Nvidia's Dominance in AI: Poised for Continued Growth in 2025

If I Could Buy Only 1 Stock to Bet on the AI Boom in 2025, It Would Be This One

Investors piled into artificial intelligence (AI) stocks last year on optimism that this hot technology would transform every industry -- and this powered gains in the three major benchmarks. The S&P 500, the Nasdaq, and the Dow Jones Industrial Average advanced in the double digits, led by companies developing and using AI. The idea is creators of AI tools and services will benefit as they sell them to others, and users of AI will benefit as the technology makes them more efficient and leads them to great discoveries. The good news for investors who got in on this story early and investors who now are looking to buy AI stocks is that growth is far from over. Analysts forecast today's $200 billion market will reach more than $1 trillion by the end of the decade -- so there is a lot for AI companies and their investors to gain in the coming years. And the even better news is this: To potentially score a big AI win, you don't have to research and buy shares of several players. One company in particular is perfectly positioned to dominate the field now and over the long term, and this could translate into fantastic stock performance. So, if I could only buy one stock to bet on the AI boom in 2025, it would be this one. The search for an AI winner You may have the feeling that, after the performance of AI stocks last year, you now should search far and wide for a player that hasn't yet taken off. But that isn't necessary. One of last year's AI winners might have just been getting started as plenty of catalysts ahead could drive further gains this year and beyond. This means it's not too late to invest in this top stock, and you could reap the rewards in both the near term and the long term. The stock I would buy to bet on the AI boom this year and over the long term is Nvidia (NVDA 0.10%). And here's why. My first point is Nvidia already has established itself as the provider of the highest-performance AI chips, or graphics processing units (GPUs). These are the basic elements needed for crucial AI tasks like the training and inferencing of models. Nvidia has benefited from the initial wave of AI growth as data centers built out their infrastructure and companies developing AI platforms sought out the company's GPUs. This helped Nvidia to report quarter after quarter of double- or triple-digit revenue growth in recent years -- and gross margin of greater than 70% shows the company is highly profitable on sales. A commitment to innovation Of course, Nvidia faces competition in the chip market, but the company's commitment to innovation -- promising annual updates to its chips -- should make it very difficult for rivals to jump ahead. Right now, Nvidia is launching its new Blackwell architecture, a customizable platform with various chips and networking options, and expects several billion dollars in revenue right out of the gate. UBS forecasts Blackwell revenue of $9 billion by early next year, up from an earlier forecast of $5 billion, according to Guru Focus. And Nvidia's Rubin AI architecture could be following close behind, with reports of a launch later this year. Revenue growth from Blackwell and news on Rubin could serve as catalysts for stock performance in the months to come. Meanwhile, Nvidia's moves over the past few years to develop an entire portfolio of AI products and services also may offer some catalysts. Thanks to this, and particularly the company's offering of software, Nvidia is helping customers apply AI to their businesses through tools such as AI agents. The next wave of AI growth And this could represent the next wave of AI growth, a wave that could supercharge Nvidia's revenue. The company already has launched blueprints to help customers create AI agents tailored to their needs, and Nvidia partners also have created agents that integrate with Nvidia Enterprise software. The AI agent market, at a compound annual growth rate of 44%, is expected to reach $47 billion by 2030, according to Markets and Markets research. This creates a whole new growth opportunity for Nvidia. Finally, it's important to remember that Nvidia, because of its creation of AI platforms specifically for industries such as automobiles or healthcare, may win as these sectors increase their use of AI. The idea is Nvidia has set itself up to gain from every stage of AI development known to us so far, making investment in this top player the best way to bet on the AI boom this year and over time.

Why Nvidia's $100B AI opportunity still makes it a top stock to buy

Nvidia Corporation's stock is experiencing a resurgence, boosted by the announcement of the Stargate initiative, a major project aiming to enhance artificial intelligence infrastructure. This joint venture could generate a $500 billion investment over the next four years, with a significant portion allocated to Nvidia. According to Melius Research analyst Ben Reitzes, well over $100 billion of the Stargate spending could be directed toward Nvidia, alongside other companies such as Broadcom and Arista Networks. Following the announcement, Nvidia's stock rose 4.1% on Wednesday after a 2.3% increase on Tuesday. The Stargate initiative was unveiled by former President Trump, alongside executives from OpenAI, SoftBank, and Oracle. Reitzes likened this announcement to Broadcom's CEO Hock Tan's previous forecasts regarding AI, suggesting that Stargate presents a comparable long-term opportunity for Nvidia. Reitzes addressed worries about Nvidia's future growth, particularly after the Biden administration imposed restrictions on AI-chip exports. He noted the potential for the Trump administration to relax these rules, indicating that Nvidia could continue to thrive regardless. He remarked that the U.S. market could be larger than previously anticipated, based on projections of increased spending on Nvidia products. Nvidia is strategically positioned to capitalize on the Stargate initiative. The company's stock has traded between $130 and $150 since October, with an anticipated breakout to a target of $180. Investors see the stock as undervalued despite its forward PE ratio of 31 compared to the industry median of 20. Nvidia's expected earnings per share (EPS) growth stands at 65%, with revenue growth projected at 57%. Its net margins also lead the industry at 56%, significantly higher than the 20% industry median. These metrics reinforce Nvidia's growth potential amid ongoing advancements in AI technology. These 5 agentic AI stocks are the hottest picks for January To leverage Nvidia's prospective growth from the Stargate project, a bullish call spread strategy is suggested, involving a purchase of the March $141 call while selling the March $165 call. This strategy caps the maximum risk at $763 per contract, with a maximum reward potential of $1,637 if Nvidia's stock exceeds $165 at expiration. Nvidia continues to expand its role in the AI sector, developing custom AI models in partnerships with organizations such as IQVIA and collaborating with the Mayo Clinic for AI-driven pathology solutions. Management indicated at the J.P. Morgan Healthcare Conference the significant opportunities that AI presents within the $10 trillion healthcare industry, emphasizing AI's role in addressing labor shortages. Nvidia ranks first among semiconductor stocks as a key player in the AI boom, attracting considerable interest from hedge funds, with 193 holders. Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

This Artificial Intelligence (AI) Stock Could Soar by 67% in 2025. Here's Why. | The Motley Fool

Artificial intelligence (AI) isn't a theme that's going to wrap up this year. There are still huge gains to be made in this sector, so investors shouldn't avoid it just because it has had a strong two years. One stock that's been the epitome of AI investing is Nvidia (NVDA 3.10%). One key point about Nvidia that sets it apart from other AI investments is that it's making piles of money from all of the AI investments from big tech companies. Hans Mosesmann from Rosenblatt Securities has a Street-high price target of $220 per share on Nvidia. That means it has a 67% upside over the next year. That's a massive gain for a stock the size of Nvidia, but it's entirely possible if certain things happen. As mentioned above, one key factor about Nvidia that sets it apart from other AI picks is that it's actually making money on AI. While the AI hyperscalers are pouring mountains of money into building out their computing power to train AI models, hoping that these investments will eventually pay off, Nvidia is pocketing some of that money. Its graphics processing units (GPUs) and software package that powers them are best-in-class and have become the go-to choice for any company looking to train an AI model. GPUs have a key ability to compute in parallel, which means they can process multiple calculations simultaneously. Furthermore, GPUs can be grouped in clusters to multiply this effect. With some of the largest AI companies building servers with thousands of GPUs in them, it's evident how quickly AI models can be trained. However, that's just with the old-generation models. While Nvidia's legacy Hopper architecture GPUs provided impressive performance, its next-generation Blackwell GPU architecture provides huge performance gains. Blackwell can train AI models at four times the speed of its predecessor, making it a key upgrade for those looking for the best computing performance possible. Another key factor is that GPUs don't have the longest lifespans in data centers. Because they are used nearly constantly, they burn out quickly. According to an unnamed Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) data center specialist, this can cause the lifespan of a GPU to last from one to three years. As a result, many of the GPUs purchased over the past few years may need to be replaced. Throw in the fact that AI demand is still growing and that these companies are still building out their computing capacity, and it's clear how Nvidia can keep growing. But Nvidia isn't without its challenges. A couple of headwinds popping up that could cause Nvidia some trouble in 2025 are a greater push for using CPUs for AI inference and custom AI accelerators. While Nvidia's GPUs are considered some of the best available, they are power-hungry and aren't as efficient as a CPU for simple tasks like AI inference. Inference occurs when a pre-trained model is used, so using a powerful, energy-hungry GPU doesn't make sense when a cheaper, more efficient CPU could be used. Additionally, most of Nvidia's largest clients are working on developing custom AI training accelerators. These chips would allow them to bypass Nvidia, as they wouldn't need to pay a middleman to have access to the computing power that GPUs provide. However, these custom AI accelerators require workloads to be configured in a certain way for optimum use. If a general AI model is being developed or developers are just testing some training methods, these custom accelerators may not be an efficient way to train AI models. While these are clear headwinds for Nvidia, I believe they are relatively minor and will only affect a portion of Nvidia's business. So, how can Nvidia's stock soar 67% in 2025? Simple. It does what it's expected to and gives a solid outlook for next year. Right now, Nvidia trades for 52 times trailing earnings, which is near the cheapest level it has traded at over the past two years. As a result, I don't think investors can call Nvidia "overvalued," especially when other tech companies like Apple and Amazon trade at 38 and 47 times earnings, respectively, despite growing at a much slower pace. Nvidia is expected to grow revenue by 52% in fiscal year (FY) 2026 (ending January 2026), so if it maintains its profit margins and its valuation increases just a little bit, Nvidia's stock will rise in that 67% range. As a final kicker, there need to be indications that 2026 (Nvidia's FY 2027) will also be strong; otherwise, the stock may collapse in preparation for a down year. We're at a point where Nvidia's expectations don't outweigh the current business. Although some are selling Nvidia stock to take profits, there's still plenty of upside available, and I think Nvidia is a great buy after its latest pullback.

If I Could Only Buy 1 AI Stock, This Would Be It | The Motley Fool

Choosing just one artificial intelligence (AI) stock to own isn't an easy thing to do. There are multiple ways to invest in this trend, and many of them have their merits. Furthermore, investing in just one AI stock also isn't a great move, as putting all your eggs in one basket is an easy way to miss out on a trend as massive as AI if the pick fails. What this one pick boils down to is my favorite AI stock, which is the one I will add to first if the market suddenly drops. If I had to only own one, I'd likely choose Nvidia (NVDA 3.10%). There are multiple reasons why, but my primary reason for it being my top AI pick is that it is actually making money from the trend. Many of the biggest AI companies stated that actual profits from their generative AI models and platforms may be years off. Considering how much money is being poured into this technology, that's not what investors want to hear. But where is all that money that they're investing going? Nvidia. While Nvidia isn't getting 100% of those investment dollars, it is getting a large chunk. Nvidia's GPUs (graphics processing units) are the tools these AI companies need to create these top-tier AI models. GPUs have a unique ability to process multiple calculations in parallel, allowing them to process information faster than a standard CPU. Furthermore, these GPUs can be connected in clusters to multiply their computing power. With Nvidia's GPUs and software being the best in the business, it's no wonder that Nvidia captured a massive amount of the AI computing market share. Just take a look at how its revenue spiked over the past two years. With that kind of increase, investors would be forgiven if they assumed that Nvidia was done growing, but that's not the case. AI computing demand hasn't been satisfied yet. AI hyperscalers like Meta Platforms warned investors that their computing infrastructure spending will increase in 2025. Additionally, the cloud computing providers have all said that as their demand grows, the need to purchase additional computing power also increases. This means that Nvidia's revenue will continue to grow for years to come, which is great news for shareholders. However, it's not like there isn't competition. As these AI models need less development, companies may switch to buying more CPUs for AI inferencing, which is when an AI model is prompted for an output but has already been trained on a data set. This is a far less intense process and can be accomplished with less computing power than one of Nvidia's GPUs needs. Furthermore, many cloud computing companies and AI hyperscalers created their own versions of GPUs that they don't have to pay Nvidia for. While these AI accelerators have specific use cases, GPUs are much better at broader training tasks, making them incredibly versatile. All of this suggests that Nvidia isn't done growing, but it may see more challenges in the future. Still, Wall Street analysts have strong growth projections. With revenue expected to increase 52% in FY 2026, Nvidia still has plenty of growth left to continue its AI stock market dominance if it can be bought at the right price. With Nvidia's large run-up, you'd be forgiven if you'd assume the stock is expensive. And you'd be right. However, when growth is factored into the equation, it doesn't look all that bad. Nvidia trades at 52 times earnings, which isn't a bad price to pay for a stock that's growing as fast as it is. With Nvidia trading for less than 30 times FY 2026 earnings, this stock starts to look like a bargain after the recent pullback. Nvidia has been one of the best AI stocks to own for the past two years, and I think it could continue that in 2025. We're still at the beginning stages of AI, which means we'll need more Nvidia GPUs to continue training these models. As a result, Nvidia's stock is primed to rise even more, making it a fantastic pick in the AI investing space.

