service providers. Broadcom also is winning thanks to its integration of cloud virtualization company VMware -- the acquisition closed a year ago. VMware operating margin has reached 70%, and Broadcom says it's on the path to delivering adjusted EBITDA that surpasses its goal of $8.5 billion after three years. All of this means AI and the VMware addition are set to drive more growth at Broadcom in 2025. Nvidia and Broadcom have been winning during this AI boom, as reflected in their earnings as I mentioned above, and their share price performances. Nvidia advanced 171% last year, while Broadcom climbed more than 107%. And the great news for investors in these players is they both have what it takes to gain through the next stages of AI development. So, choosing between them isn't easy. That said, if you're interested in value, one element may push you in one particular direction. Both players' valuations have increased over the past year, but Broadcom still is the least expensive of the two, trading at 36 times forward earnings estimates versus Nvidia's 47. It's true Nvidia is worth the premium considering its dominance in the AI world and likelihood of staying on top. But investors looking for a bargain should scoop up Broadcom because, at this level, it represents a fantastic opportunity to get in on a top AI growth story for 2025.

3 Artificial Intelligence (AI) Stocks to Buy in 2025 That Could Be Better Picks Than Palantir

Palantir Technologies (PLTR 6.25%) didn't join the S&P 500 until September 2024. But with a staggering gain of 340%, the stock still managed to end the year as the best-performing stock in the index. Some investors might be tempted to jump on the bandwagon, even if it's a bit late. I don't think that's the best strategy, though. Here are three artificial intelligence (AI) stocks to buy in 2025 (listed alphabetically) that could be better picks than Palantir. Probably the biggest knock against Palantir right now is its valuation. Shares of the AI and data analytics software company trade at close to 159 times forward earnings and nearly 69 times sales. Palantir is growing by leaps and bounds but, in my opinion, not enough to justify its premium price. Alphabet, on the other hand, looks like a bargain with a forward earnings multiple of 21. I look for strong growth from Alphabet this year. The company's Google Cloud business should have exceptionally good prospects with the continued AI-fueled demand for cloud services. The adoption of AI agents could also take off in 2025, providing another major tailwind for Alphabet. Don't overlook the potential impact of Alphabet's self-driving car unit, Waymo, over the next few years, either. Waymo plans to expand into Atlanta and Austin, Texas, in 2025 in partnership with Uber. Although this business likely won't contribute much revenue to Alphabet this year, it could be a huge growth driver by the end of the decade. Despite the huge gain last year, Nvidia's valuation isn't all that scary. The stock trades at 31 times forward earnings. That might seem expensive, but it isn't if the company can keep growing robustly. The launch of the new Blackwell GPUs should extend Nvidia's robust growth. In an October interview with CNBC, CEO Jensen Huang described the demand for Blackwell as "insane." That aligns with CFO Colette Kress' comment in Nvidia's November earnings call, stating that "Blackwell demand is staggering." But Blackwell could be just the tip of the iceberg for Nvidia. The company is now on an annual cycle of new product rollouts. The successor to Blackwell should come out in late 2025 and will almost certainly up the bar for performance. 3. Advanced Micro Devices Advanced Micro Devices' (AMD 3.93%) performance in 2024 was highly disappointing, especially compared to the returns delivered by Palantir and Nvidia. The chipmaker's share price tumbled 18% lower last year. However, I think a rebound is on the way. Although AMD stock hasn't made investors happy in recent months, the company's business is humming along pretty well. AMD reported record revenue in Q3 and expects to reach another all-time high in Q4. The same tailwinds for Nvidia should also help AMD. To be sure, the company isn't going to dethrone Nvidia anytime soon, if ever. However, AMD's chips should continue to enjoy strong demand thanks primarily to AI-fueled data center growth. Importantly, AMD stock is dirt cheap with its growth prospects factored in. Its price-to-earnings-to-growth (PEG) ratio is a super-low 0.31, according to financial data and infrastructure company LSEG. I can't think of any other AI stock more attractively valued based on its five-year growth potential.

Microsoft CEO Satya Nadella Said Something That Could Be Bad News for Nvidia but Great News for This AI-Powered Stock in 2025 | The Motley Fool

Artificial intelligence (AI) has been a dominant investment theme on Wall Street in the past couple of years. Considering the rapid and broad usage of these technologies and their transformational nature, many research firms have come out with updated estimates about the AI market opportunity. McKinsey expects AI to add $13.6 trillion to $22.1 trillion in economic value to current global GDP by 2030, while PWC expects AI to increase economic activity by $15.1 trillion by 2030. Although there is significant variation in these estimates, most firms agree that the impact of AI on the global economy will be sizable. Nvidia (NVDA 3.43%) has already been one of the major beneficiaries of this fast-evolving trend, driven by extensive adoption of its AI-optimized chips. With the supply of these chips falling short of demand, the company has also benefited from significant pricing power. However, this dynamic seems on the verge of changing, as is evident by a comment from Microsoft (MSFT 1.06%) CEO Satya Nadella. In a recent interview with the BG2Pod podcast, Nadella talked about the initial AI boom created by OpenAI's launch of ChatGPT in 2022 and Microsoft's efforts to catch up in anticipation of the higher demand for AI services. Nadella was asked about Microsoft's constraints right now and said, "Power yes ... I am not chip supply constrained." He was referencing the high demand for electricity to power all the data centers being built, but that the company is in better shape going into 2025 on the chip end. Nadella's comments (the one above as well as others made during the interview) have been interpreted by some to imply the possibility that the company has already built a large inventory of Nvidia chips or found alternatives to meet its needs through efficiencies, demand still ramping up, minimal competition currently, partnerships, and custom-made AI chips. Nadella's comments do not seem to be positive news for Nvidia shareholders. However, there is one high-flying stock that can benefit from these developments. There are a lot of reasons to be excited about custom AI chip manufacturer and advanced networking solutions provider Broadcom (AVGO 1.66%). A leading custom AI accelerators and AI-optimized networking solutions provider, the company posted a record revenue of $51.6 billion in fiscal 2024, implying a year-over-year jump of 44%. AI revenue surged at an even faster pace of 220% year over year to $12.2 billion in fiscal 2024. Hyperscalers require high-bandwidth and low-latency networking components to build large AI clusters for training and inferencing complex large language models. Broadcom's three major hyperscaler clients are planning to scale the size of their AI clusters from 500,000 to 1 million XPUs (accelerators). Larger AI clusters will require higher silicon content for networking (Ethernet switches, high-speed interconnects). Furthermore, the networking specialist also expects resources expended on networking content to rise from a range of 5% to 10% to a range of 15% to 20% of computational content for increased AI connectivity. Hence, Broadcom's networking expertise is already being sought after extensively by many clients in large-scale AI deployments. Against this backdrop, since Broadcom is a major networking player enabling the global AI infrastructure buildout, Microsoft may start using its networking components to expand its data center capacity. With Broadcom's expertise in scaling up and scaling out (interconnection inside data racks and among data racks), it could become a preferred partner for even more clients building large AI clusters. Microsoft partner and ChatGPT developer OpenAI has collaborated with Broadcom and Taiwan Semiconductor Manufacturing to build its first custom inference AI chip, which will help deploy advanced AI models in a production environment. This, in turn, is expected to diversify OpenAI's chip supply and optimize costs. As Microsoft focuses on custom chip development (including in-house-designed Maia accelerators), the company may also seek out Broadcom's expertise in specialized ASICs (application-specific integrated circuits). Broadcom has already demonstrated its technological prowess by developing cutting-edge XPUs with 3-nanometer process technology. Unlike Nvidia, which specializes in general-purpose GPUs, Broadcom works with its hyperscaler clients to develop customized solutions catering to their specific needs. Microsoft may prefer to work with Broadcom in long-term engagement to develop a multigenerational roadmap for its AI infrastructure requirements. Furthermore, Broadcom may also see heightened demand for its AI-optimized server storage solutions, as Microsoft ramps up its data center capacity to meet increased demand. This may open up new growth opportunities for Broadcom in the coming years. Broadcom is currently trading at about 21.1 times trailing-12-month sales, significantly higher than its historical three-year average price-to-sales (P/S) multiple of 13.04. However, considering the company's robust growth potential, this rich valuation seems justified. Plus, Microsoft's chip sufficiency may also prove to be a major tailwind for Broadcom in the coming years.

3 Top Artificial Intelligence (AI) Stocks Ready for a Bull Run | The Motley Fool

One of the biggest themes that helped drive the market last year was artificial intelligence (AI). The technology, which in the past was relegated to science fiction, has suddenly become mainstream. Companies, meanwhile, have been racing to become AI leaders, viewing it has a generational opportunity. Let's look at three stocks that are greatly benefiting from AI. Known as one of the U.S. government's most important vendors, Palantir Technologies (PLTR -2.17%) and its data gathering and analytics solutions have been used for such critical tasks as fighting terrorism and tracking COVID-19 cases. However, the company has now been able to incorporate AI into its solutions to begin helping commercial customers address their own mission-critical needs. While many large tech companies have focused on developing the best AI models, Palantir instead has decided to focus on the applications and workflow layers of AI software to improve logic and functionality. This helps AI better carry out actions in real-life applications. Its AI platform is designed to be the operational layer of an organization, where digital assets, such as data sets and models, are then connected to their real-world counterparts, such as products or customer orders. The company's solutions have been seeing huge demand from commercial customers, with its U.S. commercial revenue rising 54% last quarter to $179 million, while its U.S. commercial customer count soared 77%. Meanwhile, the U.S. government, its largest customer, is also starting to embrace AI solutions. Thus far, much of Palantir's early success in AI has been with proof-of-concept prototype work. It has done a great job of acquiring commercial customers through its Artificial Intelligence Platform (AIP) boot camps, where it demonstrates to customers how its technology can be applied to potential use cases while providing onboarding and training. The big opportunity moving forward is moving these customers from proof of concept to production. This should help accelerate the company's overall revenue growth, which was 30% last quarter. The one knock on Palantir is valuation, as the stock currently trades at 42 times forward price-to-sales ratio. Another company that has greatly benefited from AI is AppLovin (APP 1.03%). The company owns a portfolio of apps, but its primary business is an adtech solution that helps gaming apps attract and better monetize customers. Since the launch of its AI-powered Axon 2 solution in early 2023, the company's revenue has soared as gaming apps have embraced its technology. Existing customers have begun to spend more and it also attracted a lot of new customers. Axon 2 uses predictive machine learning to target ads toward users most likely to download those apps. The success of Axon 2 can be seen in AppLovin's software platform revenue, which surged 66% to $835 million last quarter. Even more impressive is that this revenue growth was on top of the 65% software platform revenue growth it saw a year ago in Q3 2023. The company's solution appears to be taking away business from Unity Software, whose comparative "grow solutions" segment saw a 5% decline in revenue last quarter. Axon 2's success is also leading to a big improvement in the company's gross margin as well, which rose from 69.3% a year ago to 77.5%. This, in turn, is leading to even better profitability growth. AppLovin has said it expects revenue growth with gaming customers to settle into the 20%-to-30% range longer-term, but its bigger opportunity is moving its adtech platform beyond gaming. The company has been piloting Axon 2 with e-commerce companies with early success, and it expects this new vertical to become a meaningful contributor in 2025. The stock currently trades at forward price-to-earnings (P/E) ratio of 39.5 based on 2025 analyst estimates with a price/earnings-to-growth (PEG) ratio of 0.63. A PEG ratio below 1 is considered undervalued and growth stocks will often have multiples well above 1. Semiconductor maker Broadcom (AVGO 3.02%) has begun making waves in AI chip market, where the company is working with customers to design custom AI chips for such things as AI training and inference. Alphabet was its first big customer in this arena with its tensor processing units (TPUs), which it has credited as being a key differentiator that helps reduce inference processing times and lower costs. Broadcom's custom chips are designed for very specific tasks and as such perform better at those tasks than graphics processing units (GPUs), which offer more flexibility. For example, Alphabet's TPUs are optimized for tensor operations within Google's Cloud's TensorFlow framework. Tensor operations are a form of high-level mathematics used in AI deep learning. The company has been seeing strong growth from its custom AI chips, which topped $12 billion in revenue in fiscal 2024. Meanwhile, the company has been steadily adding new customers. Last quarter, the company said its three large custom AI chip customers -- believed to be Alphabet, Meta Platforms, and ByteDance -- were each planning to deploy 1 million AI chip clusters by 2027, which would equate to an addressable market of between $60 billion to $90 billion in fiscal 2027 alone. Meanwhile, it said two additional customers -- believed to be OpenAI and Apple -- were moving forward in their chip development, which could increase this number even more. If the custom AI chip market continues to take off, Broadcom looks poised to be the biggest winner. The stock currently trades at forward P/E of 36.5 based on this fiscal year's analyst estimates (ending November 2025), which isn't expensive if it can take advantage of its AI chip opportunity.

