The Rise of Agentic AI: Key Players and Investment Opportunities in 2025

2 Artificial Intelligence Stocks You Can Buy and Hold for the Next Decade | The Motley Fool

Artificial intelligence (AI) stood out as a major investing theme in 2024, but this isn't just a short-term trend. AI takes time to develop and apply to the real world, and we're still in the early days of this growth story. Last year, the focus was on building out AI infrastructure, and that continues. As we move into the next stage of growth, companies will apply AI more and more to their businesses. We're seeing this already with the development of agentic AI, or software that can consider a problem, find solutions, and apply them. Analysts predict that today's $200 billion AI market will reach beyond $1 trillion by the end of the decade, suggesting significant revenue growth may be ahead for certain players in the space. All of this means that AI represents a long-term investing opportunity -- as long as you choose stocks that may benefit from every stage of this AI growth. Let's check out two to buy and hold for the next decade. Meta Platforms (META 1.74%) hasn't been shy about its AI ambitions. The company said the technology was its biggest investment area in 2024 and, in the most recent earnings call, suggested it would increase spending on AI infrastructure this year. CEO Mark Zuckerberg says he aims to design AI assistants for every user of Meta apps -- that's Facebook, Messenger, Instagram, and WhatsApp -- spanning the areas of leisure and professional activities. The company got started by launching its first assistant, Meta AI, and said adoption has been rapid. The tool now has more than 500 million monthly active users. Meta's very own large language model, Llama, powers Meta AI, and Meta has made Llama open source -- a decision that allows anyone to use and contribute to its development. This move could help Meta set the standards in this technology and potentially emerge as a leader over time. How does all of this equal revenue growth? Meta's launch of assistants or other products may spur users to spend more time on its apps, which should encourage advertisers -- its biggest source of revenue -- to increase advertising on these platforms to reach us where they know they'll find us. And Meta's focus on AI could lead to the development of additional revenue-generating products down the road. Meta is an AI player that's here to stay, and the company is already profitable and generating revenue growth through its social media business. So, the stock makes a great long-term addition to any growth portfolio. Amazon (AMZN -0.24%) is already winning in the world of AI -- in two ways. First, the company applies AI to improve efficiency and the user experience across its e-commerce business. Second, it sells AI tools to customers through its Amazon Web Services (AWS) cloud computing unit. Let's talk about each one. I probably don't have to tell you that Amazon is an e-commerce giant, generating billions of dollars in revenue and profit quarter after quarter. But to keep this great earnings picture going, the company has to focus on keeping costs down, and AI is helping it do just that. For example, the technology helps the company better manage inventory and determine the shortest delivery routes. Amazon has also launched AI tools, such as the Rufus shopping assistant, for shoppers. Helping customers save time is essential, and this could keep them coming back. Now, let's move on to AWS, the world's leading cloud service provider. This unit has generally been Amazon's profit driver, and thanks to AI, this is likely to continue. AWS' AI platform helped the cloud business reach a $110 billion revenue run rate last year. The cloud provider is winning in AI because it offers customers a broad variety of AI products and services -- across price points. Cost-conscious customers can opt for Amazon's own AI chips, and others with bigger budgets can find premium graphics processing units (GPUs) from market leaders like Nvidia. AWS provides everything from the chip to a fully managed AI service called Amazon Bedrock. Finally, through Bedrock, customers can even build AI agents -- meaning Amazon is also setting itself up for a win in this next phase of AI growth. So, now is a great time to add Amazon to your portfolio and hang on as this long-term AI story develops.

Prediction: These 2 "Magnificent Seven" Stocks Will Be AI's Biggest Winners by 2030 (Hint: Neither One Is Nvidia) | The Motley Fool