Jensen Huang Just Delivered Incredible News for Nvidia Stock Investors | The Motley Fool

Nvidia (NVDA 3.10%) was founded in 1993, and it went on to create the world's first graphics processing units (GPUs) for computing, media, and gaming applications. Now, decades later, the company has adapted those powerful chips for data centers, where they are used to develop advanced artificial intelligence (AI) models. Nvidia CEO Jensen Huang believes data center operators will spend $1 trillion over the next four years on upgrading their infrastructure to meet demand from AI developers. Since the data center segment currently accounts for 88% of Nvidia's total revenue, that spending will be instrumental to the company's future success. However, the semiconductor industry has always been cyclical, so the data center boom won't last forever. That's why it's critical for Nvidia to diversify its revenue streams, and at the CES 2025 technology conference on Jan. 7, Huang delivered some incredible news for investors on that front. Nvidia saw the autonomous driving revolution coming. In fact, the company's automotive business is more than two decades old, but its revenues were so tiny that it lived in the shadow of the gaming and data center segments. That's all about to change, because global car brands like Mercedes-Benz, Hyundai, BYD, Volvo, Toyota, and more are adopting Nvidia's Drive platform to power their autonomous ambitions. Drive provides all of the internal hardware and software a car needs for self-driving capabilities. That includes Nvidia's latest chip called Thor, which processes all of the incoming data from the car's sensors to determine the best course of action on the road. But Nvidia's opportunity doesn't end there, because it also sells the infrastructure a car company needs to maintain and improve its autonomous models, so it can differentiate itself from the competition. In addition to Drive, Huang says car companies are buying DGX data center systems featuring its latest Blackwell-based GB200 GPUs, which deliver the necessary computing power to continuously train self-driving software. Then there is Nvidia's new Cosmos multimodal foundation model, which allows companies to run millions of real-world simulations using synthetic data, serving as training material for the software. Overall, Huang says autonomous vehicles could be the first multitrillion-dollar opportunity in the emerging robotics space. He's not alone, because Cathie Wood's Ark Investment Management thinks technologies like autonomous ride-hailing could create $14 trillion in enterprise value by 2027, with the majority of that value attributed to autonomous platform providers -- in this case, that would be Nvidia. Nvidia's fiscal year 2025 will finish at the end of January, but the company generated $1.1 billion in automotive revenue through the first three quarters (if we extrapolate that result, full-year revenue will probably be around $1.5 billion). Huang says in fiscal 2026, Nvidia's automotive revenue could soar to $5 billion, so it's going to ramp up insanely fast. Wall Street's consensus forecast (provided by Yahoo) suggests Nvidia could generate a whopping $196 billion in total revenue during fiscal 2026, so the automotive segment's potential $5 billion contribution would still be relatively tiny. It's a longer-term story that could secure Nvidia's future growth, but in the here and now, it's all about the data center. Nvidia just started shipping its new Blackwell GB200 GPUs to customers, but sales are expected to grow quickly. By April this year, revenue from Blackwell chips could overtake revenue from the previous generation of chips built on the Hopper architecture, which highlights how quickly Nvidia's business is evolving. The GB200 NVL72 system is capable of performing AI inference up to 30 times faster than the equivalent H100 GPU system, so Blackwell will pave the way for the most advanced AI models to date. Therefore, over the next year or so, consumers and businesses might have access to the "smartest" AI software applications (like chatbots and virtual assistants) so far. Demand for Blackwell chips is outstripping supply, which should support further strength in Nvidia's revenue and earnings during fiscal 2026. Plus, some reports suggest a Blackwell successor called "Rubin" might be unveiled later in the year, which would further cement the company's chokehold on the market for data center GPUs. Nvidia stock has soared by 830% since the start of calendar year 2023, lifting the company's value from $360 billion to an eye-popping $3.3 trillion in just two years. Despite the amazing run, the stock might still be cheap. It currently trades at a price-to-earnings (P/E) ratio of 53.6, which is a discount to its 10-year average P/E ratio of 59. But Wall Street's consensus estimate suggests Nvidia could generate $4.44 in earnings per share in fiscal 2026, placing its forward P/E ratio at just 30.6. In other words, Nvidia stock would have to soar by 92% over the next 12 months just to trade in line with its 10-year average P/E ratio of 59. Nvidia has a habit of beating Wall Street's forecasts, so it's possible the stock has even more upside potential. On the flip side, there is some competition emerging from other chipmakers like Advanced Micro Devices, which plans to release a Blackwell rival in a few months. That's a risk investors should keep an eye on as this year progresses.

Jensen Huang Says AI Is Progressing at an "Incredible Pace." Where Will Nvidia Stock Be in 1 Year? | The Motley Fool

Nvidia (NVDA 3.10%), the producer of the world's most powerful artificial intelligence (AI) chips, has been at the forefront of the AI revolution. Customers have piled into these top graphics processing units (GPUs) for the crucial AI tasks of training and inferencing of models. So Nvidia plays a key role in helping customers at the earliest stages of their AI journey. On top of this, the company has developed an entire portfolio of AI products and services to accompany customers through every stage of their AI programs. All this has helped the tech giant deliver double- and triple-digit quarterly revenue in recent years and has sent revenue to record levels. And Nvidia, maintaining gross margin above 70%, has delivered strong profitability on sales. The great news is this success story may be far from over. Nvidia chief executive officer Jensen Huang, speaking at CES earlier this month, said AI is progressing at an "incredible pace." Considering this, where will Nvidia stock be in one year? Let's find out. First, let's consider the story so far. Nvidia got in early on AI, establishing itself as the go-to player for any company interested in setting up a program. Initially, the tech powerhouse was known for its GPUs, but it quickly expanded into a range of products and services, from networking equipment to enterprise software. And it's even developed expertise in various industries, such as healthcare and automobiles, to offer specific platforms tailored to their needs. Nvidia has benefited as data centers launched upgrades, requiring new GPUs, and companies got their feet wet in AI, training models or developing initial projects. Now let's look to the future. Nvidia should continue to gain from these trends, as they're far from over. Huang has said about $1 trillion in outdated computers exist in the world -- and need to be upgraded for accelerated computing. It's also important to keep in mind that most companies that have started to incorporate AI into their businesses still have much farther to go -- offering Nvidia an ongoing revenue opportunity. For example, the next wave of AI growth may be agentic AI, or the development of AI software to consider complex problems, reason, find solutions, and apply those solutions. Nvidia is launching blueprints that make it easy for customers to design their own AI agents -- and Nvidia partners also have created blueprints that integrate with Nvidia software. Over the coming year, we should expect a complete rollout of Nvidia's much-anticipated Blackwell architecture, a fully customizable platform featuring seven different chips, multiple networking options, and more. The production ramp has been happening now, in the fourth quarter of the current fiscal year, and Nvidia expects billions of dollars in Blackwell revenue during this period. The next big launch is also on the horizon. A report in ZDNet Korea suggests Nvidia's next-generation architecture Rubin, originally set for launch in 2026, could start initial shipments as early as the third quarter of this year. Meanwhile, companies aiming to apply AI to their businesses could turn more and more to this AI leader. For instance, Nvidia, launching its latest car computer at CES, spoke about how the autonomous vehicle industry may become the first multitrillion-dollar robotics industry -- and Nvidia already works with all the leading automotive players. Nvidia may see some pressure on gross margin in the early stages of big platform launches such as Blackwell or Rubin -- the company said that in the current quarter, as it ships Blackwell, gross margin may dip into the low-70% range from the mid-70%. But these new products also should serve as big revenue drivers from the very first quarter of commercialization. All this should continue to drive strong earnings growth in the quarters to come. Will the stock price follow? Today, Nvidia shares trade for about 46x forward earnings estimates. This isn't cheap, but it's down from more than 75x back in 2022, and it isn't ridiculously expensive, considering Nvidia's growth opportunities and earnings track record. So Nvidia's stock has room to run from today's level, meaning that, after two years of gains, it could easily climb in the double digits to score yet another win for investors over the coming year.

Why Jensen Huang's vision could propel Nvidia stock higher

Nvidia (NVDA) CEO Jensen Huang announced significant developments for the company during the CES 2025 technology conference held on January 7. He revealed that data center operators are expected to invest $1 trillion over the next four years to enhance their infrastructure for artificial intelligence (AI) development, a segment that currently represents 88% of Nvidia's total revenue. Nvidia has positioned itself for the autonomous vehicle market, with its automotive business now gaining traction after more than two decades of relative obscurity. Major global automotive brands, including Mercedes-Benz, Hyundai, BYD, Volvo, and Toyota, are adopting Nvidia's Drive platform to advance their self-driving technologies. The Drive platform offers comprehensive hardware and software solutions essential for autonomous driving, utilizing Nvidia's latest chip, Thor. This chip processes data from a vehicle's sensors to determine optimal actions on the road. Nvidia stock slides 2% amid new AI export limits: Should you be worried? Alongside the Drive platform, Jensen Huang indicated that automotive companies are investing in DGX data center systems equipped with Nvidia's GB200 GPUs based on the Blackwell architecture. These GPUs are vital for continuously training self-driving software. Additionally, Nvidia introduced Cosmos, a multimodal foundation model that allows companies to conduct millions of real-world simulations using synthetic data, which serves as a basis for software training. Huang emphasized that the autonomous vehicle sector could emerge as the first multitrillion-dollar opportunity in the robotics field. Technologies like autonomous ride-hailing could generate $14 trillion in enterprise value by 2027, primarily benefiting autonomous platform providers such as Nvidia. Nvidia's fiscal year 2025 will conclude at the end of January, and the company has reported $1.1 billion in automotive revenue over the first three quarters. When extrapolated, this could result in approximately $1.5 billion in full-year revenue. Huang projected that in fiscal 2026, Nvidia's automotive revenue could escalate to an impressive $5 billion. While the automotive segment promises long-term growth, Nvidia's immediate focus remains on data center operations. Wall Street analysts forecast that Nvidia could achieve total revenue of $196 billion during fiscal 2026, making the automotive sector's anticipated $5 billion contribution comparatively minor. Nvidia has commenced shipping its new Blackwell GB200 GPUs, with rapid sales growth anticipated. By April, revenue from Blackwell chips is expected to surpass that from the prior generation of Hopper architecture chips, signaling a swift evolution in Nvidia's business operations. The GB200 NVL72 system delivers AI inference capabilities up to 30 times faster than its predecessor, the H100 GPU system. This advancement is expected to facilitate the development of the most sophisticated AI models to date. The demand for Blackwell chips currently exceeds supply, likely bolstering Nvidia's revenue and profit in fiscal 2026. Reports suggest a new version, referred to as "Rubin," may be introduced later this year, further solidifying Nvidia's dominance in the data center GPU market. Nvidia's stock has experienced a dramatic increase of 830% since the beginning of 2023, boosting the company's market value from $360 billion to approximately $3.3 trillion. Despite this substantial growth, Nvidia's shares may still be undervalued, trading at a price-to-earnings (P/E) ratio of 53.6. This figure is lower than its 10-year average P/E ratio of 59. Analysts estimate Nvidia's earnings per share in fiscal 2026 could reach $4.44, leading to a forward P/E ratio of 30.6. In order to align with its 10-year average P/E ratio of 59, Nvidia's stock would need to increase by 92% within the next year. Historically, Nvidia has exceeded Wall Street estimates, indicating potential for further stock value increases. However, investors should remain vigilant of emerging competition from other chip manufacturers, such as Advanced Micro Devices, which plans to launch a rival to the Blackwell chips in the coming months. Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

The Best AI Stocks to Invest $500 in This Year | The Motley Fool

Artificial intelligence (AI) was a market-driving theme last year, with AI stocks helping the S&P 500, the Nasdaq, and the Dow Jones Industrial Average each soar in the double digits. Companies selling AI tools and services saw earnings climb -- and investors piled into these players. The initial wave of AI growth was all about this building out of infrastructure and the training of models to solve tomorrow's complex problems. Now, in the early days of 2025, there's reason to be optimistic about another great year for AI as the infrastructure buildout continues. Nvidia (NVDA -1.96%) CEO Jensen Huang has said about $1 trillion of computers worldwide must be upgraded for accelerated computing, and that doesn't happen overnight. On top of this, 2025 may be the year of agentic AI, or the AI agents that can reason, develop a solution for a problem, and apply it. This and other real-world applications could be transformative for companies and industries. The great news is, you don't have to invest a fortune in 2025 to potentially win in this top growth area. Here are the best AI stocks in which to invest about $500 this year. Nvidia has been the star of the AI market so far -- and it's well positioned to keep that success going. The company is present in every stage of AI development, from the chips to power the training of models to the software to apply AI to the needs of businesses and organizations around the world. As a result, Nvidia's double-digit and triple-digit revenue growth probably has much further to go. To make the story even brighter, the AI leader is solidly committed to innovation, promising to update its graphics processing units (GPUs) on an annual basis. This should make it very difficult for rivals to beat Nvidia -- by the time they catch up, Nvidia already is launching a new product. Speaking of new products, the company is in the middle of an important launch right now. Its Blackwell architecture has seen "staggering" demand, according to the company, and will bring in billions of dollars in revenue in its first months of commercialization. So Nvidia stock could be heading for another eye-popping gain in 2025. Alphabet (GOOG -1.30%) (GOOGL -1.35%) is the least expensive of the "Magnificent Seven" technology stocks that have driven market gains in recent times. The stock trades for 21x forward earnings estimates, a bargain considering its long track record of earnings growth and solid future prospects. You probably know Alphabet best through its Google Search, the most used internet search platform worldwide. Advertising across Google equals billions of dollars in revenue for Alphabet every quarter. But Alphabet also is building strengths in AI, which is helping another source of revenue -- Google Cloud -- to quickly grow. Recently, Google Cloud passed the milestone of $10 billion in quarterly revenue and $1 billion in quarterly operating income. The service sells AI tools to customers, supported by its own large language model (LLM) Gemini. Alphabet also is using AI to make Google Search even better and help advertisers reach the best audience for their products. All of this could equal a big win for Alphabet -- and its investors -- in the AI boom. Amazon (AMZN -1.20%), like Alphabet, is benefiting from AI in two ways. The e-commerce giant is a user of AI to improve its operations and sells AI products and services through its cloud computing business, Amazon Web Services (AWS). As you probably know, Amazon is a giant in e-commerce -- and the company's investment in AI could help this billion-dollar business generate even more profit over time. Amazon is applying AI tools to make its fulfillment process more efficient -- for example, by designing the best delivery route to save time and money. AWS already has demonstrated success in AI, reaching a $110 annualized revenue run rate last year. AWS is focusing on every "layer" of AI -- from offering customers a wide range of chips to power their projects to a fully managed service featuring LLMs to customize. Amazon also is present in the area of apps and recently launched Project Amelia, an AI agent for sellers on its e-commerce platform. Amazon is set to benefit from the next wave of AI growth, making it an ideal bet for 2025.