Beyond 2025: Here Are 2 Artificial Intelligence (AI) Stocks You Can Buy and Hold for the Next Decade | The Motley Fool

Investing in artificial intelligence (AI) stocks isn't just about setting yourself up for 2025, but also positioning yourself for the next decade. AI innovations won't stop in 2025, and with the stock market being a forward-looking machine, you're better off taking the long-term view rather than just narrowing in on what will happen in 2025. With that in mind, I have two AI picks that are set to dominate the next decade: Taiwan Semiconductor Manufacturing (TSM 5.46%) and Amazon (AMZN 1.52%). Both are strong long-term picks and solid buys right now. Without Taiwan Semi, also called TSMC, AI technology wouldn't be where it is today. TSMC is the world's leading chip manufacturer and acts as a fabrication shop for any company that needs chips. So whether that's Nvidia's (NASDAQ: NVDA) GPUs or Apple's (NASDAQ: AAPL) iPhones, TSMC has chips in nearly every cutting-edge electronic device, which likely won't change in the coming decade. It's also at the forefront of innovation. It can produce 3-nanometer (nm) chips, which is the current best technology. But it's already working on 2nm chips that are set to launch later this year. This cycle of continuous innovation has kept Taiwan Semiconductor on top, and there's no reason to doubt that it will stay atop the semiconductor throne. AI demand has also been a huge part of its recent growth. For 2024, management expects AI revenue to triple year over year, and it shows no signs of slowing down anytime soon. For 2025, Wall Street analysts expect revenue and earnings-per-share (EPS) growth of 26% and 27%, respectively. The stock is a solid bargain, too, considering that Taiwan Semiconductor trades for 23 times forward earnings. This makes it a great buy now, as well. Amazon may seem like an odd pick for an AI investment, but its cloud computing division, Amazon Web Services (AWS), is a critical part of the computing infrastructure. Cloud computing platforms like AWS give clients access to the computing power necessary to train and run AI models that would be too expensive to justify purchasing themselves. Furthermore, the client doesn't have to worry about maintenance or the hardware going obsolete, as that falls onto Amazon's shoulders. AWS is the largest cloud computing player by market share, but there is plenty of opportunity for growth over the next decade. AI demand continues to bring in new workloads, and AWS' partnership with Anthropic, the maker of the Claude generative AI model, should pay off, as Claude is often seen as one of the top generative AI models. In 2024, the cloud computing market was valued at around $752 billion, according to Grand View Research. That figure is expected to expand to $2.39 trillion by 2030, making it an extremely fast-growing industry relative to its size. However, AWS only made up 17% of Amazon's total revenue over the past 12 months, so can it really affect the stock? That's the wrong metric to use, as cloud computing and commerce have very different margin profiles. AWS made up only 17% of revenue over the past 12 months, but it comprised 60% of operating profits. With AWS having better operating profit margin than the commerce business, an argument could be made that Amazon is more of a cloud computing company than an e-commerce company. Regardless, with the massive growth expected to come from cloud computing over the next decade, Amazon makes for a solid stock pick in 2025.

History Says the Nasdaq Could Jump Higher in 2025: 2 Artificial Intelligence (AI) Stocks That Can Bounce Back and Soar 25% to 40%, According to Wall Street | The Motley Fool

Technology stocks were in fine form on the stock market in 2024, with the tech-laden Nasdaq Composite (^IXIC -1.89%) index clocking impressive gains of 28.6% last year following an even stronger jump of 43% in 2023. Historical trends indicate that the Nasdaq Composite could be on track to deliver more gains in 2025. In any year where the Nasdaq managed a 30%-plus gain overall, it averaged a 19% jump in the year that followed. Moreover, the Nasdaq averages a 17% return following a year in which it delivered returns of 20% or more. Of course, veteran investors are well aware that past returns cannot be taken as reliable indicators of future performance. However, the broader sentiment on Wall Street suggests that the stock market could head higher in 2025 on the back of continued investments in artificial intelligence (AI), a robust U.S. economy, and additional interest rate cuts by the Federal Reserve. Given this upbeat sentiment, there is no harm in taking a closer look at the prospects of Advanced Micro Devices (AMD -1.71%) and Dell Technologies (DELL -2.72%), two AI stocks that have been hammered in recent months but are expected to make a solid comeback in the new year. AMD stock is down nearly 39% from its all-time high set in March 2024. That may seem surprising considering that AMD's growth profile has been improving in recent quarters on news of improving demand for its AI chips used in data centers as well as in personal computers (PCs). Of course, AMD is nowhere close to Nvidia in the market for data center graphics processing units (GPUs), and that's probably a primary reason why the stock slipped significantly in the past year -- its AI-powered growth isn't as solid as the market may have liked. However, savvy investors would do well to focus on the bigger picture, especially considering the gains that Wall Street expects from AMD in 2025. AMD carries a 12-month consensus price target of $183, according to 55 analysts covering the stock. That would be a 41% jump from current levels. What's more, 80% of the analysts recommend buying AMD stock. That's not surprising considering that AMD trades at an attractive 24 times forward earnings and is expected to deliver a 54% increase in earnings in 2025 to $5.13 per share, which would be much higher than 2024's estimated earnings growth of 26%. There are a couple of factors that could help AMD deliver such strong growth in 2025. First, sales of PCs are expected to jump 4.3% in 2025, according to market research firm IDC. That would be a big improvement over last year when PC sales were flat. The improving prospects of the PC market bode well for AMD's client processor business, which has already started gaining terrific traction. AMD's revenue from the client segment in the third quarter of 2024 increased 29% year over year on the back of healthy demand for its Ryzen central processing units (CPUs). The new year could be even better for this segment as the company's AI-focused Ryzen CPUs are expected to power more than 100 commercial PC designs in 2025, which management believes will set the company up for more share gains in the client CPU market. The second factor is the continued growth of its data center GPU business. AMD expects to finish 2024 with at least $5 billion in data center GPU revenue. That would be a massive improvement over 2023 when the company sold $400 million worth of AI GPUs in the fourth quarter of the year. The company seems on track to sell more data center GPUs in 2025 thanks to a combination of strong customer demand and an improvement in the supply chain. This AI stock indeed seems capable of delivering the impressive upside that Wall Street is expecting from it this year, so buying AMD right now could turn out to be a smart move given its attractive valuation. Dell Technologies is another stock that has been in bad shape on the market over the past few months, losing 30% of its value since hitting an all-time high in May 2024. However, analysts expect the stock to regain its mojo over the next year. Dell has a 12-month consensus price target of $155, which would be a 24% jump from current levels, according to 29 analysts covering the stock. It is worth noting that 86% of those analysts rate Dell as a buy. Again, that's not surprising considering the potential for AI to influence Dell's business in 2025. The company already reports a sharp turnaround in its infrastructure solutions group (ISG) segment through which it sells servers and networking equipment. There was a 34% year-over-year increase in revenue from this segment in the third quarter of fiscal 2025 (which ended on Nov. 1, 2024) to $11.4 billion. The booming demand for AI servers boosted Dell's ISG business and should continue doing so in 2025 thanks to its growing order book and improving revenue pipeline. Dell received record AI server orders worth $3.6 billion during fiscal Q3, which was higher than the $2.9 billion worth of revenue it generated from sales of AI servers during the quarter. This is a trend with staying power. Dell management says that its AI server pipeline grew by more than 50% in the previous quarter. Moreover, the global AI server market is expected to clock an annual growth rate of 27% through 2033, generating $343 billion in revenue at the end of the forecast period as compared to $30 billion in 2023. This suggests that Dell is at the beginning of a massive growth opportunity in the AI server market that should help it maintain its outstanding growth for years to come. Elsewhere, the PC market is set for a turnaround in 2025 following last year's flat performance. This bodes well for Dell's client solutions group business, through which the company sells commercial and consumer PCs. This segment's revenue was down 1% year over year in Q3, but that is likely to change this year thanks to catalysts such as AI PCs, which are projected to grow shipments by 165% in 2025. Dell's earnings in the new fiscal year (which will begin next month) could jump 20% following an estimated increase of 10% in fiscal 2025. With shares of this technology giant currently trading at just 20.6 times trailing earnings, buying Dell looks like a no-brainer. The stronger growth in the company's earnings in the coming fiscal year could help the stock soar.