Artificial intelligence (AI) has garnered so much attention over the past couple of years. Experts believe this is a game-changing technology that will impact virtually all industries one day. Investors, unsurprisingly, want to get in on the action. Nvidia (NVDA -3.12%) has been the standout performer of the AI revolution. Its shares have absolutely skyrocketed, rising 2,270% in just the past five years. As of Jan. 22, this is the world's most valuable company with a market cap of $3.6 trillion. There's no doubt Nvidia deserves credit for how well it's positioned in the industry. But looking out five years to 2030, I believe two other "Magnificent Seven" stocks will end up being AI's biggest winners. Nvidia sells graphics processing units that support AI infrastructure. It has a monopoly position in the market for data center chips, its top business line, which generated 88% of company revenue in the fiscal third quarter of 2025 (ended Oct. 27). That figure was up 112% year over year, demonstrating insatiable demand for these powerful chips. This business has become the premier way to invest in the AI trend. That's because it's a picks-and-shovels play, benefiting from the growth of the overall industry. But there are some red flags hiding in plain sight. Nvidia deals with customer concentration. It's believed that a handful of companies, a list that probably includes Amazon, Alphabet (GOOGL 1.13%) (GOOG 1.16%), Meta Platforms (META 1.74%), and Microsoft, account for a sizable portion of revenue. The issue, though, is that these so-called hyperscalers are all working on their own chips to power their own AI applications. They have the cash and technical know-how to integrate upstream, which could seriously hurt demand for Nvidia in the future. Additionally, investors need to think about what happens in an economic downturn. Spending on technology is such a huge part of the economy that there will surely be a major pullback in a recessionary scenario. Nvidia would likely take a hit in this situation, which leads to sizable downside for what is an expensive stock. The two businesses that I believe will be AI's top winners by 2030 are Alphabet and Meta Platforms. These are already dominant enterprises that each serve billions of users, which is a key advantage. This supports the view that AI success stories might mostly come from companies that have long been thriving, letting the technology enhance their offerings. Having a massive user base provides an immediate audience to constantly introduce AI features to, with instant feedback. This can inform further product upgrades and iterations. And while Nvidia's revenue is concentrated in a relatively small number of customers, both Alphabet and Meta each have millions of customers using their ad platforms to target users. Not having customer concentration is a positive trait. Alphabet and Meta possess powerful network effects. Google Search and YouTube get better as more people use these services. The same is true of Meta's social media apps. There aren't many businesses as financially sound as these two, either. Both generate billions of dollars in free cash flow each quarter, allowing them to operate with strong balance sheets that facilitate aggressive growth investments. Having access to a massive amount of data to train AI models is critical to improve their functionality. Here's where Alphabet and Meta shine. They might have the two largest data repositories on the face of the planet, ranging from search queries to social interactions to even video, with Alphabet's YouTube and Meta's Reels, for example.

A Once-in-a-Decade Investment Opportunity: The Best AI Stock to Buy in 2025, According to a Wall Street Analyst | The Motley Fool

Dan Ives at Wedbush Securities made a number of prescient calls last year. Perhaps most impressive was his prediction that the Nasdaq Composite would reach 20,000 in 2024 as the artificial intelligence boom drove technology stocks higher. Ives remains bullish in 2025. The first three industrial revolutions were driven by technological innovations in steam power, electricity, and microprocessors, and Ives sees AI as the driving force behind the fourth industrial revolution. Investment opportunities of that magnitude come along maybe once in a decade, perhaps even less often. Importantly, during a recent Bloomberg interview, Ives selected Nvidia (NVDA -3.12%) as his top stock pick for 2025 due to the company's central role in the artificial intelligence economy. Read on to learn more. Nvidia graphics processing units (GPUs) are the industry standard in accelerating complex data center tasks like training large language models and running artificial intelligence (AI) applications. Analysts estimate the chipmaker has between 70% and 95% market share in AI accelerators. And Forrester Research says, "Without Nvidia's GPUs, modern AI wouldn't be possible." In a recent note, Joseph Moore at Morgan Stanley wrote, "The market tends to underestimate the difficulty of competing with Nvidia." Indeed, analysts generally expect the company to maintain its dominance for at least two to three years. One reason for that confidence is Nvidia's CUDA platform, a robust ecosystem of code libraries and pretrained models that simplifies the development of AI applications. Another reason for that confidence is the company's full-stack approach to accelerated computing. Nvidia is best known for GPUs, but its product portfolio also includes central processing units (CPUs), interconnects, and networking equipment. That vertical integration lets the company build systems with a superior total cost of ownership, according to CEO Jensen Huang. Christopher Rolland at Susquehanna recently wrote, "Nvidia has become the world's de facto enabler of AI." He attributed that success to vertical integration spanning chips, adjacent data center hardware, and software. Overcoming that advantage is more complicated than developing better accelerators. Instead, competitors would need an entire ecosystem of hardware and software comparable to what Nvidia offers. Dan Ives recently wrote on X (the platform previously known as Twitter), "The AI revolution is entering a new stage of growth and Nvidia and Jensen continue to be the foundation for this 4th industrial revolution." Also, in a recent CNBC interview, Ives identified two catalysts that could send Nvidia shares higher: the Blackwell GPU and physical AI. Blackwell is Nvidia's next-generation GPU architecture. Compared to the previous Hopper generation, Blackwell can complete AI training tasks up to four times faster and AI inference tasks up to 30 times faster. Production of Blackwell started to ramp up in the fourth quarter of fiscal 2025, which ends in January 2025, so Nvidia should see substantial revenue from the new chip this year. CEO Jensen Huang believes, "The Blackwell architecture platform will likely be the most successful product in our history and even in the entire computer history." He also told attendees at the 2025 CES, "The next wave of AI is here. Robotics powered by physical AI will revolutionize industries." Ives believes Nvidia has a $1 trillion opportunity in physical AI as self-driving cars and robotics become sizable markets in the next decade. Importantly, Nvidia has already positioned itself to be a long-term winner. Like its strategy with generative AI, the company has a full-stack computing solution for autonomous robots spanning data center infrastructure, software development tools, and embedded processors. Dan Ives is not alone in selecting Nvidia as a top stock pick for 2025. Harsh Kumar at Piper Sandler recently wrote, "We are making Nvidia our top large-cap pick given the company's dominant position in AI accelerators and the upcoming launch of the Blackwell architecture." Wall Street expects Nvidia's adjusted earnings to increase by 39% annually through fiscal 2027, which ends in January 2027. That makes the current valuation of 55 times adjusted earnings look very reasonable. But Ives believes that the consensus figure underestimates earnings by as much as 30% over the next few years. Whether he is correct or not, investors with a time horizon of three to five years should feel comfortable buying a small position in Nvidia today. However, investors should not limit themselves to a single "best" AI stock. It would be more prudent to build a basket of AI stocks that cover different areas of the AI economy, such as data center infrastructure, cloud services, and software.