Is Nvidia a Millionaire-Maker Stock? | The Motley Fool

After languishing for some time after the company's Q3 earnings, shares of artificial intelligence (AI) juggernaut Nvidia (NVDA 3.10%) briefly shot up to nearly $150 before retreating to their current level south of $140. Some investors were a bit perplexed by the poor performance of Nvidia's stock after its fiscal 2025 Q3 numbers were released. After all, the report was quite positive, so why did the company's shares slip? A lot of anticipation is built into earnings releases, and for a company as successful and high-profile as Nvidia, even success can be read as failure by the market -- at least temporarily. At this point, unless Nvidia completely surprises Wall Street, its stock may struggle in the weeks that follow future releases. Luckily, this effect weakens over time. It seems the dust has settled and the company's stock is more responsive to good news, which is exactly what Foxconn's recent earnings were. Foxconn, a longtime partner of Apple, is also a key partner of Nvidia. The company, despite seeing slight declines in revenue from its smartphone division, posted record fourth-quarter sales thanks to growth in its networking and cloud division, where it does much of its business with Nvidia. The company told investors to expect similar year-over-year growth next quarter. The numbers are a clear indication that demand for Nvidia's products and artificial intelligence (AI) computing on the whole remains strong. Foxconn's earnings release comes just a week after Microsoft announced that it expects to spend $80 billion on AI data center infrastructure in its FY 2025. This was huge news for investors, as it confirms that Silicon Valley's AI arms race is not winding down any time soon. Many were concerned that the already ballooning budgets from Microsoft and its competitors would be tightened this year, or that at the very least their growth would be slowed, but the number Microsoft announced represents a roughly 60% increase year over year. Of all the providers downstream of these infrastructure spends, Nvidia will more than likely be receiving the lion's share of the funds. As the newest iteration of its Superchip is released, its competitive advantage and moat are firmly intact. Jensen Huang, Nvidia's CEO, gave the keynote speech at CES 2025 on January 6. This is one of the largest and most important trade shows in the industry. All eyes were on the man whose vision has helped shape the AI revolution. Huang is one of the most important intangibles in Nvidia's competitive arsenal. His leadership has been absolutely critical to the company's success and his presentation at CES helped paint a picture of the next year and beyond. While the company's roll-out of its new Blackwell chips was a central theme, Huang revealed several new products and highlighted the impact that Agentic AI -- a kind of AI more capable than the chatbots popular today -- will have presently. Is Nvidia a millionaire-maker stock? At this point, it's hard to say yes. It is already one of the largest companies in the world, so extreme growth is unlikely. That being said, there's a whole lot of growth still ahead. There is ample reason to believe Nvidia will continue to outperform the market for some time. Agentic AI really does represent a leap forward in the technology and I think its value in the real world will be made very clear very soon, helping to justify the enormous sums being spent on Nvidia hardware.

Nvidia Stock Investors Just Got Great News From Wall Street That Could Send Shares Soaring | The Motley Fool

Nvidia (NVDA 3.10%) has been one of the hottest stocks on the market in recent years. Shares have advanced 840% since December 2022 amid tremendous demand for the company's graphics processing units (GPUs), chips that power essentially all of the most advanced artificial intelligence systems. Nvidia is currently worth $3.3 trillion, but certain Wall Street analysts see upside arising from its Blackwell GPUs and robotics computing solutions. Here's the good news for Nvidia shareholders. Tom O'Malley at Barclays last week raised his target price on Nvidia to $175 per share, up from $160 per share. That forecast implies nearly 28% upside from its current share price of $137. He cited expectations that Nvidia's next-generation Blackwell GPUs will drive a meaningful increase in sales growth as the reason for the upward revision. Remember, Nvidia GPUs are the industry standard in accelerating data center tasks like artificial intelligence (AI). Compared to the previous Hopper architecture, Blackwell GPUs can handle AI training tasks up to four times faster and AI inference tasks up to 30 times faster. O'Malley estimates Blackwell GPUs will add $15 billion to sales in the current quarter, and thinks that number could more than double in the next quarter. Barclays is not the only Wall Street firm to revise its outlook higher. LSEG data shows the average estimate regarding Nvidia's earnings in the fourth quarter of fiscal 2025 (which ends in January 2025) has increased 5% in the last 90 days, and the average estimate for fiscal 2026 has increased 9% during the same period. Many analysts attribute their upward revisions to increased confidence in Blackwell. Beth Kindig, lead technology analyst at the I/O Fund, is particularly optimistic. She believes data center sales will increase at least 50% in fiscal 2026, driven by Blackwell GPU sales of at least $200 billion. Looking further ahead, Kindig estimates Nvidia will be worth $10 trillion by 2030, which implies 200% upside from its current market value of $3.3 trillion. Additionally, Dan Ives at Wedbush says demand for Blackwell GPUs is currently outpacing supply by a factor of 15. Put differently, he believes Nvidia can only supply a single chip for every 15 chips that customers want to buy. That adds context to recent commentary from Nvidia CFO Colette Kress, who said during the third-quarter earnings call that Blackwell "demand greatly exceeds supply." Dan Ives recently told CNBC the Wall Street consensus underestimates Nvidia's earnings growth by 30% over the next few years. He attributes some of that shortfall to Blackwell GPU revenue, which he believes will beat expectations in the near term. But Ives also sees upside to the consensus arising from robotics solutions in the long term. That last point is particularly important. The market is currently focused on generative AI, but Nvidia CEO Jensen Huang says the next wave of AI is robotics powered by physical AI. For context, generative AI can create text, images, and other media content in response to prompts, whereas physical AI can understand, navigate, and interact with the real world. Nvidia has been very successful in monetizing generative AI, which is good reason to believe the company will be just as successful with physical AI. Nvidia has the distinct advantage of providing a full-stack computing solution for autonomous robots. Its robotics platform comprises the supercomputing chips and networking gear needed to train AI models, and the software development tools needed to build industrial manipulation arms, autonomous vehicles, and humanoid robots. Importantly, Nvidia's automotive and robotics sales totaled just $449 million in the most recent quarter, which pales in comparison to the company's $30.7 billion in data center revenue. However, Jensen Huang believes autonomous vehicles and robotics will eventually become two of the largest computing industries in the world, which hints at strong growth in the coming years. Indeed, Ives estimates that Nvidia has a $1 trillion opportunity in autonomous vehicles and robotics, and he believes the company will ultimately attain a market value of $5 trillion as it monetizes those opportunities. His forecast implies 52% upside from its current market value of $3.3 trillion. That is undoubtedly great news for Nvidia shareholders.

Better Artificial Intelligence (AI) Stock for 2025: Nvidia vs. Microsoft | The Motley Fool

While Microsoft-backed OpenAI kicked off the AI craze when it launched the highly popular ChatGPT in November 2022, the chatbot may not have seen the light of the day without Nvidia's graphics processing units (GPUs), which were used for training the large language model (LLM) powering ChatGPT. As other major tech giants joined the AI race, the demand for Nvidia's chips went through the roof, and sent its revenue and bottom line soaring. Meanwhile, the impact of AI on Microsoft's business has been gradual. The company is spending billions to build its AI data center infrastructure -- benefiting Nvidia in the process -- and believes its AI-focused investments will "support monetization over the next 15 years and beyond." This explains why Nvidia stock has outperformed Microsoft's by a massive margin in the past couple of years. But will Nvidia continue to outperform Microsoft in 2025? Let's find out. As already mentioned, Microsoft is benefiting gradually from AI. The company's revenue in fiscal year 2024 (that ended June 30) was up 16% from the previous year to $245 billion. Its adjusted earnings increased 20% year over year to $11.80 per share. The company's estimated revenue growth rate of 14% for fiscal 2025 to $278.6 billion isn't all that great, while its earnings are expected to increase by 10.5% to $13.04 per share. The forecasts for fiscal 2026, which will begin in July 2025, don't point toward a major improvement either. Consensus estimates are projecting a 14% increase in Microsoft's revenue in the next fiscal year, along with a 15% jump in earnings. Nvidia, on the other hand, is expected to finish the current fiscal year (ending January 2025) with outstanding revenue growth of 112% to $129 billion, followed by a 52% increase in the next fiscal year to $196 billion. Nvidia's bottom line is also expected to jump an impressive 128% in the ongoing fiscal year followed by a 50% jump in the next one. All this indicates that Nvidia could continue to grow at a much faster pace than Microsoft over the course of the next year. What's more, the 12-month median price targets of both companies suggest that Nvidia stock could rise 33% while Microsoft is expected to deliver 20% gains. So, the odds seem in favor of Nvidia outperforming Microsoft in 2025, and that's not surprising considering that the chipmaker continues to witness outstanding demand for its AI data center GPUs. However, investors would do well to note that a few concerns could weigh on Nvidia stock. From potential restrictions that could be imposed on sales of its AI chips to foreign countries to an expensive valuation to the efforts being undertaken by major Nvidia customers to reduce their reliance on its chips, there are multiple reasons why Nvidia shares may remain under pressure. Moreover, the company's growth rate -- though still impressive -- is gradually slowing down. These are the reasons why Nvidia stock may lose its shine in 2025. Microsoft, on the other hand, is slowly but steadily stepping up its game in key AI-focused niches that could set it up for outstanding growth in the long run. The tech giant is already gaining share in the cloud computing market thanks to AI. Microsoft's Azure cloud and other services revenue increased by 33% in the first quarter of fiscal 2025, with AI contributing 12 percentage points of that growth. More importantly, AI is helping Microsoft build a solid revenue pipeline by driving an increase in the number of big contracts that the company is signing for its Azure cloud solutions. This is evident from the 22% increase in Microsoft's commercial remaining performance obligations (RPO) in fiscal Q1 2025 to $259 billion. The faster growth in RPO as compared to the revenue bodes well for Microsoft, as this metric refers to the total value of a company's unfulfilled contracts. Microsoft expects to recognize 40% of its RPO as revenue in the next 12 months, which would be an increase of 17% on a year-over-year basis. As a result, the possibility of Microsoft growing at a faster pace than Wall Street's expectations in the coming year cannot be ruled out. A similar story could unfold at Nvidia, and the company could overcome the adversity that it is facing right now. Though the outgoing administration's potential curbs on Nvidia chip exports could post a threat to its remarkable revenue growth -- 56% of its revenue is from customers outside the U.S. -- investors should note the rules will be enforced 120 days from now, giving the incoming administration time to weigh in on the new rules. Looking at the positive side of things, Nvidia's focus on significantly enhancing the production capacity of its latest Blackwell AI processors to meet the red-hot demand from its customers, along with the massive increase in AI infrastructure spend by its U.S. customers, could be enough to help the company grow at an impressive pace once again in 2025. As such, the possibility of Nvidia stock retaining its mojo despite the potential challenges it faces cannot be ruled out. The uncertainties surrounding Nvidia may tempt investors to put their money into Microsoft stock to capitalize on the AI boom, especially considering the latter's valuation. After all, Microsoft is trading at a much cheaper 34 times earnings as compared to Nvidia's earnings multiple of 52. However, Nvidia's forward earnings multiple of 31 is in line with Microsoft's, and that's not surprising considering the outstanding growth that the company is expected to deliver. This makes Nvidia an attractive AI stock to buy right now, and investors can consider using the negative press surrounding it as a buying opportunity considering that its huge addressable market could be enough to help it overcome any potential regulatory challenges. But at the same time, even Microsoft looks like a top AI stock to buy for the long run considering the massive opportunities in cloud computing and workplace collaboration that could supercharge its growth. So, investors can consider buying any one of these two AI stocks right now depending on their risk appetite, and there is a good chance that they may not go wrong in 2025, as well as in the long run, as both Microsoft and Nvidia are sitting on lucrative end markets thanks to AI.

Is Nvidia a Buy?