Meet the 5 Generative AI Stocks on the Cutting Edge of a $1.3 Trillion Opportunity by 2032 | The Motley Fool

These companies aren't "Magnificent" for nothing. The looming growth in generative AI is a game changer. The hype around artificial intelligence (AI) is justified. AI represents a ground-breaking technology poised to transform existing industries and create new ones over the coming decades. According to an analysis by Bloomberg Intelligence, the market for generative AI is poised to reach $1.3 trillion by 2032. That's a 43% annualized growth rate from today. Generative AI involves creating content using computer systems and large language models (LLMs) like ChatGPT. As you might imagine, the investment upside is tremendous for cutting-edge companies with the chips, models, data, and applications to help generative AI realize its potential. These five generative AI stocks below have already produced stellar returns but still have the appropriate growth prospects and valuations to reward long-term investors. Consider buying and holding them today. AI models require vast computing power. Nvidia (NVDA -0.27%) graphics processing unit (GPU) chips are the go-to for training AI models. That's where AI digests vast amounts of data to learn. The company captured the market with its Hopper architecture (H100 chip) and is starting to roll out Blackwell, its next-generation AI chip line. Nvidia's business performance over the past two years is arguably unprecedented, and it's poised to continue as AI hyperscalers like Microsoft and other big technology companies invest billions of dollars to build the capacity to support generative AI's growth. Nvidia's stock may seem expensive at a forward price-to-earnings (P/E) ratio of 48, but analysts estimate the business will grow earnings by an average of 38% annually over the long term. That's a price/earnings-to-growth (PEG) ratio of just 1.3, meaning the growth justifies the valuation. The stock might be volatile along the way, especially after such a strong 24-month run, but the long-term upside remains compelling. Broadcom (AVGO -2.00%) is a chip and enterprise software company that recently became a major player in generative AI. It has developed a chip roadmap for three hyperscalers, with two more in the early stages. Management declined to name names during its latest earnings call, but industry reports pointed to OpenAI and Apple being among them. These chips are allegedly for AI inference, which is how AI models efficiently apply their intelligence to new data and applications. The company's total AI-related revenue was $12.2 billion in its fiscal 2024, but management believes it will capture a leading share of a $60 billion to $90 billion opportunity by 2027. These developments have brightened Broadcom's outlook. Analysts now expect the business to grow earnings by 21% annually over the long term, which makes the stock a solid long-term buy at its current PEG ratio of 1.7. AI models require enormous amounts of data, so possessing the AI model and data is a significant competitive advantage. Meta Platforms (META -0.94%) monitors the 3.29 billion social media users who log onto Facebook, Instagram, WhatsApp, and Threads daily. Meta uses that data to train its AI model (Llama). The company has already used generative AI to enhance its core digital advertising business and began experimenting with AI-powered social media profiles to drive human engagement on its apps. Meta should remain a leader in the field because it has the capabilities, data, and resources to develop and apply generative AI technology. The stock remains a compelling value for long-term investors. Analysts estimate Meta will grow earnings at a long-term average rate of 17% to 18%, which values the stock at a PEG ratio of 1.3 at its current P/E ratio. Google's parent company, Alphabet (GOOGL 0.36%) (GOOG 0.32%), shares many similarities with Meta that could translate to leadership in generative AI. Alphabet possesses its own AI model (Gemini), first-party data from across its ecosystem (Google Search, YouTube, Google Workspace, Google Home, etc.) to train it on, and even the world's third-leading cloud-computing platform (Google Cloud). Thus, you might think of Alphabet as a one-stop shop for AI. Alphabet was a remarkable technology conglomerate before AI, but management has begun incorporating generative AI into existing products. Alphabet also seems bound to become a key partner for other companies who want to use AI but lack the tools. Analysts believe the company will grow earnings by an average of 16% to 17% annually over the long term, making the stock a bargain at just 21 times forward earnings. E-commerce giant Amazon (AMZN -0.60%) may not be an obvious generative AI winner at first glance, but it operates Amazon Web Services (AWS), the world's largest cloud-computing platform, making it a critical partner for any company deploying AI technology in real-world applications. Additionally, Amazon has first-party data on the customers who shop on its site or use any of the services included in its Amazon Prime subscription. It has unleashed a network of over 100 million active smart devices via its Alexa technology, a perfect distribution system for generative AI applications. Amazon is involved in various industries, such as e-commerce and digital advertising, so it's a bit more diversified than other AI stocks. Analysts estimate Amazon will grow earnings at a brisk 22% annually over the next three to five years, which is plenty of time to make the stock a buy today at its current forward P/E ratio of 36.

2 Nasdaq Artificial Intelligence (AI) Stocks to Buy Before They Soar as Much as 153% in 2025, According to Certain Wall Street Analysts | The Motley Fool

The stock market is taking a breather after a relentless run, but opportunities still abound, according to some on Wall Street. The Nasdaq Composite (^IXIC 1.77%) has climbed consistently higher over the past couple of years as technology investors have sought to profit from the economic recovery, the rapid adoption of artificial intelligence (AI), the slowing of inflation, and the ongoing campaign to lower interest rates. After notching gains of 43% in 2023, the index tacked on an additional 29% in 2024. Investing offers no guarantees, but history suggests there could be more upside in store for investors in 2025. Looking back as far as 1972 -- the first full year of trading for the Nasdaq Stock Market -- in every year following gains of 28% or more, the tech-focused index gained another 19%, on average. This suggests the coming year could be a profitable one for investors. Let's look at two Nasdaq stocks that could soar in 2025, with potential upside of up to 153%, according to certain Wall Street analysts. The first Nasdaq stock with the potential for significant upside is ASML (ASML 1.99%). The company manufactures the advanced lithography systems used to produce microchips. ASML is also the only company in the world that supplies extreme ultraviolet (EUV) lithography technology, which is used by chipmakers to create the world's most advanced semiconductors. This gives ASML a distinct advantage over its competitors. For example, Taiwan Semiconductor Manufacturing produces an estimated 92% of the world's most advanced chips and is ASML's largest customer. This illustrates that ASML continues to benefit for the accelerating demand for AI. In the third quarter, ASML's revenue jumped 12% year over year to 6.67 billion euros (roughly $6.85 billion) while reporting earnings per share (EPS) of 5.28 euros (about $5.42), an increase of 10%. CEO Christophe Fouquet expects the company's accelerating growth to continue, forecasting net sales of 32.5 billion euros in 2025 at the midpoint of its guidance, an increase of 16% compared to its full-year 2024 sales forecast. The chief executive goes even further, saying ASML's sales growth should average between 8% and 14% over the coming five years. Some on Wall Street believe investors are missing the forest for the trees. Included among their ranks is JPMorgan analyst Sandeep Deshpande. He maintains an outperform (buy) rating on ASML, with a price target of $1,148. That represents upside potential of 66% compared to Tuesday's closing price. The stock price is down 36% from its July peak, as some system sales have been pushed out until next year. The analyst believes this is a mere speed bump and will set the stage for a rebound as sales ramp up -- representing a compelling opportunity for long-term investors. Given the accelerating demand for AI and the company's strategic place in the semiconductor industry, I think now is the time to buy ASML as the secular tailwinds of AI continue to ramp up. And at just 28 times forward earnings, the stock is attractively priced in the context of its growing opportunity. The proliferation of e-commerce and the race to deliver ever-faster shipping has created the need for more efficient fulfillment operations and advances in warehouse automation -- and Symbotic (SYM 3.76%) is leading the charge. The company offers a comprehensive suite of customizable AI solutions to automate the processing of full pallets and the peeling off of individual cases to maximize available warehouse space. Symbotic employs sophisticated algorithms and an army of robots equipped with computer vision that work in tandem to move pallets, load and unload delivery vehicles, and separate individual containers. This helps increase efficiency and uses every available inch of warehouse space, ultimately saving users money. Symbotic notes that its systems increase efficiency, reduce labor costs, and dramatically lower operating and delivery expenses, while achieving a 30% to 60% reduction in space requirements. As a result, the return on invested capital (ROIC) is equally dramatic, and the system can generally pay for itself in a very short time. In fact, Symbotic estimates the purchase of each module can pay for itself numerous times over, saving customers tens or even hundreds of millions of dollars, depending on the overall size of the system. The results are compelling. In its fiscal 2024 fourth quarter (ended Sept. 28), Symbotic generated revenue of $577 million, an increase of 47% year over year, resulting in EPS of $0.05, swinging from a considerable loss in the prior-year quarter. Symbotic restated some of its quarterly reports in 2024, which sent some investors running for the exits. However, management noted these resulted in timing differences with "no impact to full-year fiscal year 2024 results." Early last month, Symbotic filed its completed annual report with no additional changes, removing the final shadow the hung over the stock. On the heels of these developments, Cantor Fitzgerald analyst Derek Soderberg reiterated an overweight (buy) rating and $60 price target on the stock, which represents potential upside of 153% compared to Tuesday's closing price. The analyst's optimism was confirmed after a recent meeting with management regarding its ongoing global expansion and progress with its warehouse-as-a-service joint venture. Even more intriguing is the price tag, as Symbotic's is selling for less than 1.3 times sales. I view that as an attractive price to pay for a key player in an emerging industry.

Prediction: This AI Company Will Be the Most Valuable in the World by the End of 2025 | The Motley Fool

There isn't a prize for being the largest company in the world by market cap, but it's a position that many companies envy. Right now, Apple (AAPL 0.20%) is the largest, although Nvidia (NVDA -0.02%) is right on its tail and may move in and out of first place depending on the market's daily swings. Microsoft (MSFT 0.52%) is in third place, but it would need to rise about 16% to take the lead from Apple. As a result, the race for the title of world's most valuable company by the end of 2025 is likely between just Nvidia and Apple, barring major news from Microsoft that vaults it into the lead. Apple has held the title pretty much since 2011, but can Nvidia take it over by the end of the year? Apple is by far the leading consumer tech brand, and a large percentage of consumers already have an iPhone. Most iPhone users are also devoted to the Apple ecosystem and may own its AirPods, MacBooks, iPads, and smartwatches. This dominance has made the company the world's largest for a long time. Nvidia has received much more attention during the past two years with its primary product, the graphics processing unit (GPU), which it invented in 1995. The original purpose of a GPU was for processing video gaming graphics, but other uses were soon discovered. Because the GPU can process multiple calculations in parallel, it became the choice for any task that required vast amounts of computing power. This expanded its functions into engineering simulations, drug discovery, cryptocurrency mining, and artificial intelligence (AI) model training. AI training has been a huge theme during the past few years, and with Nvidia's GPUs and software being the best available for the job, the company quickly established dominance in the market. GPU demand has rapidly risen since 2023, as shown by the chipmaker's revenue growth. In just two years, the company has gone from about $30 billion in annual revenue to more than $100 billion, and Wall Street analysts still forecast enormous growth during the next two years. With more than 50% growth expected in fiscal 2026 (ending January 2026), Nvidia still seems to have plenty of potential. But what about Apple? Apple's growth has been nonexistent during the past few years, and its revenue has been little changed during the same frame as covered in the Nvidia charts above. Its overall revenue figure is much higher than Nvidia's, but it has shown no growth in earnings per share or revenue in the period. However, during the past three years, Apple's stock has risen 42%. How is this possible? Investors have been willing to pay more for Apple's earnings, which has caused the valuation to skyrocket. The same trend also happened with Nvidia, but it had considerable underlying growth as well. After the run-up during the past few years, Apple's stock is within shouting distance of the chipmaker's price-to-earnings (P/E) valuation. Nvidia still holds about a 46% premium to Apple's stock from a (P/E) perspective. However, Nvidia earnings per share (EPS) are forecast on average to rise by 50% while Apple's EPS is projected to grow by 22%. The question for investors is: For two companies producing about the same earnings, should the one growing faster be valued higher than the one growing slower? The answer seems obvious, and as a result, I think faster-growing Nvidia will be the world's most valuable company by the end of the year, as long as analyst projections are close to correct.