My Top 2 Artificial Intelligence (AI) Stocks for 2025 (Hint: Nvidia Is Not One of Them) | The Motley Fool

Global spending on artificial intelligence (AI) is expected to remain solid in 2025, with market research firm IDC estimating that organizations are likely to pour $337 billion into this technology as they integrate AI tools into their business operations. Notably, IDC estimates that 67% of the projected AI spending this year "will come from enterprises embedding AI capabilities into their core business operations, surpassing investments in leading cloud and digital service providers." At the same time, cloud computing giants are set to continue spending big money on building out their AI infrastructure. Nvidia has been at the forefront of the AI boom with its powerful graphics processing units (GPUs) that have helped major tech giants train large language models (LLMs). And there is a good chance that the chipmaker will continue to witness impressive growth in its revenue and earnings. However, we will take a look at two other names that are also on track to benefit from the proliferation of AI in different verticals and see why they can turn out to be top AI picks for 2025. While Nvidia is dominating the market for AI GPUs, Broadcom (AVGO 1.84%) is leading the charge in application-specific integrated circuits (ASICs). These are custom chips that can be programmed to perform specific tasks, unlike GPUs that can perform multiple tasks and are used for general computing purposes. The specific nature of ASICs makes them more energy-efficient and adept at tackling the tasks they are designed to do. This explains why cloud computing giants are using Broadcom's custom AI processors, known as XPUs, to power their data centers. Reports suggest that Broadcom could be manufacturing chips for Meta Platforms, Alphabet's Google, TikTok parent ByteDance, and OpenAI. It has now emerged that even Apple could tap Broadcom to manufacture its AI server chip. Broadcom management pointed out on the company's December 2024 earnings conference call that it is supplying its custom AI chips to three cloud hyperscale customers. The company notes that these customers are on track to deploy one million of its custom AI chip clusters over the next three years. Additionally, Broadcom says it has "been selected by two additional hyperscalers and [they] are in advanced development for their own next-generation AI XPUs." This expanding AI customer base could lead to outstanding financial growth for Broadcom over the next three years. That's because the chipmaker sees its addressable market in AI reaching a range of $60 billion to $90 billion in fiscal 2027. For comparison, Broadcom's AI revenue stood at $12.2 billion in the recently concluded fiscal 2024, which was a massive increase of 220% from the preceding year. The size of the addressable market suggests that AI is likely to supercharge Broadcom's growth in 2025 and beyond, especially considering that it controls an estimated 55% to 60% of the ASIC market, as per JPMorgan. Not surprisingly, analysts have raised their revenue estimates for the current and the next two fiscal years. However, Broadcom may be able to deliver stronger growth than analysts expect following the potential addition of new customers. In addition, its price/earnings-to-growth ratio (PEG ratio) stands at just 0.7 right now based on its estimated earnings growth for the next five years, as per Yahoo! Finance. A PEG ratio of less than 1 means that a stock is undervalued with respect to the earnings growth that it is expected to deliver, suggesting that growth investors can still consider buying Broadcom even after the impressive 108% gains that it has delivered in the past year. While the likes of Broadcom and Nvidia produce chips that allow major cloud computing companies to train LLMs, Snowflake (SNOW -0.47%) gives customers an avenue to consolidate their data into a single platform. Its customers can then use this data to build generative AI apps, gain insights into their data, or solve business-related challenges by applying AI to that data. So, Snowflake has a huge addressable market to tap in 2025, considering that IDC is expecting a big chunk of AI spending to go toward embedding AI capabilities in businesses' operations. The good part is that Snowflake's AI-focused solutions are already gaining healthy traction among customers. The company's Cortex AI platform, for instance, is "showing significant adoption," as per management. Customers can use Cortex AI to analyze their data and build generative AI apps, find specific information within documents, and get access to popular LLMs such as Llama and Anthropic Claude. As it turns out, over 3,200 of Snowflake's customers are already using its AI and machine learning (ML) features. That's impressive, considering that Snowflake started rolling out its AI offerings in mid-2023, and it has continued to add more services so it can give users access to a wider range of tools. The company has also made a move into the fast-growing market for AI agents as well with the Snowflake Intelligence platform, which was announced in November last year. This platform will enable enterprises to create AI agents, which can analyze and summarize data in a secure environment and then take action using those insights. With the agentic AI market expected to clock an estimated revenue of $45 billion in 2025, Snowflake's AI-focused addressable opportunity should ideally expand. As a result, there is a solid chance that the company will be able to clock better-than-expected growth going forward. After all, Snowflake's remaining performance obligations (RPO) shot up an impressive 55% in the third quarter of fiscal 2025 (which ended on Oct. 31, 2024) to $5.7 billion. That was significantly higher than the 29% year-over-year increase in its quarterly revenue to $900.3 million. RPO refers to the unfulfilled contracts of a company that will be recognized as revenue in the future when those contracts are executed. So, faster growth in this metric, as compared to Snowflake's top line, points toward a potential acceleration in growth. Existing customers spent more on its platform, as evidenced by a net revenue retention rate of 127% during the quarter. The metric compares the spending by Snowflake's customers in a quarter to the spending by those same customers in the prior-year period, so a reading of more than 100% indicates that the adoption of its services by existing customers grew. This is a trend that's likely to continue as more Snowflake customers start using its AI offerings. Snowflake had just over 10,600 customers at the end of the previous quarter, and 30% of them are using its AI/ML solutions. So, as the company upsells its AI products to more customers, it could witness a nice improvement in both revenue and earnings. All this explains why Snowflake is expected to deliver 40%-plus earnings growth for the next couple of fiscal years. As such, Snowflake looks like a top AI stock to buy, considering that its addressable market is likely to expand nicely in 2025 thanks to the addition of AI-centric tools in its data cloud platform, which should set the stage for outstanding earnings growth going forward.