Buying Nvidia at these prices is a bet on the company's future. Here's a look at Nvidia's growth prospects to determine whether the stock deserves your investment. At this point, most investors interested in artificial intelligence (AI) know the critical role Nvidia's (NVDA 3.10%) AI accelerator chips have played. The resulting growth spurt has propelled the company and its stock to staggering heights. If you're reading this, you're probably wondering whether Nvidia's AI tailwinds can continue and whether the stock is still buyable after soaring over 800% since early 2023. Yes, the cat's out of the bag on Nvidia and AI. Today, the stock trades over 50 times trailing-12-month earnings, so buyers are banking on the future rather than the past. What might the future hold for Nvidia? I researched the company's growth prospects to determine whether the stock is a buy today. Peering into Nvidia's leadership in AI chips amid massive market expansion Nvidia rose to prominence in AI thanks to its Hopper AI accelerator chip architecture, which became the gold standard for training today's AI models. According to industry estimates, the company owns between 70% and 95% of the market. Owning that much of the market means that future growth depends on market expansion because there's little room to gain additional business from competitors. On the other hand, it means Nvidia risks ceding market share to other chip companies. However, the market is growing so fast that it could realistically offset any modest market share losses. The global AI chip industry was estimated at $123 billion in 2024 and could grow to $311 billion by 2029. Nvidia's trailing-12-month revenue was $113 billion, most of which came from AI data center sales. The company could lose market share and double its revenue over the next five years. The underlying factors driving AI chip growth seem pretty intact. AI will need more (and better) chips to train and operate more intelligent models, and increased demand for AI services will require additional computing resources to create the capacity to accommodate that demand. Blackwell looks like a successful continuation of AI momentum Nvidia has begun transitioning to Blackwell, the successor to Hopper. The new architecture represents significant breakthroughs in performance and, arguably more importantly, efficiency. The chip has 208 billion transistors, up from 80 billion on the H100. The B200 can achieve up to 20 petaflops of computing power (like horsepower for computing) versus four for the H100. The B200 will deliver three times faster large-model training than the H100 and 15 times the AI inference performance. It's also 25 times more energy efficient, translating to a significantly lower cost of ownership. This is a key point because companies investing billions of dollars in AI data centers need to monetize these investments over time. Low operating costs can be very helpful. Blackwell has already shown signs of rampant demand. A few months back, Nvidia announced that it had sold out its entire Blackwell capacity for 2025. The lack of Blackwell supply should also continue trickling down to ongoing Hopper sales, as some companies may opt to build with Hopper chips rather than wait 12 months or longer for chips. Is Nvidia a buy? Assuming the prominent companies building up AI data centers, known as hyperscalers, continue investing in AI infrastructure, Nvidia's growth prospects look fantastic. Analysts estimate Nvidia will grow earnings by an average of 38% annually over the next three to five years, which makes sense within the broader growth forecast for the AI chip market. There doesn't seem to be much reason to doubt the growth forecast until competition shows tangible evidence of eating into Nvidia's business. So far, Blackwell looks like a smashing success. I like using the PEG ratio to weigh a stock's valuation versus its growth rate. Typically, I'll buy high-quality stocks up to a PEG ratio of 2.0 to 2.5, and Nvidia's (PEG ratio of 1.4) falls comfortably below that threshold. I'd much rather buy Nvidia here than a similarly priced retail stock like Costco, which has much slower growth.

Why Nvidia Stock Surged Today | The Motley Fool

Nvidia (NVDA 4.43%) stock posted significant gains in Wednesday's trading following bullish artificial intelligence (AI) news. The company's share price closed out the day up 4.4% amid the backdrop of a 0.6% gain for the S&P 500 index and a 1.2% increase for the Nasdaq Composite index. Nvidia gained ground today following the announcement of Stargate -- a new joint company formed by OpenAI, Oracle, and Softbank. The three partners have announced they will soon be investing $100 billion in U.S. AI infrastructure -- and the development bodes well for Nvidia. At the White House yesterday, President Trump hosted OpenAI CEO Sam Altman, Oracle chairman Larry Ellison, and Softbank CEO Masayoshi Son to announce Stargate's AI infrastructure initiative. The joint venture is focused on expanding AI-focused data centers domestically. This project will kick of with an initial $100 billion investment and could see as much as $500 billion in investments over the next four years. If there's one company that's poised to see the largest immediate benefits from Stargate's infrastructure spending, it's probably Nvidia. The hardware leader's graphics processing units (GPUs) are the preferred hardware for training and running advanced AI applications, and there's a good chance it will see significant sales wins connected to Stargate projects. Thanks to its dominant position in GPUs for AI, Nvidia is positioned to be one of the biggest winners from ramping AI infrastructure spending. The company has already been posting fantastic sales and earnings growth in conjunction with the rise of AI, and recent indications suggest that customers still have plenty of appetite for processors they can use to bolster their positions in the data center. Earlier this month, Microsoft announced that it planned to spend approximately $80 billion on AI data center infrastructure this year. Microsoft is Nvidia's largest customer, and its spending guidelines signaled a strong performance outlook for the GPU leader. Now that OpenAI, Oracle, and Softbank have formed Stargate, Nvidia could soon have the benefit of another massive customer entering the AI data center space.

3 Top AI Stocks to Consider Right Now (Hint: Nvidia's Not One) | The Motley Fool

AI could become a $826 billion market over the next five years. Nvidia is an obvious choice, but don't overlook these other AI power players. The significant interest in artificial intelligence (AI) stocks has shined a bright spotlight on Nvidia, the leading AI chip company. Nvidia has been an incredible stock for investors, but AI stretches far beyond one company. You can be sure there are many winners in a global AI industry that experts believe could swell to more than $826 billion by 2030. And despite the broader market trading within shouting distance of all-time highs and a remarkable run by technology stocks over the past two years, there are still deals out there. Here are three top AI stocks (not named Nvidia) that investors can buy today. Their respective growth prospects and valuations offer compelling value that should translate to stellar investment returns as AI technology advances. Many people may not realize how much goes into making AI chips; it goes beyond designers like Nvidia. Lam Research (LRCX 1.36%) designs and builds equipment used in chip fabrication (manufacturing). To sum up Lam Research's value to the chip industry, its equipment helps companies build smaller and more efficient chip designs. Nvidia's H100 AI chip has 80 billion transistors. Its successor, built on Blackwell architecture, has 208 billion. Remember, you can hold these chips in your hand. Cutting-edge equipment is needed to make such small circuits. As AI technology improves and requires smaller and more powerful chips, Lam Research will be among the companies making these advancements possible. The company's reputation, intellectual property, and long-standing relationships with chip fabricators make its equipment hard to displace. The stock currently trades at a price-to-earnings ratio of about 24. Meanwhile, analysts estimate the company will grow earnings by an average of 16% annually over the long term. The resulting 1.5 PEG ratio makes Lam Research a smart buy at these prices. Let's explore the AI chip space a bit longer. Taiwan Semiconductor Manufacturing (TSM -1.53%) is the leading chip fabricator. As you might guess, this makes the company a pillar of the AI industry, as chips are the building blocks on which AI models train and operate. Just how dominant is Taiwan Semiconductor? In the third quarter 2024, the company manufactured approximately 64% of the world's chips. That includes Nvidia's AI chips, which Taiwan Semiconductor builds with a custom manufacturing process. The company could have years of rampant growth ahead as Nvidia and other companies design increasingly complex chips and seek Taiwan Semiconductor's expertise and capacity to build them. Analysts estimate Taiwan Semiconductor will grow earnings by an average of 31% annually over the long term. That makes the stock a compelling value at just 32 times earnings, a PEG ratio of just 1. Part of the reason why the stock isn't more expensive is the geopolitical dispute between Taiwan and China. The latter has long claimed Taiwan (where Taiwan Semiconductor operates) belongs under its control, even threatening force to make it happen. The dispute adds some uncertainty to owning the stock, though the value becomes too compelling to pass up at some point. Taiwan Semiconductor has begun expanding into the United States, Japan, and Germany to mitigate its geopolitical risks, so this may become less of an issue. Lastly, let's shift from AI chips to almost everything else AI. Alphabet (GOOG 1.62%) (GOOGL 1.60%), Google's parent company, might be the closest thing to a do-it-all AI company. Alphabet still counts on its search engine for much of its profits, but it has branched out into various other industries, including a heavy tilt into AI. Alphabet has the third-largest cloud computing platform, Google Cloud. It has developed and deployed an AI model (Gemini) to enhance its existing products and services. It's also among the leaders in autonomous vehicle technology and is making breakthroughs in quantum computing. I mean, what doesn't Alphabet do? When people think of AI today, most think of generative AI, software that creates content. However, over the coming decades, AI should become much more, including self-driving cars and robotics -- whatever technology makes possible. Alphabet's financial resources, innovative background, and leadership in existing fields give it a great shot at competing in almost any market AI creates in the future. Analysts expect the business to grow earnings by 16% annually. At a P/E of only 25 today, Alphabet is one of the most intelligent AI stock buys you can make.

Prediction: These 3 Artificial Intelligence (AI) Chip Stocks Will Crush the Market in 2025 | The Motley Fool

The semiconductor industry has received a major shot in the arm from the rapid advancement of artificial intelligence (AI) technology: The size of the semiconductor market jumped by an estimated 19% last year to $630 billion, according to Gartner. That was a huge turnaround from its 12% decline in 2023. The good news for investors is that the semiconductor industry is expected to enjoy another year of double-digit percentage growth in 2025, generating an estimated $717 billion in revenue. Data center operators have been among the biggest purchasers of AI chips so far -- those cloud computing majors have been loading up on powerful parallel processors so that they'll be equipped to allow their clients to train and deploy large language models (LLMs). At the same time, the adoption of AI chips in edge devices such as smartphones and personal computers (PCs) is set to increase in 2025. So, it won't be surprising to see the chip market clocking strong growth this year once again. That's why it seems like a good time to take a closer look at the prospects of three companies that are benefiting big time from the booming demand for AI chips in various sectors. Advanced Micro Devices (AMD -1.27%) and Qualcomm (QCOM -1.81%) delivered underwhelming gains in 2024 compared to the 24% jump clocked by the PHLX Semiconductor Sector index, but they could witness remarkable turnarounds in their fortunes this year. That's because both companies are on track to benefit from the big bump in sales of AI-capable edge devices. On-device AI capability means that these devices will be able to tackle some AI workloads locally rather than having to offload them to the cloud. More specifically, smartphones and PCs will be equipped with dedicated AI engines to carry out AI-specific tasks. AMD and Qualcomm have already deployed chip platforms equipped with dedicated AI engines. At CES 2025, AMD announced that it is expanding its portfolio of AI-capable Ryzen CPUs for both the commercial and consumer markets. Its new Ryzen AI processors come with a neural processing unit (NPU) capable of clocking 50 trillion operations per second (TOPS), sufficient to power next-generation AI PCs. AMD clients such as Dell, Asus, HP, Lenovo, and MSI will be rolling out notebooks and computers powered by Ryzen AI processors. Meanwhile, Qualcomm has set its sights on the AI PC market with its Snapdragon X Series CPUs. In a recent press release, Qualcomm said that "Snapdragon X Series continues to gain traction with now over 60 designs in production or development with more than 100 coming by 2026 from leading OEMs including Asus, Acer, Dell Technologies, HP, and Lenovo." With sales of AI PCs expected to jump by a remarkable 165% in 2025, both AMD and Qualcomm could benefit from the secular growth of this market. Qualcomm, however, has an additional catalyst in the generative AI smartphone market. Market research firm IDC expects sales of generative AI smartphones to jump 73% in 2025. Qualcomm is in a terrific position to make the most of this opportunity. As Counterpoint Research notes, the chipmaker captured half of the market for generative AI smartphone chipsets in 2024. Finally, both Qualcomm and AMD are trading at attractive valuations. While Qualcomm is trading at 14 times forward earnings, AMD has a forward price-to-earnings ratio of 23. So, investors today can get a great deal on two AI chip stocks that seem set to gain big time from the growing demand for AI-enabled smartphones and PCs in 2025. The proliferation of devices capable of running some AI workloads and the arrival of AI agent systems that are able to execute tasks autonomously are likely to meaningfully increase the computing load on data centers. This is probably why market research firm TrendForce expects investments in AI servers to jump to $298 billion in 2025. That would be a 45% increase from the $205 billion spent on that infrastructure last year. As a result, the demand for AI chips that Nvidia (NVDA -1.96%) sells should continue to expand. The AI pioneer is currently rolling out its latest generation of Blackwell data center GPUs (graphics processing units), which are said to be four times faster than its previous-generation Hopper processors. Nvidia has been aggressively expanding production capacity for its Blackwell processors in an effort to meet customers' demand. This explains why consensus estimates are projecting the company will generate almost $171 billion in data center revenue in its fiscal 2026 (which will begin toward the end of this month and include 11 months of calendar 2025). That would be a massive increase over the estimated data center GPU revenue of $97.6 billion from its fiscal 2025. However, analysts' estimates for Nvidia's overall revenue for fiscal 2026 have moved significantly higher. So the possibility of the company blowing past Wall Street's expectations cannot be ruled out, especially considering that its foundry partner is set to increase its capacity to manufacture AI chips significantly in 2025. With shares of Nvidia trading at an attractive 32 times forward earnings right now as compared to the tech-laden Nasdaq-100 index's earnings multiple of 32.5, buying Nvidia looks like the right thing to do right now, particularly given the 52% bottom-line growth the chipmaker is expected to deliver in the upcoming fiscal year.