2 Unstoppable Artificial Intelligence (AI) Stocks to Buy Hand Over Fist in 2025 and 1 to Avoid | The Motley Fool

Some of Wall Street's most-popular AI stocks may take diverging paths in the new year. Year two of Wall Street's bull market rally didn't disappoint. When the iconic Dow Jones Industrial Average, benchmark S&P 500, and growth-fueled Nasdaq Composite crossed the finish line for 2024, they'd respectively gained 13%, 23%, and 29%, and hit multiple record-closing highs along the way. Though the stock market didn't hurt for catalysts last year, there's no question that the rise of artificial intelligence (AI) has played the biggest role in sending stock valuations higher. With AI, software and systems are given the ability to make split-second decisions without the need for human intervention. The utility for this technology spans most industries around the globe, which is what gives AI seemingly limitless potential. But as we've witnessed from previous next-big-thing technologies, not all stocks are necessarily going to be winners. As we steam ahead into 2025 and the practical application of this game-changing technology comes into full focus, two unstoppable AI stocks stand out as no-brainer buys, while another highflier is worth avoiding. Among the dozens of AI stocks investors can choose from, the most attractive of all in the new year just might be Alphabet (GOOGL 1.25%) (GOOG 1.31%), the parent company of internet search engine Google, streaming service YouTube, and cloud infrastructure service platform Google Cloud, among other ventures. Alphabet's application of AI is best seen through Google Cloud, which is the third-largest cloud infrastructure service platform in the world by market share. Alphabet is deploying generative AI solutions and large language model (LLM) capabilities within Cloud for its customers. Sales for Google Cloud surged 35% to $11.4 billion during the September-ended quarter, with this segment expected to play a key role in cash-flow generation throughout the decade. Alphabet is dipping its toes into the hardware side of the business, too. It's developing tensor processing units and its Trillium chip, which can be used for LLM training, machine learning, and inference. While Alphabet's hardware isn't likely to outperform Nvidia's Hopper or Blackwell chips in terms of computing speed, it should be significantly cheaper and more readily available. But the great thing about Alphabet is it's far more than just an AI stock. According to data from GlobalStats, Google accounted for just shy of 90% of global internet search in December 2024. Dating back 10 years, it's consistently controlled 89% to 93% of worldwide internet search share. This makes it a clear go-to for advertisers and provides highly predictable operating cash flow. Alphabet is sitting on a veritable treasure chest of capital, as well. It closed out September with $93.2 billion in cash, cash equivalents, and marketable securities. This cash allows the company to aggressively repurchase its stock, which has helped to boost earnings per share (EPS). Lastly, Alphabet's valuation remains compelling among a sea of pricey AI stocks. The company's forward price-to-earnings (P/E) ratio of 21 remains cheap considering Alphabet's sustained double-digit annual EPS growth potential. The second unstoppable Ai stock that can be bought hand over first in the new year is China-based Alibaba Group (BABA 0.69%). Admittedly, China stocks come with more risk than U.S.-based businesses. China's regulatory environment can be unpredictable at times, which is why China stocks typically trade at discounted earnings multiples when in the same industry as American-based companies. Additionally, it's not clear if trade relations between the U.S and China will worsen after Donald Trump takes office in two weeks. Despite these challenges, three catalysts make Alibaba a standout buy in 2025. The primary growth driver for the company in the new year should be Alibaba Cloud, which according to estimates from tech analysis firm Canalys is the leading provider of cloud infrastructure services in the world's No. 2 economy (a 36% share). Similar to Google Cloud, Alibaba is making generative AI solutions available on its platform for its corporate clients. Cloud-service margins are typically juicy, which should pave the way for meaningful growth in operating cash flow and EPS in the latter-half of the decade. E-commerce should act as another spark for Alibaba in the new year. On top of Alibaba being China's top cloud infrastructure service provider, the company's Taobao and Tmall marketplaces combine to account for just over half of the country's online retail sales market share. China's up-and-coming middle class should lead to a sustainable runway of outsized growth for e-commerce retailers. Similar to Alphabet, the third selling point for Alibaba is its pristine balance sheet. Alibaba ended the third quarter with north of $33 billion in net cash, which affords it plenty of opportunity to repurchase its stock and invest in higher growth initiatives. Alibaba's forward P/E of 9 stands out in all the right ways amid a historically expensive U.S. stock market. However, not all artificial intelligence stocks should be counted on to be winners in 2025. If there's one AI highflier that's worth avoiding, it's data-mining specialist Palantir Technologies (PLTR 6.25%), whose shares have skyrocketed by 1,080% over the trailing-two-year period, as of Jan. 2. There are viable reasons that help explain why Palantir stock has gone parabolic in recent months. For one, the company's services can't be duplicated at scale. Its AI-powered Gotham platform helps federal governments plan and execute missions, as well as gather data. Meanwhile, Foundry is the AI- and machine learning-propelled service that helps businesses make sense of their data. While other companies may offer bits and pieces of the services Palantir provides, there is no one-for-one replacement of what Palantir does at scale. Investors have also been excited about Palantir's shift to recurring profitability. Gotham is the core profit-driver, with government contracts that typically last four or five years fueling steady double-digit sales growth and predictable cash flow. Unfortunately, Palantir's otherworldly valuation might make it impossible to maintain its parabolic climb. Whereas most market-leading businesses have historically topped out at a price-to-sales (P/S) ratio of around 40 before the bubble burst, Palantir is sporting a P/S ratio of 68, as of the closing bell on Jan. 2. With its sales growth decelerating in recent years and over a third of its net income coming from interest earned on its cash (i.e., an unsustainable/non-innovative source), this level of premium makes no sense. To build on this point, Palantir's Gotham platform has a limited long-term growth ceiling. Although it's earned plenty of contracts from the U.S. government, this is an AI-driven platform that only the U.S. and its immediate allies can use. With most countries eliminated from being future clients, it allows Palantir's nosebleed valuation to stand out even more. Palantir is the perfect example of a solid company with a stock valuation that's simply doesn't make any sense.

1 "Magnificent Seven" Stock to Buy Hand Over Fist in 2025 and 1 to Avoid | The Motley Fool

While a confluence of factors is responsible for this outperformance, such as the rise of artificial intelligence (AI) and Donald Trump's victory in November, the foundational catalyst that helped lift Wall Street's three major stock indexes to multiple record highs last year was the outperformance of the "Magnificent Seven." The Magnificent Seven is comprised of seven of the most-influential companies on Wall Street: Two traits define these seven businesses. The first, which I've already touched on, is their historic outperformance. These seven companies have run circles around the benchmark S&P 500 over the trailing decade. Whereas the S&P 500 has gained nearly 189%, not including dividends, over the last 10 years, Amazon, Tesla, and Nvidia have respectively skyrocketed by 1,350%, 2,710%, and 28,610%! The other consistent characteristic of the Magnificent Seven is their sustained competitive advantages within their respective industries. But while these seven companies share similar traits, their outlooks meaningfully differ for 2025. As the bull market looks to extend into a third year, one Magnificent Seven stock stands out as a bargain, while another is worth avoiding in 2025. Among this group of more than a half-dozen outperformers, Alphabet stands out as the cream of the crop in the new year. Though we'll dive into Alphabet's higher-margin growth opportunities in a moment, the first thing to note is its absolute dominance in internet search. Over the trailing decade, Google has accounted for 89% to 93% of worldwide internet search share. In other words, businesses have made Google their go-to when targeting their message(s) at users, which is typically great news for Alphabet's ad-pricing power. Alphabet is also the parent company of streaming platform YouTube, which is the second most-visited social site behind Meta's Facebook. The proliferation of Shorts (short-form videos lasting less than 60 seconds), coupled with roughly 2.5 billion monthly active users, should steadily improve YouTube's subscription and ad-pricing power. To build on the above, history is most definitely in Alphabet's corner. Even though ad spending tends to be highly cyclical, periods of economic growth last substantially longer than recessions. This is a way of saying that ad-fueled companies like Alphabet spend a considerable portion of their time basking in the sun, rather than sulking under the proverbial clouds. However, Alphabet's longer-term growth prospects primarily hinge on its cloud-service platform. Google Cloud is expected to deliver sustained double-digit revenue growth. Businesses are still in the relatively early stages of increasing their cloud-service spending. Further, Alphabet's incorporation of generative AI solutions into Google Cloud should be beneficial to its customers and dramatically increase operating cash flow from this segment in the latter-half of the decade. Alphabet's veritable treasure chest of cash on its balance sheet is a competitive edge, as well. It closed out the third quarter with $93.2 billion in cash, cash equivalents, and marketable securities, which affords a hearty capital-return program. Aside from Apple, no other S&P 500 company has repurchased more of their stock over the last decade than Alphabet -- $286.7 billion, as of Sept. 30, 2024. Lastly, Alphabet's valuation makes sense for opportunistic long-term investors. Its shares are currently valued at 15.7 times forecast cash flow for 2025, which represents a 13% discount to the company's average multiple to cash flow over the trailing-five-year period. However, not all Magnificent Seven components are necessarily worth buying. As we power forward into 2025, the one member I'd suggest steering clear of is none other than Nvidia. There are certainly tangible catalysts that explain why Nvidia has gained well over $3 trillion in market value over the last two years. At the top of the list is its utter dominance of AI-GPUs. The company's H100 GPU (commonly referred to as the "Hopper") and next-generation Blackwell chip are the "brains" of high-compute data centers. Nvidia has also undeniably benefited from AI-GPU scarcity. Demand for the company's AI solutions has handily swamped supply, which has allowed Nvidia to charge a premium price for its products. The end result has been a double-digit point increase in the company's gross margin. The concern is that all of Nvidia's catalysts have been more than fully baked into its share price. For instance, competition is picking up from all angles. On top of direct GPU developers (e.g., Advanced Micro Devices) increasing their output, Nvidia could lose out on valuable data center real estate because of the actions of its top customers. Microsoft, Meta, Amazon, and Alphabet are some of Nvidia's core customers by net sales, and they're all developing GPUs to use in their respective data centers. Even though these chips won't match the Hopper or Blackwell in terms of computing speed, they're going to be more readily available and considerably less costly than Nvidia's hardware. President-elect Donald Trump's November victory also adds big-time question marks to Nvidia's future. Trump previously announced plans to implement a 35% tariff on imported goods from China on his first day in office, which could lead to testy trade relations with the world's No. 2 economy. This comes atop Joe Biden's administration restricting shipments of high-powered AI chips and related equipment to China since 2022. History is no friend of Nvidia, either. Over the last three decades, there hasn't been a next-big-thing innovation or technology that's avoided an early stage bubble-bursting event. The cause of these boom-bust cycles is investors overestimating the early stage adoption and/or utility of new technologies. Given that most businesses lack well-defined plans to generate a positive return on their AI investments, it would appear that artificial intelligence is the next in a long line of bubbles. Finally, Nvidia's valuation is worrisome. Although its forward price-to-earnings (P/E) ratio isn't egregiously high, its price-to-sales (P/S) ratio of 32 (which was north of 40 in June and July) is consistent with a multiple where other market-leading businesses rolled over during previous bubble-bursting events.

Nvidia Vs. Broadcom: Which Stock Is Poised for Bigger Gains in 2025? | Investing.com UK

Kick off the new year with a portfolio built for volatility and undervalued gems - subscribe now during our New Year's Sale and get up to 50% off on InvestingPro! Artificial intelligence has electrified markets in recent years, driving a transformative rally across industries. Yet, with surging investments and the incredible advancements of AI models, this revolution is likely just getting started. When it comes to companies capitalizing on AI's explosive potential, two giants stand out: Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO). Both boast impressive growth stories and compelling strengths, but they also come with unique challenges. If you had to pick just one, which stock offers the best bet for 2025? Few companies have harnessed the AI boom as effectively as Nvidia. Over the past year, its stock has tripled in value, solidifying its position as the undisputed leader in AI and GPU technology. With a complete ecosystem spanning hardware, software, and services, Nvidia has become synonymous with AI innovation. For skeptics calling it a bubble, Nvidia counters with numbers that command attention. Its fundamentals include: Despite its dominance, Nvidia isn't without risks. The company's reliance on semiconductor supply chains exposes it to potential disruptions. Geopolitical tensions, particularly involving China, and market volatility -- reflected in its beta of 1.63 -- also loom large. Moreover, its valuation, with a price-to-earnings (P/E) ratio of 58x, remains elevated. Even so, Wall Street is overwhelmingly bullish. With 60 Buy ratings, 4 Hold, and no Sell recommendations, analysts see more upside for Nvidia. Their average price target of $172.80 suggests a potential gain of over 15% from its January 6 closing price of $149.43. While Nvidia has dominated the AI spotlight, Broadcom is making significant strides to challenge its throne. Having surpassed $1 billion in market capitalization, Broadcom is leveraging its strong partnerships with tech giants like Google (NASDAQ:GOOGL), Meta (NASDAQ:META), and ByteDance. Its deepening collaboration with OpenAI positions it to play a critical role in developing next-generation ChatGPT models. Broadcom's financial performance is equally impressive, with: The company's AI ambitions are ambitious. For fiscal 2025, Broadcom expects AI revenue between $15 billion and $18 billion, up from $12.2 billion in 2024. It also projects an AI market opportunity of $60 billion to $90 billion by 2027. However, replicating 2024's staggering 220% AI revenue growth will be challenging, potentially introducing volatility in the year ahead. Still, analysts remain optimistic, with 38 Buy ratings, 5 Hold, and no Sell recommendations. When comparing the two, Nvidia edges out Broadcom for 2025, at least in analysts' eyes. Nvidia offers a more favorable upside of 15.64%, compared to Broadcom's modest 0.43% potential gain. Additionally, Broadcom's sky-high P/E ratio of 180x dwarfs Nvidia's already elevated 58x, raising questions about its valuation. While both companies are primed to ride the AI wave, Nvidia's proven track record and ecosystem dominance make it the stock to watch in 2025. Investors betting on the AI revolution may find Nvidia's combination of growth and market leadership hard to beat. *** How are the world's top investors positioning their portfolios for next year? Don't miss out on the New Year's offer -- your final chance to secure InvestingPro at a 50% discount. Get exclusive access to elite investment strategies, over 100 AI-driven stock recommendations monthly, and the powerful Pro screener that helped identify these high-potential stocks.

Why AI Chip Stocks Broadcom, Marvell, and Arm Holdings Rallied Again Today | The Motley Fool

AI-related chip stocks sold off a bit during the last couple of weeks of 2024, but they got a lift Friday on signs of strong AI chip demand. Then on Monday, another data point emerged that bodes favorably for the near-term outlook of the AI sector. On Monday morning, Hon Hai Precision (HNHPF 3.14%), also known as Foxconn, released its latest monthly revenue figures. Of note, Foxconn is one of the world's largest electronics assemblers, as it assembles the iPhone. But it also has significant businesses in electric vehicles and, most importantly for this discussion, AI servers. Foxconn reported massive year-over-year growth of 42.3% in December, its highest figure of any month last year. Furthermore, the company noted its growth was primarily due to high demand for AI servers. This is an indicator that AI chip demand will remain robust despite the hypergrowth of the past two years. The news dovetailed nicely with a blog post published by Microsoft (NASDAQ: MSFT) on Friday in which it said that it would spend upwards of $80 billion on AI data centers this fiscal year. Foxconn's December surge may reflect the availability of Nvidia's (NVDA 4.06%) new Blackwell chip. The rollout of that hardware had been delayed, but production was supposed to ramp up in late Q4. Of note, Arm licenses its architecture to Nvidia and other cloud giants for their data center CPUs, which often accompany Nvidia GPUs or custom accelerators in AI servers. So, a steepening ramp-up in production of Nvidia Blackwell systems would benefit Arm. Arm also tends to be among the most volatile AI stocks, so it's perhaps not a surprise to see it having strong gains. While Nvidia and adjacent stocks surged Monday, the Foxconn news was a positive for Broadcom and Marvell as well. These two companies have a nice duopoly as makers of custom accelerator parts that the cloud computing giants incorporate into their own AI accelerator designs. With cloud companies all investing heavily in developing and producing their own chips to cut costs, shares of Broadcom and Marvell have soared. Foxconn also makes "white label" server components for large cloud companies, which often assemble its subsystems and systems into their own proprietary server designs. So the boom in Foxconn orders actually bodes well not only for Nvidia, but also for Broadcom and Marvell. In 2024, Broadcom rose by 110%, Marvell gained 84%, and Arm was up 64% -- all stellar results. However, there is a lot of optimism reflected in their valuations. This perhaps helps explain why, in the wake of their Monday morning surges based on Foxconn's bullish AI demand indicator, the stocks fell back to more reasonable gains. 2025 will be an interesting year for the AI winners of 2023 and 2024. On the one hand, the AI infrastructure buildout doesn't show any signs of letting up. On the other hand, AI winners such as these three are trading at quite full valuations, with Broadcom valued at 37 times this year's earnings estimates, Marvell at 44 times, and Arm at 71 times. At those levels, these stocks are a tad risky in the near term. Should there be any hint of an AI growth slowdown at all relative to expectations, their prices could slide. Still, it's hard to see anything but positive news for these three companies over the medium term, as long as the cloud giants continue racing to achieve a better and better AI.

3 No-Brainer Artificial Intelligence (AI) Stocks to Buy for 2025 With $200 Right Now

The U.S. stock market ended 2024 on a high note, with the benchmark S&P 500 index up by 23.3%. That came on the heels of its 24.2% rise in 2023, so overall, the S&P was up by 53.2% since 2022 -- one of its best two-year stretches of the 21st century. It is indisputable that technology stocks, especially those connected to artificial intelligence (AI), played a significant part in this strong rally. Not surprisingly, many high-quality AI stocks have risen to sky-high valuations. However, there are still gains to be made in this trend. If you have a little money available to invest right now that you don't need to cover your bills or for other contingencies -- even if it's as little as $200 -- purchasing these three AI stocks now could strengthen your portfolio over the long haul. Palantir Though it trades at a lofty 65.7 times trailing 12-month sales, Palantir Technologies (PLTR 6.25%) remains a top stock to buy in 2025 for several compelling reasons. The data mining and analytics company's strength in advanced AI technologies and its long-term relationships with government agencies and large enterprises have been at the heart of its exceptional growth in recent quarters. In the third quarter, its revenue jumped 30% year over year to $729 million while its operating margin was a solid 38%. The company also generated free cash flow of $435 million. The rapid adoption of Palantir's Artificial Intelligence Platform (AIP) drove the 39% year-over-year expansion of the company's customer base to 629 in the third quarter. That included a 77% jump in commercial customers. Unlike several competing AI platforms that focus mostly on model development, AIP has prioritized developing ontologies -- i.e., frameworks that establish relationships between digital assets and real-world applications. Hence, rather than expending resources on models, which are getting commoditized, Palantir's strategy has helped it to rapidly implement AI solutions in production environments across use cases. For one final point in the stock's favor, Palantir was also recently added to the S&P 500 index. Considering its multiple tailwinds and its increased liquidity, the stock could appreciate significantly in the coming months. SoundHound AI Voice AI specialist SoundHound AI (SOUN 2.28%) offers a lot to be excited about these days. That's despite the stock's extremely rich price-to-sales (P/S) ratio of 107, which is more than triple its 3-year average multiple of about 32. Shares soared by a whopping 836% in 2024 on the back of the company's improving operational and financial strength, as well as analysts' upgrades. In the third quarter, its revenue jumped 89% year over year to $25.1 million. Management expects to report revenue in the $82 million to $85 million range for 2024 and has guided for a range of $155 million to $175 million for 2025. Furthermore, the company expects to convert a bookings backlog worth more than $1 billion into revenue in the next six years. SoundHound has also succeeded in reducing its overreliance on a few customers. While a single customer contributed almost 72% of its revenue in 2023, that same client accounted for only 12% of revenue in 2024's third quarter. Plus, while its top five customers contributed 90% of revenues in 2023, they accounted for only 33% of its 2024 third-quarter revenue. The rapid adoption of SoundHound's voice AI and conversational intelligence solutions across the restaurant and automotive industries, among others, has helped reduce the company's customer concentration risk. SoundHound also differentiates itself from competitors with its proprietary Polaris foundational model, which leverages billions of real conversations and millions of hours of audio across dozens of languages, collected over the past two decades. Polaris is helping improve the accuracy of its offerings while also controlling hosting costs. Now powering one-third of the company's AI interactions for restaurant industry clients, Polaris could emerge as a strong growth catalyst in the coming years. The company is not without risks as an investment. In addition to its elevated valuation, SoundHound has a cash balance of just $136 million, which seems tight relative to its high cash burn rate. The company posted a net GAAP loss of nearly $92 million in the first three quarters of 2024. Considering these challenges, astute investors would be well advised to pick up only a small stake in this stock, allowing them a chance to participate in its upside potential, but limiting their downside risk. UiPath With a 35.8% share in the robotic process automation (RPA) market, UiPath (PATH 2.71%) is a dominant player in its space. Not surprisingly, the company stands to be one of the key beneficiaries of the explosive growth in that market, which Grand View Research forecasts will expand at a compound average rate of 39.9% from 2023 through 2030. UiPath has built an extensive partner ecosystem that includes technology giants such as Amazon, Microsoft, SAP, and Alphabet, and this has opened it up to new business expansion opportunities. Furthermore, the company differentiates itself from competition by offering low-code tools for automation across both legacy systems and new applications, which helps its clients avoid vendor lock-in. Plus, UiPath offers enterprise-grade governance services to manage automation agents, people, and models. It's also helping clients build, maintain, and deploy automation agents -- thereby targeting the greenfield agentic automation space. Agentic automation involves the use of software agents that can take autonomous actions based on insights provided by large language models, generative AI technologies, large action models, and other AI tools. Market research firm IDC expects the agentic labor automation market to expand from zero in 2023 to almost $4.1 billion by 2028. UiPath's agentic automation offering has already generated strong customer interest -- more than 1,000 organizations have already signed up for private previews of this agent builder. Although the company's stock crashed by about 48% in 2024 due in part to leadership changes and reduced revenue guidance, the rapidly evolving agentic automation opportunity could drive a revival in the share price in the coming years. UiPath's recent financial and operational numbers have also been quite healthy. As of the latest quarter, ended Oct. 31, the company had a solid balance sheet with $1.6 billion in cash and zero debt. It also posted a solid 17% year-over-year jump in annual recurring revenue to $1.6 billion and achieved a 97% customer retention rate. Given the backdrop of its healthy business and evolving opportunities, UiPath could be an appealing pick for retail investors.