Opinion: The Biggest Risk Facing Nvidia Stock, and How the Company Will Solve It

The semiconductor industry has always been cyclical, because whether it's computers, smartphones, or even data centers, consumers and businesses only upgrade their physical hardware once every few years. That means revenue comes in big waves, followed by lengthy troughs. Artificial intelligence (AI) recently changed that. Since 2023, spending on data center chips and components appears to be growing exponentially, as some of the world's biggest technology companies race to develop the most powerful AI software. Nvidia (NVDA 2.27%) has been the biggest beneficiary of that spending boom, because it supplies the most advanced data center graphics processors (GPUs) for developing AI. Nvidia is selling so many chips that it has become the second-largest company in the entire world, adding $3 trillion to its market capitalization over the last two years alone. But data center spending can't continue at this pace forever, and the inevitable slowdown could be the biggest risk to Nvidia's stock price. However, CEO Jensen Huang might have already revealed the solution. Data center spending could slow significantly in a few years The ultimate goal for every company developing AI is to achieve artificial general intelligence (AGI), which is the point at which the technology matches human intelligence in most cognitive tasks. A researcher who used to work for ChatGPT creator OpenAI predicts AGI could arrive as soon as 2027. Tesla CEO Elon Musk believes 2029 is a more realistic target. In any case, it could be just a few years away. Developing AI beyond the point of AGI will almost certainly yield diminishing returns, because very few commercial workloads would benefit from such a high degree of machine intelligence. If that's the case, demand for Nvidia's data center GPUs could plunge a few years from now because the pool of developers who want (or who can afford) further performance increases will be very small. Today, the bulk of data center infrastructure spending comes from just a handful of trillion-dollar tech giants (more on that in a moment), and Nvidia is launching new generations of data center GPUs almost on an annual basis to meet their needs. It released the Hopper architecture in September 2022, the Blackwell architecture in March 2024, and reports suggest a new architecture called "Rubin" will be revealed by the end of 2025. That isn't sustainable over the long term, not only because demand is likely to slow in a few years, but also because it cost Nvidia $10 billion to develop Blackwell alone, and research and development costs will only climb from there. Blackwell demand is so strong right now that Nvidia can't keep up, so there's nothing to worry about in the short term. Nvidia's growth relies heavily on just a handful of customers Nvidia is on track to generate a record $128.6 billion in total revenue during its fiscal year 2025, which ends later this month. That would be a whopping 112% increase from the prior year. If the first three quarters are anything to go by, Nvidia's data center segment will account for around 88% of that total revenue figure, primarily driven by GPU sales. As I mentioned earlier, a small number of tech giants are responsible for most of the AI data center infrastructure spending. That's why during Nvidia's recent third quarter (ended Oct. 27), 36% of its $35 billion in total revenue came from just three unnamed customers: In my opinion, this heightens the risk Nvidia faces if AI spending slows down, because if even one of its top three customers abruptly pulls back, it will leave a massive hole in the company's revenue base that will be practically impossible to fill. That would threaten Nvidia's ability to maintain its incredible growth rates, which could result in a significant correction in its stock price. The solution: Nvidia will materially diversify its revenue Jensen Huang presented at the CES 2025 technology conference on Jan. 7, where he highlighted several new opportunities for Nvidia as the AI industry expands beyond the data center. Autonomous vehicles will be one of them, and Huang says it could be the first multitrillion-dollar segment of the emerging AI-powered robotics industry. Nvidia already has an automotive business that is more than two decades old. It's currently home to the Drive platform, which is an end-to-end solution for car manufacturers seeking to install self-driving capabilities into their new vehicles. It includes all of the hardware and software manufacturers need, including Nvidia's powerful Thor chip, which processes data from the car's sensors to facilitate real-time decisions on the road. Automotive giants like Toyota, Mercedes-Benz, Hyundai, BYD, Volvo, and more have already partnered with Nvidia. Aside from using the Drive platform, Huang says some of those companies are also buying DGX data center systems featuring Blackwell-based GP200 GPUs, so they have enough computing power to continuously train their self-driving models. Moreover, Nvidia just launched a new multimodal foundation model called Cosmos, which is trained on 20 million hours of video so it's equipped with an understanding of the real physical world. Car manufacturers can use it to run millions of simulations with synthetic data, which serves as training material for their autonomous driving software. This is yet another way for Nvidia to attract customers into its ecosystem. Nvidia is on track to generate around $1.5 billion in revenue from its automotive segment in fiscal 2025. However, in fiscal 2026, Huang says that figure could more than triple to $5 billion. Wall Street's consensus forecast (provided by Yahoo!) suggests Nvidia will deliver $196 billion in total revenue in fiscal 2026, so the automotive segment will still be very small. However, if it grows at that pace consistently for the next few years, it could become a major part of Nvidia's business just in time for the potential slowdown in data center spending. Plus, Cathie Wood's Ark Investment Management believes autonomous ride-hailing alone -- just one use case for self-driving vehicles -- will create $14 trillion in enterprise value by calendar year 2027. The firm believes most of that value will come from autonomous platform providers like Nvidia, so it's possible this opportunity is even bigger than Huang expects right now.

Nvidia Just Became the World's Most Valuable Company. Is It Too Late to Buy the Stock? | The Motley Fool

The past few years have been undeniably profitable for Nvidia (NVDA 4.41%) investors. The stock price has surged more than sevenfold over the past two years, and today, it topped the charts as the world's most valuable company in terms of market cap. The stock was up as much as 4.7% Wednesday morning. At 12:32 p.m. ET, the stock was still up 4.1%. The advent of artificial intelligence (AI) has fueled Nvidia's relentless rise, and a new U.S. government initiative shows there's still a long runway for growth ahead. One of a multitude of announcements by the Trump administration yesterday was the launching of Stargate, a project designed to increase AI infrastructure in the U.S. President Trump announced the joint venture, which will include investments from Oracle, OpenAI, and SoftBank of as much as $500 billion over the next four years. The project will focus on increasing the number of American data centers -- and the energy needed to power them. The group named several "key initial technology partners" -- and beneficiaries of the initiative -- including Nvidia, Microsoft, and Arm Holdings. Nvidia pioneered the graphics processing units (GPUs) that underpin most AI systems. Furthermore, these advanced chips are a staple in data centers that house these AI models. Nvidia has absolutely dominated the data center GPU space, with a market share of 98% in both 2022 and 2023. While the 2024 figures have not yet been released, Nvidia is expected to continue to be the undisputed leader. Now that it's the world's most valuable company, some investors might believe the time to buy Nvidia has already passed, but these developments show that's not the case. Furthermore, the stock is currently selling for just 32 times next year's expected sales, a remarkably attractive price for a company with so much opportunity.

Here Are My Top 4 No-Brainer AI Stocks to Buy for 2025 | The Motley Fool

Artificial intelligence (AI) investing has been a key theme for the market in 2023 and 2024, and I expect nothing to change in 2025. There are just too many investment dollars flowing into this space to ignore, and companies have barely scratched the surface of what's possible with AI. As a result, I still think AI stocks are a smart investment, and I've got four no-brainer picks that investors should consider buying right now. Nvidia (NVDA 3.40%) has been the top AI investment pick for two years in a row now, and I think 2025 will make it three straight. The company has been the best investment because it's making a lot of money from the AI competition. Its graphics processing units (GPUs) and the software that supports them are best-in-class, and it has become the go-to pick in this sector. This has caused Nvidia's revenue to soar over the past few years, but 2025 is expected to bring more of the same. In its fiscal 2026 (ending January 2026), Wall Street analysts expect 52% revenue growth. That's another strong year for the GPU leader, and the growth will be fueled by its new Blackwell chip architecture, which has huge performance advantages over the existing Hopper design. Nvidia's stock isn't super cheap, but at 62 times trailing earnings, it's not terribly expensive when its growth is considered. It is still a top AI pick for 2025, and investors would be smart to add more, with the stock price dipping 10% from its all-time highs. Another company making huge money from the AI race is Taiwan Semiconductor Manufacturing (TSM 2.66%). TSMC, as it's also known, makes the chips that go into Nvidia's and its competitors' GPUs. This neutral position makes it a great way to invest in AI without needing to pick a winner. Management wasn't shy about how much these chips are helping its business. During its third-quarter conference call, it said that AI-related revenue is slated to triple this year. That's strong growth, but AI is only a part of the picture at TSMC. Because Taiwan Semi makes chips for all kinds of devices, it isn't seeing the explosive growth that Nvidia is. Still, analysts expect TSMC to put up 26% growth (in New Taiwan dollars) next year. With the stock trading at 23 times earnings, it's well worth adding some shares at these prices. Many see Alphabet (GOOG 3.10%) (GOOGL 3.11%) as a big spender in AI (which it is), but it's also a huge benefactor. Alphabet is a significant player in the cloud computing space and a key part of AI infrastructure. Big AI companies can afford to build supercomputers, but many start-ups and established businesses cannot. They rent the necessary computing power from a cloud computing provider like Google Cloud to gain access to the power needed to train AI models. Cloud computing isn't a massive part of Alphabet's business (it made up 13% of revenue in the third quarter), but it gives Alphabet a growth sector to balance out the relatively slow growth of its Google search business. It also justifies Alphabet's AI investments, since Google Cloud gives developers access to powerful AI tools to build upon. Alphabet is one of the cheapest big-tech stocks around, trading for 21.4 times forward earnings. For reference, the S&P 500 (^GSPC 1.83%) trades for 23.4 times forward earnings, so Alphabet is a clear bargain in today's market. Meta Platforms (META 3.85%) is in a different boat than the other three: It is mainly spending money on AI rather than making any from it. Meta has made its generative AI platform, Llama, free to use, making it more of a money pit than something the company can profit from. But that's the wrong way of looking at this, as Meta is gaining valuable insight into users and getting access to wider data sets through this approach. Meta doesn't aim to make money from its AI model; it's just trying to maximize its current social media ad business and develop a leading model that can provide contextualized AI for some of its virtual- and augmented-reality services. However, if it succeeds in either endeavor, the AI investment will massively pay off for shareholders. The stock is also fairly cheap, trading at 24.2 times forward earnings -- slightly more expensive than the S&P 500. However, revenue is expected to increase by 15% this year, so that slight premium is well earned. Meta Platforms makes another strong stock pick for 2025, and I wouldn't be surprised to see it stomp the market in 2025.

1 Wall Street Analyst Thinks Nvidia Stock Is Going to $175. Is It a Buy? | The Motley Fool

Nvidia (NVDA 3.10%) stock may have soared by about 170% in 2024, but shares of the leading artificial intelligence (AI) semiconductor maker haven't done much in the most recent three months. But one Wall Street analyst thinks investors should take advantage of that lull. Oppenheimer's Rick Schafer just made the company one of his top picks for 2025 in the semiconductor sector. His firm's price target of $175 per share would represent a 27% gain from recent levels. That price would put Nvidia into elite territory, with a market cap of about $4.25 trillion. But that would make sense, according to Schafer. That's because he believes revenue just from Nvidia's data center segment will reach $172 billion in 2025. That would be an increase of about 50% compared to calendar year 2024. In his recent note to investors shared by Barron's, Schafer wrote: "Nvidia is the largest volume producer of AI accelerators and the cost/bit leader in AI training. NVDA dominates the AI infrastructure market with their full-stack hardware/software." It's notable that Schafer mentioned software, too. Most investors consider Nvidia's dominance from its Hopper and Blackwell GPU (graphics processing unit) chips. But it also has software architecture meant for AI computer factories. Software solutions like those included in its DGX platform for enterprise AI and its CUDA platform for developers are used along with its GPU accelerators. Sales of those products will also be boosted as tech companies and others increase capital expenditure for data centers and the AI architecture built into them. While competition is coming along, demand for its latest Blackwell architecture appears to be very strong. And with its next-generation Rubin coming in 2026, there looks to be a long runway for growth. The recent lull in Nvidia stock does look to be a good opportunity to buy shares before they go even higher.

This Artificial Intelligence (AI) Stock Is an Absolute Bargain Right Now, and It Could Skyrocket in 2025 | The Motley Fool

Shares of AMD have cratered over the past year, making it a rare example of a chip stock that has fallen out of favor with investors. Among investment opportunities in the artificial intelligence (AI) realm, semiconductor stocks have become a top choice. Nvidia has been the most popular among chip stocks over the last two years, and for good reason. The company's graphics processing units (GPUs) play an important role in generative AI development, and companies around the world can't seem to get enough of what Nvidia has to offer. While it remains a solid opportunity at the intersection of semiconductors and AI, I see another stock that looks like a better value right now. Below, I'm going to break down the current price action around Advanced Micro Devices (AMD -1.27%). And I'll explain why I think the company is well-positioned for years of robust growth despite a tough matchup with Nvidia. The chart below illustrates the price movements among AMD and a number of leading semiconductor stocks as well as the VanEck Semiconductor ETF over the last year. Unlike its peers, shares of AMD have dropped considerably -- and as of Jan. 14, the stock is hovering near a 52-week low. Considering how integral chips are for AI development, what's causing AMD stock to sell off while its competition witnesses overwhelming support from investors? From what I can gather, the poor sentiment surrounding AMD boils down to growth -- or lack thereof. Right now, the company's top line is growing at a modest 18%. When compared to Nvidia, with its nearly triple-digit sales growth, it appears underwhelming. However, I think investors are missing the forest for the trees. While AMD's overall revenue growth may appear muted when benchmarked against the competition, it's crucial to take a look at the finer details before jumping to a conclusion. The company breaks its revenue down into four major categories: data center, client, gaming, and embedded. At the moment, the company's gaming and embedded segments are not growing at all. Unfortunately, this lack of growth is cannibalizing the areas of the business that are thriving. Per the company's most recent financial report, the data center operation grew by 122% year over year -- nearly identical to that of Nvidia's data center GPU segment. Despite this impressive growth, AMD trades at a price/earnings-to-growth ratio (PEG) of just 0.3. This suggests that analysts may be missing just how robust the company's data center business is and therefore muting its growth estimates. Note that a stock with a PEG ratio below 1 generally implies that it is undervalued. This year is going to be an interesting one for the chip space. Investors and Wall Street analysts are going to be assessing every possible statistic surrounding Nvidia's new Blackwell GPU -- which is reportedly already sold out for the next 12 months. This is good news for Nvidia on the surface, but I think AMD has a big opportunity looming in the background. Namely, these supply-and-demand dynamics provide an interesting opening for AMD in that the company can compete on price and offer an optimal solution when businesses simply cannot get their hands on Nvidia's GPUs. Such an idea is not unreasonable to buy into, either. A big tailwind for AMD over the last year has been notable adoption of its MI300 accelerators by hyperscalers including Oracle, Microsoft, and Meta Platforms. While each of these companies relies heavily on Nvidia's GPU architecture as well, they have made moves to diversify their AI infrastructure by complementing their respective Nvidia stack with products developed by AMD. When you take into account that AMD already has a lineup of successor chips scheduled to be released throughout 2025 and 2026, I think the company has a good chance of taking advantage of the ongoing demand shaking throughout the semiconductor landscape by offering a number of alternative solutions to Nvidia's product suite -- all at a more reasonable price point. To me, investors should be laser focused on the growth trends around AMD's data center GPU segment. If the company can continue accelerating this specific part of its business profitably, then I think it's only a matter of time before investors begin to take note of its scale, and shares could begin to break out. I see AMD as a compelling long-term opportunity for AI investors and think the ongoing depressed price action makes now a lucrative time to buy the stock.