All But 1 "Magnificent Seven" Stock Beat the S&P 500 in 2024. Here's Why It Could Be a Big Winner in 2025 and Beyond.

Here's why Microsoft stands out as my top buy of the Magnificent Seven for 2025, and why it is well positioned to reward investors over the long term. A down year for a long-term winner Microsoft gained just 12.1% in 2024, underperforming the S&P 500 and its Magnificent Seven peers by wide margins. NVDA data by YCharts However, the stock has still been up big over the last five years, crushing the S&P 500 during that period. When investing in any company, it's important to understand what it does and where it is trying to go. Microsoft stands out as a fairly easy-to-understand company with a clear vision for future growth. Microsoft today Microsoft has a highly diversified business spanning hardware and software. Microsoft has three segments -- Productivity and Business Processes (Microsoft 365 and Microsoft 365 Copilot, Microsoft Teams, SharePoint, LinkedIn, Dynamics products and cloud services, etc.), Microsoft Intelligent Cloud (Azure and other cloud services, GitHub cloud services, enterprise support services, etc.) and More Personal Computing (Windows, devices like Surface and Xbox hardware, Bing, Microsoft News, Microsoft Edge, and more). Microsoft is a uniquely strong business because of its growing sales and profits across all its segments. Its most profitable segment is also its largest. Productivity and Business Processes comprised 43.2% of first-quarter fiscal 2025 (three months ended Sept. 30, 2024) revenue and had a whopping 58.3% operating margin. Intelligent Cloud made up 36.7% of revenue with a 43.6% operating margin during the quarter, while More Personal Computing comprised 20.1% of revenue with a 26.8% operating margin. The expansion of artificial intelligence (AI) solutions for Microsoft 365, Microsoft Cloud, and GitHub has unlocked market expansion across Microsoft's business even as it continues to invest in research and development and infrastructure expansion. Microsoft tomorrow On January 3, Microsoft Vice Chair & President Brad Smith published a blog titled "The Golden Opportunity for American AI." Smith said that AI will become a world-changing general-purpose technology over a relatively short period of time: Not since the invention of electricity has the United States had the opportunity it has today to harness new technology to invigorate the nation's economy. In many ways, artificial intelligence is the electricity of our age, and the next four years can build a foundation for America's economic success for the next quarter century. Perhaps the standout comment from the blog was a commitment to accelerating spending on large-scale infrastructure investments: In FY 2025, Microsoft is on track to invest approximately $80 billion to build out AI-enabled data centers to train AI models and deploy AI and cloud-based applications around the world. More than half of this total investment will be in the United States, reflecting our commitment to this country and our confidence in the American economy. Eighty billion dollars is no small feat, even for Microsoft. Microsoft has seen its operating and research and development (R&D) expenses gradually grow over time while its capital expenditures have skyrocketed in recent years. MSFT Total Operating Expenses (TTM) data by YCharts Yet, it has still been able to grow its operating margins at a breakneck pace because the company has done such a phenomenal job monetizing AI. As Microsoft accelerates spending, investors should brace themselves for what could be a period of lower margins because infrastructure investments will take time to pay off. Additionally, if there's a sector-wide or broader economic slowdown, Microsoft could be more vulnerable. However, Microsoft has the resources to swim against the current and make long-term contrarian investments even during a slowdown. A financially stable company with a growing dividend Microsoft exited the most recent quarter with more cash, cash equivalents, and short-term investments than short- and long-term debt on its balance sheet. Microsoft has AAA and Aaa credit ratings from S&P Global and Moody's, respectively. So, it's not like the company is overexpanding at the expense of its financial health. While Microsoft's balance sheet remains in excellent shape, it has been scaling back the pace of stock buybacks to fund its AI investments. It continues to buy back enough stock to avoid diluting shareholders because buybacks are still greater than stock-based compensation. However, as you can see in the chart, the margin of separation has narrowed as Microsoft's stock-based compensation expense has more than doubled in the last five years. MSFT Stock Based Compensation (TTM) data by YCharts Microsoft continues to pay a growing dividend. In September, it announced a 10% increase in the payout, marking the 15th consecutive annual increase. Many of these increases have been around 10%, which are sizable and have led to the dividend growing more than fivefold in the last 15 years. So, even if Microsoft pulls back on buybacks, it still returns a ton of capital to shareholders through dividends. Leading the next wave of AI Microsoft stands out as a good value for 2025 and beyond. The stock isn't overpriced, sporting a 34.9 price-to-earnings (P/E) ratio compared to its 32.1 median P/E over the last decade. However, Microsoft is arguably a far stronger business today with better growth prospects than it was 10 years ago. Buying Microsoft stock now is a bet that its AI investments will pay off and that large-scale infrastructure investments are a better use of capital than buybacks. If you agree with the company's sustained bet on AI, Microsoft can serve as a foundational holding given its strong profitability, diversification, solid balance sheet, and growing dividend. But if you think Microsoft is being too aggressive, you may want to consider keeping the stock on a watchlist.

2 AI Stocks to Buy Before They Soar Up to 108% in 2025, According to Certain Wall Street Analysts | The Motley Fool

Excitement about artificial intelligence (AI) was once again the defining investment theme last year, and it will likely be just as important this year. Indeed, two Morgan Stanley analysts have outlined bull-case scenarios in which Datadog (DDOG 0.34%) and Arm Holdings (ARM 0.57%) generate monster returns as AI supercharges their businesses. Here's what investors should know about Datadog and Arm. Datadog provides observability software. Its platform includes nearly two dozen products that help businesses monitor their critical applications and infrastructure. In doing so, Datadog helps customers identify and resolve peformance issues, while enabling better collaboration between development and operations teams. Consultancy Gartner recently ranked Datadog as a leader in observability and digital experience monitoring software. Spending in that market is forecast to grow at 12% annually through 2027 as cloud migration and digital transformation make computing environments more complex. Artificial intelligence (AI) in particular should be a major tailwind, and the company is rolling out new products to meet demand. Last year, Datadog introduced LLM Observability, a software module that lets developers monitor generative AI applications and the underlying large language models (LLMs). CEO Olivier Pomel recently said hundreds of customers are already using the product, and AI-native clients accounted for 4 percentage points of revenue growth in the recent quarter, up from 2 point in the same quarter last year. Wall Street expects Datadog's adjusted earnings to increase at 13% annually through 2026. That consensus estimate makes the current valuation of 75 times adjusted earnings look expensive. Not surprisingly, Morgan Stanley's bull-case target is based on revenue increasing at 28% annually through 2026, which implies earnings growth well above the consensus. I think that outcome is plausible, perhaps even likely. Datadog's earnings have topped the consensus estimate in the last 12 quarters. But the stock would still need a very expensive valuation to generate a 45% return in 2025. Investors shouldn't count on that happening. But Datadog is still an excellent company with solid growth prospects, so long-term investors should look for opportunities to buy on dips. Arm designs central processing unit (CPU) architectures and sells the instruction sets to other companies. Those clients use the intellectual property (IP) to build chips optimized for use cases across mobile devices, automotive systems, industrial sensors, and data center servers. Arm also provides development tools that helps engineers configure systems and programmers write applications. Arm's unique business models lets companies outsource some R&D expenses associated with chip design, while still retaining the flexibility to build custom processors. Arm architecture has a reputation for superior power efficiency, so much so that the company has more than 99% market share in smartphones. But that quality also makes its chips compelling for energy-intensive data center workloads like artificial intelligence. Importantly, Arm gained six percentage points of market share in cloud computing in the last two years as its chips became more powerful. Today, 10 of the largest hyperscalers in the world are building Arm-based chips for their data center servers, including Amazon, Microsoft, and Alphabet. That positions Arm for further share gains in the coming years as businesses seek out cost-efficient AI infrastructure. Wall Street expects Arm's adjusted earnings to increase at 33% annually through fiscal 2027, which ends in March 2027. That consensus makes the current valuation of 104 times adjusted earnings look expensive. Not surprisingly, Morgan Stanley's bull-case target is based on much faster growth, driven in part by demand for AI server chips. While that is certainly plausible given that Arm has topped expectations in recent quarters, I am still skeptical about the stock returning more than 100% this year. Earnings would either need to increase much faster than expected, or else the stock would need an even more expensive valuation. Investors shouldn't count on either outcome. However, Arm is a worthwhile long-term investment given its unique business model. I think more compelling buying opportunities will present themselves in the future, but patient investors eager to own shares could start with a very small position today.