Nvidia Stock Is Poised to Be a Big Winner From Humanoid Robots, Which Are Coming Faster Than Many People Probably Realize | The Motley Fool

Humanoid robots are machines powered by artificial intelligence (AI) that physically resemble humans and can emulate human movements and communication. While many of us can still only dream of having a humanoid maid like Rosie from the futuristic Jetsons cartoon, useful humanoid robots will be here sooner than many people realize. This is the opinion of Nvidia (NVDA 3.10%) CEO Jensen Huang, who has led the company he co-founded in 1993 to become the world's second-largest company by market cap (behind Apple, but not by much). Earlier this month, Huang gave the opening keynote speech to kick off Consumer Electronic Show (CES) 2025 and co-hosted a CES financial analyst conference. One of the most exciting things for Nvidia stock investors that he said was this remark: "Less than 10 years from now I am certain humanoid robots will surprise everybody [with] how good they are." The 2024 global humanoid robot market was worth about $1 billion to $2.5 billion in 2024, according to most estimates. Currently, the market consists largely of research and development of hardware and software for humanoid robots. Some companies are in the early stages of using humanoids internally, but no company has yet to offer a humanoid robot -- or "general-purpose robot" -- for sale to the public, to my knowledge, at least not in the United States. Market growth projections from reputable sources are nearly universally very rosy and have recently significantly increased with the rapid advances of AI, namely the advent of generative AI. Generative AI, which greatly increases the use cases for AI, burst onto the tech scene in late 2022 with OpenAI's launch of its ChatGPT chatbot. "The total addressable market for humanoid robots is projected to reach $38 billion by 2035, up more than sixfold from a previous projection of $6 billion," Goldman Sachs wrote in an early 2024 report. Its previous projection was from just one year earlier! This is Goldman's "base case" model which estimates unit shipments of 1.4 million by 2035. Along with the acceleration of progress in AI, the firm also cited investment in the sector growing faster than it had anticipated as a factor for its huge upward revision. The firm's "bull case" projects humanoid robot shipments to hit 1 million units by 2031, four years ahead of its previous expectation of 2035. And it has a "blue sky" scenario that is even rosier. Keep in mind the Goldman report I'm citing is from early 2024. It seems likely that the firm will be releasing another report soon and its market size projection for the base case seems poised to be revised upward from the $38 billion by 2035. Indeed, a hot-off-the-presses Jan. 17 report from Technavio, a global technology research and advisory company, forecasts the global humanoid robot market will reach $59.2 billion by 2029, equating to a blistering compound annual growth rate (CAGR) of about 70% from 2024. Morgan Stanley is also very bullish on the growth prospects for humanoid robots. The investment banking firm forecasts that there will be 40,000 humanoids working alongside humans in the U.S. by 2030, and that number will soar to 8 million by 2040 and 63 million by 2025. Nvidia is the leader in providing chips -- primarily graphics processing units (GPUs) -- and related technology to enable AI capabilities. The company has been involved in robotics for years, as its technology has been used to train robots such as drones and warehouse robots and also used as the AI-powered "brains" inside these machines. Starting in 2024, Nvidia has greatly ramped up its robotics offerings by pushing into the humanoid robotic space. This was only possible through the advent of generative AI. In March 2024, Nvidia introduced its Project GR00T (Generalist Robot 00 Technology) AI foundation model for humanoid robots. Robots powered by GR00T "will be designed to understand natural language and emulate movements by observing human actions," the company said in the press release. As part of this initiative, it also unveiled a new computer, Jetson Thor, for humanoid robots, and major upgrades to its Isaac robotics platform, including generative AI foundation models and tools for simulation. At that same time, Nvidia announced that it is "building a comprehensive AI platform for leading humanoid robot companies such as 1X Technologies, Agility Robotics, Apptronik, Boston Dynamics, Figure AI, Fourier Intelligence, Sanctuary AI, Unitree Robotics, and Xpeng Robotics [part of China's XPeng electric vehicle company], among others." At CES 2025, Huang announced additional initiatives for the development of AI-powered humanoid robots. Essentially, the company has created a full-stack offering of software, hardware, and tools for enabling companies to develop humanoid robots. This includes training, simulation, and deployment. All or nearly all the big players in the humanoid robotics space are using Nvidia's technology to develop their robots. In my view, that makes Nvidia stock the best way, at least currently, for folks to invest in the humanoid robot market, which is poised to be massive in size.

Is It Too Late to Buy AI Stocks in 2025? The Answer May Surprise You. | The Motley Fool

Investors need to dig beyond the narrative when deciding whether to buy an AI stock for their portfolios. Any stock associated with artificial intelligence (AI) has had quite a run in the last few years. Take Nvidia (NVDA 3.10%), which is up more than 1,000% and now sports one of the largest market caps in the world. Frankly, almost every big tech stock is benefiting from the AI boom, leading to monster returns in 2024. The big question is, though, will this party continue in 2025? The hard truth? It doesn't matter whether a stock is considered an "AI stock" or not. What matters is the stock's valuation, its potential for growth, and the downside risk of buying shares today. Three different stocks in C3.ai (AI -0.93%), Nvidia, and Amazon (AMZN 2.39%) illustrate the wide range of AI stocks you can buy right now. Here's why you shouldn't ask whether 2025 is a good year to buy "AI stocks" but instead look at each of these companies individually and decide for yourself whether you want to own them in your portfolio. A popular AI stock that literally has the ticker "AI" is C3.ai. The enterprise software seller has seen its stock zoom up and down in the last few years. At the end of 2022, it had a stock price around $10. Today, it trades around $30. Investors are bullish on the potential for the company to deploy AI tools across enterprises, earning lengthy and expensive software contracts. While it has a good narrative and clearly fits the AI theme, investors who buy C3.ai stock are betting on a risky stock. The company's revenue has grown by 49% in the last three years, undoubtedly due to the growing spending on AI. Over the last 12 months, C3.ai has generated $347 million in revenue. However, in order to maintain this revenue base, the company had a net loss of $274 million over the last 12 months, or close to a negative 100% profit margin. C3.ai may see an uptick in customer demand if the AI boom continues, but it is unwise to believe it will rapidly flip to profitability. The company has never generated a profit and likely won't for many years. A stock is only worth the profits it will generate for shareholders in the future. If C3.ai remains unprofitable, well, the stock won't be worth much at all. I would categorize this as a high-risk AI stock that is likely to do poorly for investors in 2025. An AI company with a medium amount of risk is Nvidia. The semiconductor giant is seeing demand go through the roof as its customers spend aggressively to win in this nascent market. Nvidia's revenue is up 320% in the last three years, with its data center revenue growing 112% year over year last quarter to $30.8 billion. With companies planning to spend significantly to build data centers, Nvidia's revenue will likely rise once again in 2025. Don't think this makes monster returns for the stock a cinch though. Nvidia currently trades at a price-to-earnings ratio (P/E) of 52.4 with profit margins at an all-time high. Multiple times throughout its history, Nvidia's revenue has gone through a cyclical downturn due to swings in demand from the buyers of its computer chip products. It is not impossible that demand for Nvidia's products goes through a cyclical peak in 2025. It has happened before and will happen again. This doesn't mean investors should sell Nvidia stock, as it has a long track record of innovation. But with a high P/E ratio and operating in a cyclical industry, Nvidia is not a low-risk AI stock for investors to buy in 2025. My last stock is one that will benefit from AI spending (and is actually an Nvidia customer). However, it operates in a less cyclical industry, has margins that should go up instead of down, and might see accelerating revenue growth in 2025. Yes, I'm talking about Amazon, the technology giant and leader in both the e-commerce and cloud computing sectors. Cloud computing is a durable growth industry, with new revenue coming from increased IT workloads and the transition from on-premise services. Revenue has grown every year for the segment since its launch in 2006, with plenty of room left to grow. A lot of AI spending is being done in the cloud, which could help Amazon Web Services (AWS) -- and Amazon as a whole -- accelerate revenue growth in 2025. More importantly, Amazon has an easy path to expand its profit margins in 2025, making the stock a low risk at its current market capitalization. North American retail operating margin has climbed for many quarters in a row to 5.9% over the last 12 months and still has plenty of room to expand. Amazon's two fastest-growing segments -- advertising and AWS -- are also the segments with the highest profit margins. As these become a larger part of the overall pie, Amazon's profit margin will keep going higher. If Amazon can hit a consolidated operating margin of 15% in 2025 (operating margin was 10% over the last 12 months) and revenue can grow to $650 billion from $620 billion, then Amazon will generate just under $100 billion in operating income this year. Compared to a market cap of $2.3 trillion, this makes Amazon a low-risk AI stock to add to your portfolio in 2025.

History Says the Nasdaq Will Soar in 2025: 1 Artificial Intelligence (AI) Growth Stock to Buy Before It Does | The Motley Fool

Euphoria around the prospects of artificial intelligence (AI) helped snap the capital markets out of a wicked funk that took place during much of 2022. And while some investors may be wary of just how long the bull market will last, history suggests 2025 should be another terrific year for technology stocks in particular. Below, I'll make the case for why this year could feature another strong performance by the Nasdaq. Moreover, I'll outline why AI infrastructure stock Nebius Group (NBIS -5.24%) looks well positioned for some solid gains. Since the Nasdaq's inception in 1971, the index has generated negative annual returns a total of 14 times. During this period, the Nasdaq has only declined across consecutive years on two occasions: between 1973 and 1974 and from 2000 to 2002. Annotating these periods is important, as it underscores the resiliency of the Nasdaq as a whole. Looked at through a different lens, with the exception of only two periods, the index has demonstrated an ability to bounce back after a year of declines. The last time the Nasdaq witnessed negative returns was in 2022 -- when the index fell by 33%. However, investors appear relatively bullish as macroeconomic indicators such as inflation showed consistent signs of cooling over the last couple of years, the Federal Reserve tapered interest rates, and AI emerged as the next megatrend fueling the capital markets. While the Nasdaq gained 43% and 29% between 2023 and 2024, respectively, the index looks primed for another solid performance this year. If you aren't aware of Nebius, it's likely because the company has a limited trading history. Nebius was divested from a Russian internet company called Yandex. As a result of sanctions imposed by the United States and European Union, Yandex decided to spin out its non-Russian operating units. Following these transactions, Nebius became an independent entity and started trading on the Nasdaq just a few months ago. Given its complicated and limited history, you may be wondering why I'm so bullish on the stock. The answer? Nvidia. In December, Nebius completed a private placement in which it raised $700 million through the issuance of 33.3 million shares priced at $21. One of the main investors in the transaction was Nvidia, and I think I know the reason why. Nebius specializes in AI infrastructure for data centers. According to some recent press releases, Nebius will be heavily involved in scaling Nvidia's new Blackwell GPU architecture across Europe and the U.S. To put into perspective how important this business is for Nebius, the company recently raised its 2025 annual recurring revenue (ARR) guidance to reach a run rate between $750 million and $1 billion -- significantly higher than prior estimates, which showed $500 million at the low end. I see Nvidia's investment in Nebius and its explicit position in the Blackwell launch as a major nod of approval related to the company's ability to execute. Given how important the Blackwell rollout will be for Nvidia, I suspect industry analysts will be keeping a keen eye on suppliers and vendors operating within the Nvidia ecosystem. While this raises the stakes for Nebius, I think now is a great time to consider a position in the company for your portfolio. Blackwell remains very much in its early stages, and I think it could evolve into a major tailwind for the company throughout 2025 and beyond -- paving the way for Nebius to become a larger and more influential player for other chip companies and hyperscalers as the AI infrastructure market continues to grow at record speed.

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

It seems clear that 2024 was the year of artificial intelligence (AI) -- or was it? Although some of the market's biggest winners were AI stocks, they weren't uniformly top performers. If you had invested in an AI-based exchange-traded fund (ETF) at the beginning of last year, the chance that you would have beaten the market wasn't great, and if you did, it may have been a slim win. So what should you do this year? Choose AI stocks carefully and balance them with a mix of other stock types. If you invest in ETFs, make sure they're broad, or purchase a few in different categories to offset risk while maximizing your potential for gains. Nvidia (NVDA 3.10%), Palantir Technologies (PLTR 3.65%), Taiwan Semiconductor Manufacturing (TSM -1.53%), Amazon (AMZN 2.39%), and Broadcom (AVGO 3.50%) are all top choices for excellent AI stock picks in 2025. Nvidia is unquestionably the stock most associated with AI. That's because it practically has a monopoly on the graphics processing units (GPUs) necessary to handle the workload that makes generative AI possible. Some analysts believe it has as much as 95% of the market for these GPUs although competition is heating up. Nvidia isn't worried, though. Not only is its lead quite stable, at least in the near term, but it's also expanding its repertoire with new technology to tackle new solutions for other kinds of technology. Before generative AI became the best innovation since sliced bread about two years ago, it was already a highly successful company, if less familiar, for its chips that powered the gaming industry. So it's much more than a one-trick pony, even though it still has a powerful business in generative AI. Palantir was the dark horse candidate for AI superpower, but since launching its AI Platform, or AIP, in 2023, its business and stock have exploded. The company helps large organizations, including governments, capture and organize vast amounts of data, creating patterns and deciphering information. Its sales hinge on large contracts, and it closed 104 deals in the 2024 third quarter. Not only are sales rising at a high rate -- 44% in the third quarter -- but it's extremely profitable and generating increasing free cash flow. Palantir stock soared 340% last year and has become quite expensive. But the opportunity is still underappreciated, and 2025 should be another strong year. Taiwan Semiconductor is a foundry (or manufacturer) of all kinds of semiconductors and GPUs. It works with most of the chipmakers you know, like Nvidia, which design chips but don't actually produce them. Although its chips are not at all limited to AI, that's where the opportunity is today. What makes the company such a reliable long-term bet is that even if there are new challengers to Nvidia, and even if AI gets displaced to make room for the next trend in technology, Taiwan Semiconductor will still be there to manufacture the chips to make it all possible. That's for way into the future. In 2025, it's in position to demonstrate excellent performance as demand for generative AI continues to accelerate. Amazon is creating generative AI solutions for all different kinds of companies. It has launched a multibillion-dollar business offering a large assortment of services for its cloud computing clients through its Amazon Web Services (AWS) platform. It has its 3-layer system, which provides tools for programmers to develop their own custom large-language models (LLMs); the Bedrock layer, for programmers to use Amazon's LLMs; and the top layer, ready-to-use solutions for small enterprise customers. Management thinks this is just the tip of the iceberg, and the generative AI business presents massive opportunities for Amazon in 2025 and beyond. Broadcom is a technology infrastructure company that has pivoted to harness the power of AI, gearing its business to tap into those opportunities. It provides the semiconductors and infrastructure that make connections between software and hardware, and you can already imagine how it's necessary for AI, which needs specialized chips to run data at lightning-fast speeds. Like the other stocks on this list, what makes Broadcom so attractive as an investment is that it has incredible tailwinds heading into 2025 with untapped opportunities in AI, but it also has a large and varied business that won't fade away when the AI bandwagon slows down.

Should You Buy the Dip on Nvidia Stock? | The Motley Fool

Nvidia (NVDA 2.27%) hasn't been on sale much during the last few years. While the stock dipped a few times, these have all been strong buying opportunities. Recently, the stock has fallen around 10% from its all-time highs, which some may consider a buying opportunity. However, Nvidia has done so well over the past few years that other investors are concerned that it may have reached its top. So, which of these two camps is right? I think that the most recent dip looks like a buying opportunity. But even if the shares reached all-time highs tomorrow, buying the stock would still be a good decision. Nvidia has been one of the largest beneficiaries of the artificial intelligence (AI) competition. Its graphics processing units (GPUs) are best-in-class products and crucial to creating these powerful AI models. GPUs are better suited for these complex computing tasks because they can process multiple calculations in parallel. They can also be connected in clusters to multiply this ability, allowing them to process the most arduous computing tasks at unreal speeds. GPUs aren't only good for processing AI models. They can also be deployed to process engineering simulations, develop new drugs, mine cryptocurrency, and process graphics on computers (their original intended use). However, AI has been the biggest use case for this hardware by far, and how that trend goes, so will Nvidia. Its revenue has skyrocketed over the past few years, but all indications are that it will continue to rise throughout fiscal 2026 (ending January 2026). Many of the AI hyperscalers -- companies that are spending a massive amount of money to win the AI competition -- have indicated that their spending will rise from 2024's levels, which Nvidia will benefit from. Upstream, the company's chip manufacturer, Taiwan Semiconductor Manufacturing, gave guidance for strong revenue growth and increased capital expenditures to meet the demand for chips for high-powered computing hardware like Nvidia's GPUs. As a cherry on top, Wall Street analysts project Nvidia's revenue to rise by 52% in fiscal 2026. That's incredible growth, and it will bring total annual revenue to nearly $200 billion versus its current trailing-12-month total of $113 billion. This growth story isn't finished, and there are no indications that the company has fully saturated the market with its products. Still, if the stock isn't priced right, then there may not be room for more upside. Nvidia is a fully mature company, so the best way to assess the stock's valuation is to look at its earnings. From a trailing earnings perspective, the stock isn't the cheapest at 54 times trailing earnings. However, considering that it is expected to grow so much over the next year, using trailing earnings may be a flawed metric. If we value the stock based on fiscal 2026 earnings, it trades for 31 times earnings. That's right in line with where many other big techs trade, so Nvidia actually isn't overpriced right now -- it's right in line with its peers. This can give investors confidence to buy it right now, even if the stock goes back to all-time highs. The AI trend is far from over, and Nvidia is expected to benefit from increased spending. Even though the stock has done remarkably well over the past few years, there's still room for more upside, and I project that it will still beat the market for years to come.

Better Artificial Intelligence (AI) Stock: Nvidia vs. SoundHound AI | The Motley Fool

Will 2025 be the year that the king of the artificial intelligence (AI) sector is dethroned? To be sure, chipmaking giant Nvidia (NVDA 3.10%) isn't likely to take a trip to the dungeon. But with its market cap already above $3.3 trillion, some investors might reasonably wonder if Nvidia's growth rate will slow down this year. For growth stock investors, that could be the most important question. And if so, what up-and-coming AI companies might be better options for aggressive investments in 2025? One obvious place to look would be among the companies Nvidia itself has invested in. SoundHound AI (SOUN -2.36%) is one such company, and its stock broke out last year. After a sharp pullback recently, investors might wonder if this is a good time to buy shares of this maker of voice recognition AI technology solutions. Nvidia has achieved its massive market cap valuation on more than just potential and promise. Its revenue and earnings per share have soared over the past three years, and the stock price kept pace. Demand for Nvidia's advanced chips and architecture for building and training large language models (LLMs) and other AI applications remains strong. The company has said it will henceforth introduce new graphics processing unit (GPU) chips on an annual cadence. Its backlog is filled with orders for its new Blackwell chips even as it continues to satisfy demand for GPUs made with its previous Hopper architecture. Sales growth is expected to continue as hyperscalers build more data centers and as Nvidia's next-generation Rubin AI chip architecture is due out next year. However, the pace of revenue growth from Nvidia's data center segment has already meaningfully slowed from year-ago levels. Data source: Nvidia. Chart by author. Note: Fiscal 2023's Q4 ended Jan. 29, 2023, which was the first quarter following the announcement of OpenAI's ChatGPT. Fiscal 2025's Q3 ended Oct. 27, 2024, and is the latest data available. That's not to say that there won't be new opportunities for Nvidia to reaccelerate its revenue growth rates, but aggressive investors might want to look at other AI stocks, too. in the final quarter of calendar year 2023, Nvidia bought 1.73 million shares of SoundHound AI's stock (valued at about $3.6 million at the time). It has proven to be a good investment thus far. SoundHound AI stock is up by more than 650% over the last year, even after a meaningful drop of more than 40% since Christmas. The growing optimism comes as SoundHound has expanded its market potential. What started with voice technology applications in customer service sectors such as restaurants has expanded to other areas, including automotive use cases for voice generative AI bringing cloud-based LLMs into vehicles. Most recently, SoundHound announced it will supply a new hands-free voice assistant for electric vehicle (EV) maker Lucid's luxury vehicles. Management saw sales growing fast enough to increase its 2024 revenue guidance by nearly 20% in just the six months between its first-quarter and third-quarter reports. The company outlook for 2025 is that sales will double to $165 million at the midpoint of its guidance range. Any business that's doubling its sales year over year is one that should interest investors. But a fledgling company like SoundHound AI also comes with higher risks. It still isn't profitable, and its cash position dropped from $226 million on March 31, to $136 million as of Sept. 30. That elevated risk tilts the balance of an investment decision in Nvidia's favor, in my opinion. SoundHound AI could be a rewarding investment from here, but Nvidia still can be too. Nvidia still has growing revenue and profits. In addition to the innovative GPU products it continues to roll out, it has robotics and automotive segments that haven't yet meaningfully contributed to earnings. However, self-driving vehicles and robots designed to boost efficiency in many industries could go mainstream in the coming years. Those prospects give Nvidia investors added opportunities for growth, and help make it the better investment, even at its current stage and valuation.

Top AI Stocks to Buy as Tech Investors Reassess

Top AI Stocks to Buy - As the technology sector undergoes a significant reassessment, investors are closely evaluating artificial intelligence (AI) stocks to identify opportunities that align with the evolving market landscape. The integration of AI across various industries has positioned several companies at the forefront of innovation, making them attractive prospects for investment. NVIDIA has solidified its position as a leader in AI hardware with GPUs that power AI computations across industries. As of January 16, 2025, NVIDIA's stock price stands at $136.24, reflecting a 3.44% increase from the previous close. Analysts remain optimistic about NVIDIA's growth potential, citing its role in advancing AI applications, from autonomous vehicles to data centers. Despite a highly competitive market, NVIDIA continues to benefit from its dominance in AI hardware and its expansion into software services.

3 Millionaire-Maker Artificial Intelligence (AI) Stocks | The Motley Fool

Artificial intelligence (AI) has been referred to as a generational opportunity by leadership at some of the top tech companies in the world. While some of the benefits are already beginning to be felt, AI still looks to be in the early stages of its development as a revolutionary technology. Given that there is still a long way to go in AI's development, there is also seemingly plenty of opportunity left for companies to benefit and potentially help make investors who get in early into millionaires. Let's look at three stocks across AI infrastructure, cloud computing, and software that could push a millionaire-making portfolio to its goal over the long haul. Nvidia (NVDA 3.10%) has been one of the biggest AI winners thus far, but that doesn't preclude it from continuing to be a big winner. Computing power is paramount for training large language models (LLMs) and running inference needed for AI's development and operations. Nvidia's graphics processing units (GPUs) have proven to be one of the best chips to accomplish these tasks. One of two big GPU designers, Nvidia has been able to take a dominant market share of nearly 90% in the space with the help of its CUDA software platform, which makes it much easier to program GPUs for various AI tasks. As such, Nvidia's GPUs have become the backbone of AI data center infrastructure, which continues to grow at a rapid pace. As companies look to train more sophisticated LLMs, they need exponentially more computing power. Some of the latest versions of AI models require 10 times as many GPUs as their prior versions in order to accomplish their computationally intensive tasks. There are indications that there could be LLMs requiring 1 million AI chip clusters in the near future. Meanwhile, AI infrastructure remains robust, with Nvidia's largest customer Microsoft recently announcing it would spend an astonishing $80 billion building out data centers in 2025. Other large tech companies have also indicated that they plan to increase their AI-related spending this year. With no end currently in sight for AI infrastructure spending, Nvidia continues to look like a long-term winner. Meanwhile, the stock is attractively priced with a forward price-to-earnings (P/E) ratio of below 30 and a price/earnings-to-growth ratio (PEG) under 1, which generally indicates a stock is undervalued. Alphabet (GOOGL 1.60%) (GOOG 1.62%) is hoping to be an AI winner in several areas. The company has already seen strong growth in its cloud computing unit, Google Cloud, which saw its revenue jump 35% last quarter, as it helps customers build out their own AI models and applications. Meanwhile, the high-fixed-cost business has grown to a point where it is now profitable. As a result, segment income surged from $266 million in the year-ago quarter to $1.95 billion in the third quarter of 2024. Within the data center segment of its business, Alphabet has also designed its own custom AI chips with the help of Broadcom. By using these custom tensor processing units (TPUs) in combination with GPUs, Alphabet is improving AI inference processing times and lowering costs for its users and clients. That could help give the segment even more operating leverage. In addition, Alphabet has a nice opportunity with AI search and its Gemini AI assistant app. The company historically has only served ads on about 20% of its searches, so eventually monetizing its AI Overviews and Gemini app results would be a nice future opportunity. The company has also taken the lead in multimodal AI, with things such as text-to-video generation and visual search. The company is also a leader in some other AI-adjacent emerging technologies including quantum computing and autonomous driving. The stock, meanwhile, is attractively valued, trading at a forward P/E of 19 times. While AI infrastructure and cloud computing companies have seen the biggest revenue growth, agentic AI could be the next big wave. The AI getting the most attention at the moment has been generative AI, where AI can produce images, sound, or text in response to a user query. Agentic AI takes that a step further -- AI agents can go out and autonomously perform tasks within given parameters with little human supervision. Salesforce (CRM 1.43%) is looking to be at the forefront of agentic AI with its new Agentforce solution. The company already has a large customer base with its customer relationship management (CRM) software platform, and it will look to upsell these customers to its new AI agents. The company will have a number of out-of-the-box agents that can perform tasks in such areas as customer service, sales and marketing, and recruiting, while they will also be customizable through its no-code and low-code tools. Released only in October, Agentforce has grown quickly, with the company saying it had more than 1,000 deals in place in mid-December. It projects to have 1 billion agents in force in fiscal 2026 (ending January 2026). Agentforce is a consumption product that costs $2 per conversation, so the more useful customers find its agents, the more upside it has. Salesforce currently trades at a forward price-to-sales (P/S) ratio of 7.4 times fiscal 2026 analyst estimates, which is very reasonable given the opportunity in front of it.