Prediction: 1 AI Stock Will Be Worth More Than Palantir Technologies by Year-End in 2025 | The Motley Fool

Here's what that would mean for shareholders: Arm is currently worth $148 billion. So its stock price would need to advance 23% to $174 per share for its market value to hit $182 billion. I see that as a likely outcome in 2025 because of growing demand for power-efficient AI infrastructure. And the following Wall Street analysts have set target prices that support my prediction. Here's what investors should about this semiconductor stock. Arm is a semiconductor company that doesn't sell semiconductors. Instead, it designs central processing unit (CPU) architectures, and licenses the intellectual property (IP) to customers. The customers can then use the IP to design custom chips optimized to their needs, while Arm earns revenue through licensing and per-unit royalties. Arm also provides related technologies like systems IP and software development tools. The former helps engineers bring together CPUs, GPUs, memory, and other hardware to design Arm-based systems. The latter simplifies application development on Arm-based chips across domains like artificial intelligence (AI), robotics, and scientific computing. Arm chips have historically been more power efficient than competing processors built on the x86 architecture from Intel and AMD. Consequently, Arm chips are ubiquitous across mobile devices, including 99% market share in smartphones. But the company has made strides in improving performance, such that its data center market share has increased six percentage points in the last two years. Importantly, the three largest public clouds have designed Arm-based chips for their data centers: Graviton processors from Amazon Web Services, Axiom CPUs from Alphabet's Google Cloud, and Cobalt CPUs from Microsoft Azure. Additionally, Arm CEO Rene Haas recently wrote, "Ten of the world's largest hyperscalers are developing and deploying Arm-based chips into their data centers." One potentially important example is the Nvidia Grace-Blackwell superchip, which pairs Nvidia GPUs with Arm CPUs. CEO Jensen Huang believes the Blackwell platform will be the most successful product in company history, and perhaps the most successful product in the history of computing. That bodes well for Arm because the company collects per-chip royalties. In summary, Arm-based chips are the industry standard in smartphones, and they are gaining market share in other product categories, including data centers. That means Arm is increasingly well positioned to benefit as enterprises invest in artificial intelligence. AI systems require a tremendous amount of electricity, which means Arm's energy-efficient chips could be an attractive source of cost-savings. Wall Street expects Arm's adjusted earnings to grow at 33% annually through fiscal 2027, which ends in March 2027. That consensus estimate makes the current valuation of 104 times adjusted earnings look expensive. But Arm has consistently beat consensus forecasts in recent quarters, so Wall Street may be underestimating its growth trajectory. Importantly, if Arm's earnings grow 33% over the next four reports -- meaning the next four times the company announces financial results -- its share price could increase 23% to $174, while its price-to-earnings multiple declined slightly. That would bring its market value to $182 billion, which would top Palantir's current market value of $181.9 billion. However, if Arm continues to beat Wall Street's earnings estimates, the share price could move even higher. Indeed, Morgan Stanley analysts have outlined a bull-case scenario in which the stock hits $300 per share before the end of 2025. That implies 112% upside from its current share price of $141.

If I Could Buy Only 1 "Magnificent Seven" Stock in 2025, This Would Be It | The Motley Fool

2024 was another all-around terrific year for the Magnificent Seven. Since artificial intelligence (AI) emerged as the capital market's next big obsession a couple of years ago, the term "Magnificent Seven" began to gain steam. That name is used to collectively describe the world's largest technology businesses, each of which is carving out a unique pocket within the broader AI market. Here are the returns of each Magnificent Seven stock in 2024: With the exception of Microsoft, each of these mega-cap tech stocks outperformed the S&P 500 and Nasdaq Composite market indices last year. Despite these market-beating returns, I see one Magnificent Seven stock as the superior opportunity. Below, I'll reveal my pick for the top Magnificent Seven stock and make a case for why I think this company will emerge as one of AI's most lucrative opportunities in the long run. Semiconductor stocks like Nvidia are all the rage right now, and it's nearly impossible not to see headlines or financial programs covering self-driving cars or humanoid robotics, two Tesla specialties. But when it comes to mega-cap technology stocks, my top pick is e-commerce and cloud computing juggernaut Amazon. Over the last couple of years, Amazon has quietly built an AI ecosystem worth paying attention to. It all started with a $4 billion investment in an AI start-up called Anthropic, whose large language model (LLM) Claude is seen as one of ChatGPT's biggest sources of competition. Following its initial investment, Amazon plowed another $4 billion into Anthropic in November -- bringing its total funding into the start-up to $8 billion. The main tailwind that Anthropic provides is that it uses Amazon's Trainium and Inferentia chips to train its generative AI models. Anthropic also relies heavily on Amazon's cloud segment, Amazon Web Services (AWS). This partnership has been incredibly savvy for Amazon, and it's all seen in the numbers. Over the last several quarters, revenue from AWS has accelerated considerably and, more importantly, so have operating profits. This dynamic has yielded lots of free cash flow for Amazon, which the company is using to double down on its AI investments by building data centers and ratcheting up its internal chip infrastructure. AI represents a catalyst of sorts for many businesses, but I'd argue that its potential has some sort of measurable ceiling. What I mean is that AI may be a channel that helps sell more software or leads to more user engagement across social media platforms, depending on the specific end market for the business in question. Amazon has the potential to leverage AI across its e-commerce marketplace, AWS, grocery delivery services, streaming, advertising, and so much more. The company operates across such a large ecosystem, I find it hard to buy into the idea that AI has reached maturity or will become a product of diminishing returns for Amazon. I think this is doubly true, considering that the majority of Amazon's major product offerings are geared to keep users and customers sticky and returning to the platform. The one aspect of investing in Amazon that can be a little tricky is valuation. Given how vulnerable its biggest businesses (cloud computing and e-commerce) are to the wider economy, Amazon tends to have notable volatility in its net income. However, for some businesses, I prefer to look past net income altogether and focus more on adjusted measures such as free cash flow, which I see as a more accurate representation of Amazon's profitability, no matter what the economy looks like. For the trailing-12-month period ended Sept. 30, Amazon's free cash flow soared by 123% to $47.7 billion. And yet, if you look at the valuation trends below, this growth doesn't appear to be priced into the shares at all. The company's price-to-free-cash-flow multiple (P/FCF) of 55.7 is about half of its five-year average. I think investors are spooked by Amazon's rising capital expenditures (capex) in chips, data centers, and cloud infrastructure. In turn, this is causing a high degree of skepticism over how these AI ambitions will pay off. To me, these concerns are unwarranted. As I mentioned above, Amazon's partnership with Anthropic is already resulting in rising sales and profits for AWS, which is providing the company with the necessary financial horsepower to make more AI-related investments. Furthermore, given the potential AI has to transform the entire business, it's surprising to see the company trading at such a steep discount relative to historical levels. At the end of the day, I see Amazon as the most compelling opportunity among the Magnificent Seven, and at its current bargain price, I would buy shares ASAP and prepare to hold on for dear life.

2 Top Nasdaq Stocks to Buy Before They Skyrocket in 2025 | The Motley Fool

The Nasdaq Composite index had a solid 2024 with impressive gains of almost 31% during the year. This isn't surprising considering the tech-heavy nature of the index that benefited from the impressive growth reported by several technology companies last year thanks to catalysts such as artificial intelligence (AI). It is worth noting that the Nasdaq Composite index's impressive performance in 2024 was preceded by a 43% jump in 2023 as well. This is a positive sign for technology investors as historical trends indicate that the Nasdaq has returned an average of 19% in the year following a calendar year in which it gained more than 30%. Of course, past performance isn't a reliable indicator of what the future may hold, but favorable factors, such as robust economic growth in the U.S., contained inflation, and rising consumer spending on account of a rise in real income could give stocks another lift in 2025. At the same time, the growing adoption of AI in multiple industries is likely to remain a tailwind for tech stocks in the new year. That's why now would be a good time for investors to take a look at a couple of Nasdaq stocks that have the potential to deliver impressive gains this year and in the long run. Marvell Technology (MRVL 1.72%) delivered stellar gains of 83% to investors in 2024, with the stock rising remarkably in the second half of the year when it emerged that it is becoming a key player in the market for AI chips. Marvell makes custom processors, known as application-specific integrated circuits (ASICs), which are used in data centers to perform specific tasks. These ASICs have now been adopted by major cloud-service providers for AI model training and inference in data centers so that they can reduce their reliance on Nvidia and bring down their costs of developing AI models. Amazon, for instance, claims that its Trainium 2 custom AI processor can deliver more computing power than Nvidia's chips while helping customers train certain models at 40% lower cost. What's worth noting here is that Amazon's custom AI chips are designed by none other than Marvell, and both companies have tightened their relationship recently. On its earnings conference call last month, Marvell management remarked: Yesterday, we announced the expansion of our strategic relationship with Amazon Web Services through a comprehensive multi-generational five-year agreement. This multi-generational agreement encompasses a broad range of Marvell's data center semiconductors, including custom AI products, optical DSPs, active electrical cable DSPs, PCIe retimers, data center interconnect optical modules, and Ethernet switching silicon solutions. Management added that the renewed agreement will significantly increase the volume of business between the two companies. Moreover, Marvell has more than one customer for its custom AI chips, which explains why the company's AI business is growing at a faster-than-expected pace. The company expects to sell $1.5 billion worth of AI chips in the current fiscal year, which will end this month, followed by at least $2.5 billion in fiscal 2026 that's set to begin shortly. However, there is a good chance that Marvell will be able to outpace those estimates in the new fiscal year as its custom AI chip production is set to ramp up. At the same time, Marvell estimates that its total addressable market (TAM) in data centers will grow to $75 billion in 2028 from $21 billion in 2023, which means that the company has a lot of opportunity to drive incremental growth in the long run. Meanwhile, analysts are forecasting a sharp jump of 77% in the company's earnings in the new fiscal year to $2.76 per share following a small jump of just 3% in the current one. This outstanding earnings growth could be good enough to send Marvell stock higher in 2025, while the long-term opportunity in the custom AI chip market could help it sustain its rally in the long run. Social media giant Meta Platforms (META -1.16%) was in fine form on the stock market in 2024, clocking impressive gains of 65% during the year. Investors can buy this tech stock at an attractive 28 times trailing earnings and 24 times forward earnings even after last year's bull run. Buying Meta at this valuation would be a smart thing to do considering that the spending on digital ads is expected to grow almost 8% in 2025 to just under $799 billion. Meta Platforms has been gaining ground in this lucrative market. The company's revenue in the first nine months of 2024 increased by 22% to $116.1 billion, and its fourth-quarter (Q4) revenue guidance of $46.5 billion suggests that Meta will finish the year with a top line of $162.6 billion. That would be a 20.5% increase over 2023. What's more, analysts are expecting Meta's top line to grow at double-digit rates in 2025 and 2026, indicating that it is expected to outpace the growth of the digital ad market. In other words, Meta is capturing a bigger share of advertisers' wallets. That's not surprising if we consider that the tech giant has a massive daily active user base of 3.29 billion across its family of apps, which means brands and advertisers can reach a sizable audience by tapping Meta's apps. This also explains why Meta has witnessed an increase of 7% year over year in ad impressions across its apps, while also commanding a higher average price per ad that increased by 11% on a year-over-year basis in Q3 2024. AI has been playing an important role in driving this improvement in Meta's ad revenue. That's because advertisers and brands have been able to improve audience targeting and significantly increase the returns on ad dollars spent by using Meta's AI tools. The adoption of AI in digital marketing is expected to create a $1.78 trillion revenue opportunity by 2033, suggesting that Meta could be scratching the surface of a massive growth opportunity. As such, Meta Platforms looks like a solid Nasdaq stock to buy for the long run. At the same time, there is a solid chance that the stock could be a winner in 2025 as well. Analysts are forecasting a 12% increase in the company's earnings this year to $25.42 per share. If Meta hits that mark and trades at even 27 times forward earnings after a year (in line with the Nasdaq-100 index's forward-earnings multiple), its stock price could jump to $689. That would be a 14% jump from current levels. However, Meta's gains could be higher in case of stronger growth in its earnings, which could lead the market to put a premium valuation on the stock. As Meta is trading at an attractive valuation right now, buying this tech giant could turn out to be a smart move considering its prospects for 2025 and in the long run.