Nvidia could be a big winner from Trump's Stargate AI project. How to maximize profit in the trade

We have an exceptional opportunity to invest in Nvidia (NVDA) after President Donald Trump's announcement of the Stargate project, a major initiative aimed at advancing AI technology. NVDA, with its cutting-edge GPU technology, stands at the forefront of AI, machine learning, and high-performance computing, making it a prime candidate to leverage this project. As the initiative seeks to enhance national security, healthcare, and economic competitiveness through AI, NVDA's expertise in these areas positions it for substantial growth. If we look at the chart of NVDA, it has traded within a range of $130 and $150 since October and is primed for a potential breakout to the upside. The stock's momentum (RSI) suggests that there is substantial room for further appreciation in the short run. And based on the size of the rally into the trading range, a breakout to the upside would target $180 as our initial upside target. Fundamentally, NVDA is significantly undervalued. While NVDA trades at a premium relative to its peers of 31 times forward earnings compared to the industry median of 20 times, its superior growth metrics and profitability justify this valuation. NVDA boasts an expected EPS Growth of 65% (industry: 14%) and expected revenue growth of 57% (industry: 7%). Additionally, its industry leading net margins stand at an impressive 56% against the industry's 20%. These figures highlight NVDA's capability to outpace competitors in profitability and growth, suggesting that despite its premium valuation, there remains substantial upside potential. NVDA's Superior Financials: Forward PE Ratio: 31.16x vs. Industry Median 19.76x Expected EPS Growth: 64.73% vs. Industry Median 13.67% Expected Revenue Growth: 57.44% vs. Industry Median 6.71% Net Margins: 55.69% vs. Industry Median 19.87% The trade To capitalize on NVDA's potential in relation to Project Stargate, we suggest using a bullish call spread. Specifically, buying the Mar $141/$165 call vertical at a $7.63 debit. This entails: Buying the Mar $141 Call for $11.33 Selling the Mar $165 Call for $3.70 This trade structure offers: A maximum reward of $1,637 per contract if NVDA is above $165 at expiration. A maximum risk of $763 per contract if NVDA is below $141 at expiration. The breakeven point is at $148.63, calculated as the lower strike plus the net debit paid. (View this Trade with Updated Prices at OptionsPlay.) This strategy positions you to benefit from NVDA's expected growth driven by Project Stargate's focus on AI, providing leverage on the stock's movement while capping the downside risk to the premium paid. With NVDA's strong technical setup and superior fundamentals, this trade aligns well with the optimistic outlook for the company's future under the influence of this significant government initiative. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.

These 2 Artificial Intelligence (AI) Stocks Are Outpacing Nvidia's, and They Can Still Soar Higher | The Motley Fool

Nvidia stock has been one of the biggest winners of the artificial intelligence (AI) revolution in the past couple of years, clocking remarkable gains of nearly 800% over the past two years on account of the red-hot demand for its data center graphics cards, but the past three months have been difficult for the chipmaker. Shares of the semiconductor giant are down 1% over the past three months. That's a bit surprising considering that Nvidia delivered an outstanding set of results during this period that beat Wall Street's expectations. What's more, Nvidia's guidance was also better than what analysts were looking for. However, concerns about Nvidia's ability to sustain its outstanding growth, its valuation, and the short-term margin pressure that will be created by the ramp-up of its latest generation of Blackwell processors seem to be weighing on the company's stock price. Meanwhile, two other little-known chip companies have received a big boost in the past three months thanks to the positive impact of AI on their businesses: Ambarella (AMBA 3.34%) and Lumentum Holdings (LITE 5.65%). While Ambarella stock has jumped 25% in the past three months, Lumentum has appreciated nearly 23%. Their gains have been better than what Nvidia has delivered during this period, and the good part is that the AI-focused growth drivers of both of the smaller chipmakers are just kicking in. Let's check out how AI is turning out to be a catalyst for Ambarella and Lumentum. The chips that Ambarella designs are deployed in automotive and Internet of Things (IoT) applications. The company is primarily known for its computer vision chips that process images and video, and it is now finding applications in the field of AI as well. According to one estimate, the size of the AI computer vision processor market could grow from $17.2 billion in 2023 to $45.7 billion in 2028 thanks to the growing demand from multiple verticals such as automotive, security and surveillance, and consumer electronics applications. Ambarella's product portfolio already includes chips capable of processing AI workloads in these applications. For instance, the company's CV5 processor that's based on an advanced 5-nanometer (nm) process node can run AI-based algorithms in automotive cameras, consumer cameras, and even robotics. Not surprisingly, the company is witnessing an increase in demand for this processor. CEO Fermi Wang remarked on the company's November 2024 earnings conference call that its new higher-priced AI inference processors, such as the CV5, are driving record AI revenue and also contributing toward a higher average selling price (ASP). The good part is that Ambarella expects the robust demand for CV5 to continue in fiscal 2026, which will begin next month. Additionally, the company estimates that the demand for its CV7 family of AI vision processors will pick up from the new fiscal year. More importantly, this solid demand is translating into outstanding growth for Ambarella. Its revenue in the third quarter of fiscal 2025 (which ended on Oct. 31, 2024) increased an impressive 63% year over year to $82.7 million. The chipmaker also swung to an adjusted profit of $0.11 per share from a loss of $0.28 per share in the year-ago period. Ambarella's fiscal Q4 guidance of $78 million would translate into a 51% increase in its revenue from the year-ago quarter. The company is on track to finish fiscal 2025 with total revenue of $279 million, which would be a 23% improvement from the previous fiscal year. Its loss is expected to shrink to $0.30 per share from $0.83 per share in fiscal 2024. As the following chart shows, Ambarella's top and bottom lines are on track to improve further over the next couple of fiscal years, with the company expected to report an adjusted profit per share in fiscal 2027. The overall AI computer vision market is set for impressive growth over the next three years, so it won't be surprising to see Ambarella deliver the healthy growth that Wall Street is expecting from it. The company could be able to sustain its positive momentum for a longer period as well since it claims to have an automotive revenue pipeline of $2.2 billion through fiscal year 2031. If you throw in the prospects of AI computer vision processors in other areas such as consumer cameras and security applications, Ambarella may have enough room to grow its business significantly in the long run. The growing demand for high-speed data transmission in AI servers is driving robust growth in the networking equipment market. According to Morningstar, the spending on generative AI networking equipment could increase at an annual rate of 34% between 2023 and 2028, generating $34 billion in annual revenue at the end of the forecast period. Lumentum Holdings is already benefiting from this trend, witnessing a nice turnaround in its financial performance last quarter. The company's revenue in the first quarter of fiscal 2025 (which ended on Sept. 28, 2024) increased 6% year over year to $337 million. While that may not seem very impressive at first, investors should note that Lumentum's top line was down 23% in fiscal 2024 owing to soft demand from the cloud and networking and industrial segments. However, things have started changing for the better thanks to AI. Its cloud and networking revenue jumped 23% year over year in fiscal Q1 2025, offsetting the weakness in the industrial business. With cloud and networking now producing nearly 84% of Lumentum's top line, this business is set to drive stronger growth for the company. Lumentum points out that its cloud customer base is growing with the addition of new hyperscale customers that are placing orders for its lasers that are used in fiber-optic cables to enable high-speed data transmission in AI servers. What's more, Lumentum is busy expanding its manufacturing capacity so that it can fulfill more orders. These favorable developments explain why Lumentum's revenue estimate of $390 million for the current quarter would again be an improvement of 6% over the prior year. Even better, analysts are expecting the company's growth rate to improve as the year progresses. Consensus estimates are projecting a 17% jump in Lumentum's revenue for fiscal 2025 to $1.59 billion, which is expected to be followed by even stronger growth in the next fiscal year. The robust top-line growth is expected to filter down to the bottom line, with Lumentum's earnings expected to jump by 56% in the current fiscal year to $1.58 per share followed by healthy growth in the next couple of years as well. It won't be surprising to see the market rewarding this tech stock with more upside thanks to its improving earnings power. That's why it isn't too late for investors to buy Lumentum Holdings as its cloud and networking business seems set for better times ahead thanks to AI.

This Artificial Intelligence (AI) Stock Is Already Down 10% in 2025, but Wall Street Analysts Believe That It Could Soar Impressively | The Motley Fool

Enterprise artificial intelligence (AI) software provider C3.ai (AI -0.93%) is off to a shaky start in 2025. Shares of the company have fallen 10% this year, though there has been no company-specific news of note that could have triggered this pullback. However, this seems like an opportunity for investors to add a promising AI stock to their portfolios. Let's examine the reasons behind the potential long-term and 2025 gains from a C3.ai investment. C3.ai may not have got off to an auspicious start in 2025, but it has a consensus 12-month price target of $40 from 15 analysts covering the stock. That points toward a 29% jump from current levels. The good part is that it won't be surprising to see C3.ai indeed delivering such gains in the coming year. After all, C3.ai's growth has picked up nice momentum in recent quarters. The company's revenue in the first six months of fiscal 2025 (which ended on Oct. 31, 2024) increased almost 25% year over year to $181.5 million. That's a big jump over the 14% year-over-year revenue growth that C3.ai delivered in the first six months of the preceding fiscal year. This solid acceleration in C3.ai's growth can be attributed to the growing demand for the company's multiple generative AI-focused offerings. It gives customers access to applications that serve multiple industries, provides them with a software platform they can use to develop custom AI applications, and helps organizations deploy generative AI assistants to improve their operational efficiency. C3.ai offers its AI software through major cloud service providers such as Alphabet's Google Cloud, Microsoft Azure, and Amazon Web Services. More importantly, C3.ai has been able to deepen its ties with these big names, with the company announcing a strategic alliance with Microsoft in November 2024 that could help expand the reach of its generative AI offerings. Moreover, C3.ai management remarked on the company's December 2024 earnings conference call that existing customers are expanding their relationships. Additionally, C3.ai's enterprise AI software offerings are gaining traction among government agencies in the U.S. This should ideally unlock a new growth opportunity for the company given that the adoption of this technology for government applications could increase at a compound annual growth rate of 20% through 2033, generating up to $78 billion in revenue annually at the end of the forecast period. Meanwhile, the global generative AI software market is expected to generate $52 billion in annual revenue by 2028, as compared to $5.1 billion in 2023. C3.ai is currently at the beginning of a terrific growth curve as it expects to generate $388 million in revenue in the current fiscal year, which would be a 25% increase over the previous fiscal year. Even better, analysts expect C3.ai to maintain its double-digit revenue growth rate over the next couple of fiscal years as well. AI Revenue Estimates for Current Fiscal Year data by YCharts. C3.ai's pullback this month is the reason why the stock is now trading at 11 times sales, which is relatively cheaper than the 14 times sales it was trading at just a month ago. AI PS Ratio data by YCharts. The stock's current sales multiple is very close to its five-year average sales multiple of 10. C3.ai can justify this sales multiple, which is slightly higher than the U.S. technology sector's sales multiple of 8, with strong growth in the coming years. Assuming C3.ai is able to maintain a price-to-sales ratio of 10 after three years and generates $553 million in revenue in fiscal 2027, as we saw in the first chart, its market cap could hit $5.5 billion. That would be a 37% increase from current levels in the next three years. However, analysts have raised their growth expectations for the company in recent months, a trend that could continue in the future thanks to the fast-growing nature of the market that the company is operating in. As a result, stronger gains are possible, since the market could reward C3.ai with a higher sales multiple if it delivers better-than-expected revenue growth. So, savvy investors looking to add an AI stock to their portfolios would do well to keep C3.ai in their sights. The company's accelerating growth and a relatively cheaper valuation than a well-known peer make it an attractive investment at current prices.

AI Agents Are Coming in 2025. Here's My Top Stock Pick To Capitalize on the Next Wave of AI Investing. | The Motley Fool

Generative artificial intelligence (AI) is an incredible technology, and we've only scratched the surface of its potential. Currently, it's being used as a program on the side of normal work, but it's about to enter a new phase: Agentic AI. Agentic AI, often called AI agents, involves setting up software programs to do tasks that humans normally do. This next phase in implementing AI is critical, as it will allow those at the cutting edge to do more with fewer resources. One of the leaders in agentic AI is Salesforce (CRM 1.43%). The software company is making a heavy push to promote and integrate agentic AI, and it also has one of the best platforms for implementing it. Salesforce makes customer relationship management (CRM) software. CRM is an incredibly broad sector but can generally be summarized as a business interaction with a potential customer from the marketing stage to after-sale support. There's a lot that happens between those two points, and Salesforce software is there to offer support along the way. Many customer interactions can be automated by AI agents, which is why agentic AI is such a massive trend for Salesforce. As with most software-as-a-service (SaaS) companies, the more add-ons you have from the base software package, the more expensive it gets. This unlocks another milestone for the generative AI trend; we're reaching a point where many companies are starting to monetize their AI investments. Salesforce's CEO and co-founder, Marc Benioff, is extremely bullish on agentic AI. During the company's 2024 Dreamforce conference, he stated, "This is what AI was meant to be." That's a big statement, but the ability for companies to become more efficient and free their workers up to do tasks that require original thinking will be a huge change for many in the workforce. However, does this one technology have the ability to drive Salesforce's stock to new heights? Salesforce is a mature software company that started to shift from growth-at-all-costs to maximizing profitability a few years ago. However, its sales growth has been a bit slow, by most software company standards, over the past few quarters. In its fiscal 2025's third quarter (ended Oct. 31), revenue was up 8% year over year to $9.44 billion. Earnings per share (EPS) were $1.60 versus $1.26 a year ago -- a 27% gain. EPS growth outpaced revenue growth because of Salesforce's rising margins. During last year's third quarter, Salesforce posted operating margins of 17.8%. This year, it delivered 20.6% operating margins. This will be a key trend to watch, as some of the most profitable software companies can reach profit margins of up to 30%. It will likely be some time before Salesforce can reach that level (if it can), but shareholders will be elated if it does. Right now, Salesforce stock trades at 32 times forward earnings, so it's far from cheap, especially with its current growth rate. Salesforce needs agentic AI to drive further revenue growth to justify its current price tag, but its platform currently has one of the most logical use cases for agentic AI. As a result, Salesforce will be a key company to watch to see how successful this agentic AI push is. I think it will be a huge success and help Salesforce deliver faster sales growth. We won't know how well this trend turns out for a few more quarters, but I'm optimistic that Salesforce will see a massive benefit from this push, making it a top pick in the AI investing world.