History Says the Nasdaq Could Surge in 2025: 2 Stock-Split AI Stocks to Buy Now, According to Wall Street | The Motley Fool

The Nasdaq Composite (^IXIC -0.06%) advanced 29% in 2024, and history says that momentum could spill into 2025. Since its inception in 1971, the Nasdaq has gained over 20% in 20 years. Following those incidents, the technology-focused index returned an average of 16% in the next year. In other words, history says the Nasdaq could advance 16% in 2025, but most Wall Street analysts see even more upside in Nvidia (NVDA -0.02%) and Lam Research (LRCX -0.62%), two companies that reset their soaring share prices by completing 10-for-1 stock splits in 2024. Here's what investors should know about Nvidia and Lam Research. Nvidia develops accelerated computing solutions that span hardware and software. The company is best known for its graphics processing units (GPUs), chips that accelerate a variety of complex workloads, from rendering visual media to training machine learning models to scientific simulation. Nvidia GPUs are the industry standard in data center accelerator chips, especially where artificial intelligence (AI) is concerned. But the company also provides central processing units (CPUs) and networking equipment. That vertical integration lets it build data center systems with a superior total cost of ownership, according to CEO Jensen Huang. Importantly, Nvidia has also created an ecosystem of software development tools called CUDA, as well as subscription software products built atop its CUDA platform. Those tools streamline the development of artificial intelligence applications across use cases ranging from recommender systems to autonomous vehicles. No competitor offers anything so comprehensive. In short, Nvidia should be a major beneficiary as data centers transition from general-purpose computing to accelerated computing, which includes the growing demand for AI infrastructure. Spending on data center accelerators is projected to increase at 24% annually through 2030, according to Grand View Research. Wall Street expects Nvidia's adjusted earnings to increase 50% over the next four quarters. That consensus estimate makes the current valuation of 57 times adjusted earnings look relatively cheap. Patient investors should feel comfortable buying a small position today. Lam Research develops wafer fabrication equipment (WFE), which refers to the machinery and tools that semiconductor manufactures need to turn silicon wafers into chips. Specifically, the company provides technologies that address three market verticals: deposition, etch, and clean. Deposition products apply a thin electric layer to silicon that will eventually form the conductivity pathways needed for semiconductors to function. Etch products selectively remove material added during deposition to create circuit patterns. And clean products remove unwanted materials from the wafers between other steps in the process. Lam is the leader in etch equipment, and it ranks second in deposition equipment behind Applied Materials, according to William Kerwin at Morningstar. That scale is an important competitive advantage in the capital-intensive WFE industry. It supports the heavy R&D spending required to keep the company on the cutting edge of semiconductor manufacturing equipment. In summary, Lam Research should benefit as the world becomes increasingly dependent on semiconductors, which is inevitable given the growing demand for artificial intelligence infrastructure. And Lam is unlikely to lose much market share because very few companies have the expertise and capital required to produce chip-manufacturing equipment. With that in mind, Wall Street expects Lam's earnings to increase 15% in the next four quarters. That makes the current valuation of 24 times earnings look reasonable. Investors should feel comfortable buying a small position in this stock today.

2 Tech Stocks Wall Street Thinks Could Soar in 2025 | The Motley Fool

Analysts' average price targets forecast upsides of 35% for Monday.com and 52% for Advanced Micro Devices. The technology sector is home to some of the market's best-performing growth stocks. The tech-heavy Nasdaq Composite index has more than doubled in the last five years, but with artificial intelligence (AI) attracting lots of interest from Fortune 500 corporations, there are still attractive opportunities for long-term investors. Wall Street analysts see substantial upside potential this year for Advanced Micro Devices (AMD 3.93%) and Monday.com (MNDY 1.82%). The growing use of AI software is driving massive investments in advanced hardware for data centers. Training AI models requires powerful graphics processing units (GPUs), which has generated incredible revenue growth for chipmaker AMD over the last year. Wall Street analysts' average 12-month price target on AMD shares is $183. That's 52% higher than its $120 share price at the time of this writing. Revenue from AMD's data center business jumped 122% year over year in Q3 to $3.5 billion. Major data center operators including Microsoft and Meta Platforms are strategic partners with AMD, positioning it for robust growth in the coming years as data center capacity is built to support AI workloads. AMD management has put an enormous figure on this opportunity: It estimates the market for AI accelerators could reach $500 billion by 2028. AMD is also a leading supplier of other types of hardware, including central processing units (CPUs), where it has been taking market share away from Intel in recent years. AMD's client segment, which includes its CPUs for PCs, experienced strong growth, with revenue up 29% year over year in Q3. Analysts on average expect AMD's total revenue to grow by 27% in 2025 to $32 billion, according to Yahoo! Finance. Higher margins from sales of advanced AI chips are expected to push its earnings up 54%, yet investors can buy shares today at a forward price-to-earnings ratio of just 24. Strong earnings growth could send AMD shares toward Wall Street's price target over the next year. Monday.com has emerged as a top supplier of work management software. Businesses are choosing its cloud-based platform to automate tasks, build new applications, and help teams more efficiently collaborate on projects. The company offers its platform on a subscription basis, which has helped grow revenue from $161 million in 2020 to $906 million on a trailing-12-month basis. With another strong year of growth expected in 2025, analysts have an average price target of $319 on the shares, 35% above their recent $235 price. There are a lot of vendors competing in the market for this type of software, but Monday.com is still growing revenue by more than 30% year over year, and is approaching $1 billion in annual sales. It's telling about Monday's competitive position that even after a recent price increase, it has continued to see strong demand for its platform. The company is further protecting its position by continuing to launch new features, including a new AI-powered assistant that is seeing strong adoption. Profitability is also starting to improve as the company scales. After reporting net losses in recent years, net income improved to nearly $22 million over the last four quarters. The stock is up 25% over the last 12 months, but it still trades around the same price-to-sales multiple of 13. For the stock to climb by 35% to Wall Street's consensus 12-month price target, the company will need to either beat the consensus revenue estimates in 2025, or its P/S multiple will have to increase. Assuming Monday.com keeps trading at around the same valuation it carries now, it should continue to climb in line with its revenue growth. Given that analysts' average expectation is for its revenue to rise 26% in 2025, that would still be an excellent return.

Better Artificial Intelligence Stock: Wolfspeed vs. Broadcom | The Motley Fool

The rapid expansion of the artificial intelligence (AI) market is generating strong tailwinds for many chipmakers. Nvidia, the leading producer of high-end data center GPUs, has probably been the biggest winner. Its stock has soared by about 2,470% over the past five years. Nvidia continues to have potential as a great long-term investment in the future of the AI market, but investors shouldn't overlook two other chipmakers that are expected to profit from this secular trend: Wolfspeed (WOLF -3.81%), a leading manufacturer of silicon carbide chips, and diversified tech giant Broadcom (AVGO -3.29%). Let's consider which of these two artificial intelligence stocks is the better buy today. Wolfspeed, which was formerly known as Cree, mainly manufactures wide-bandgap (WBG) semiconductors made from silicon carbide and gallium nitride. These chips can operate at higher voltages, temperatures, and frequencies than traditional chips, which are made using silicon and gallium arsenide. Their superior robustness makes Wolfspeed's chips ideal for short-length LEDs, lasers, 5G base stations, and military radars. They're also used in electric vehicles (EVs), solar panels, wind turbine systems, and power supply units for AI servers. There is demand for these chips, however, the sluggishness of the EV market has throttled Wolfspeed's growth over the past two years. Broadcom, which was known as Avago before it acquired the original Broadcom and inherited its brand in 2016, is more diversified. Its semiconductor division sells a wide range of chips for the mobile, wireless, networking, data storage, and industrial markets. Its infrastructure software business -- which it expanded through its acquisitions of CA Technologies, Symantec's enterprise security division, and VMware -- provides a mix of on-premises and cloud-based software. Most of Broadcom's recent growth has been driven by the AI market, which drove data center operators to purchase more of its networking and optical chips. Management expects that segment's growth will offset slower sales of non-AI chips and infrastructure software. Wolfspeed's revenue rose 42% in its fiscal 2022 (which ended in June 2022) as it lapped a pandemic-related slowdown and benefited from rising EV sales. But its revenues only rose 24% in fiscal 2023 and 6% in fiscal 2024. That deceleration was caused by the cooling EV market, a surge in spending on AI GPUs that came at the expense of silicon carbide chips, and China's export bans on gallium and germanium amid an escalating tech sector conflict. Wolfspeed's adjusted gross margin plunged from 36% in fiscal 2022 to 13% in fiscal 2024, and it remains unprofitable on a generally accepted accounting principles (GAAP) basis. For fiscal 2025, analysts expect Wolfspeed's revenue to dip 2% to $790 million, and foresee its net loss widening to $975 million. Yet Wolfspeed continues to expand during this cyclical downcycle. It expanded its New York and North Carolina plants over the past two years, and it expects that increased utilization will reduce its overall die costs by at least 50% over the next few years. That strategy could eventually pay off, but the recent dismissal of CEO Gregg Lowe could disrupt those long-term plans. Broadcom's revenue rose by 21% in its fiscal 2022 (which ended in October 2022) as pandemic-related headwinds dissipated, then grew 8% in fiscal 2023 and 44% in fiscal 2024. Last year's top-line acceleration was largely driven by its acquisition of the cloud software giant Vmware, which closed in November 2023, and the rising sales of its AI-oriented data center chips -- which more than tripled to $12.2 billion to account for 24% of its top line. In fiscal 2025, analysts expect its revenue to rise by 19% and its GAAP EPS to more than triple. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) -- a metric that filters out the noise from its acquisitions -- is expected to grow by 26%. With an enterprise value of $6.1 billion, Wolfspeed doesn't look like a bargain at 8 times this year's sales. Broadcom, with an enterprise value of $1.13 trillion, might initially seem pricier at 19 times this year's sales -- but it still looks reasonably valued at 28 times its adjusted EBITDA. Wolfspeed's adjusted EBITDA is still negative. Neither of these stocks is cheap, but Broadcom is clearly a better buy right now. It's bigger, better diversified, growing faster, consistently profitable, and more heavily exposed to the booming AI market than Wolfspeed. Wolfspeed's business might eventually bounce back, but for that to occur, it will need the EV market to heat up and for its infrastructure upgrades to gradually reduce its costs over the next few years. It will also need to hire a new permanent CEO who can provide a clearer roadmap for its future.