These agentic AI stocks could soar in 2025

It was a very good year to invest in stocks last year. The S&P 500 returned over 20% for a second consecutive year, and the major stock market indexes consistently set new all-time highs in the process. It was an even better year for those lucky or savvy enough to have invested in technology stocks. Growth stocks outperformed value stocks, and tech stocks were among the best performers, largely because excitement about artificial intelligence (AI) dominated headlines. Related: Cathie Wood makes bold $173 million bet on surging AI stock For example, among companies in the Russell 1000 Index that generated returns of 100% or more last year (note: there were 23 of them), 8 are related to AI, including Palantir Technologies (PLTR) , Vistra Corp (VRT) , Nvidia Corp. (NVDA) , Vertiv Holdings, and Axon Enterprises (AXON) . Technology's winning ways may not be over yet, as many expect artificial intelligence to remain a big focus in 2025. The individual stocks that generate the biggest returns, however, could be slightly different. While spending on AI infrastructure will remain high, we'll also start to hear much more about agentic AI, which many believe will be the next big AI trend. Why is there so much excitement about AI According to a recent research report from Goldman Sachs, AI could boost global growth by 7% over the next decade, boost S&P 500 corporate profit margins by 4%, and raise U.S. labor productivity growth by just under 1½ percent per year over a 10-year period. Little wonder that AI has captured the zeitgeist. On January 21, OpenAI CEO Sam Altman added to the excitement when he went to the White House alongside SoftBank CEO Masayoshi Son and Oracle's Chairman and Chief Technology Officer Larry Ellison to announce a huge new AI deal. Related: Sam Altman's net worth: The OpenAI founder is now a billionaire Together, the three billionaires committed to spending as much as $500 billion building artificial intelligence infrastructure in the U.S., one of several high-profile announcements made during the new Trump administration. So far, the U.S. technology partners named in the deal include Nvidia, Oracle, Microsoft, and Arm Holdings (ARM) . Based on information from various sources, the joint venture would be called Stargate and will start with a data center in Texas. President Trump said it would create over 100,000 American jobs almost immediately. So far, 10 data centers in the U.S. are under construction, and 20 more are planned. The real estate company CBRE recently stated, "The rapid growth in digital services, cloud computing, artificial intelligence (AI) and 5G is driving a persistent surge in demand for data center capacity." They added, "Despite record construction activity, the data center market will struggle to keep pace with demand, leading to higher utilization rates in existing facilities and tighter vacancy rates. The average vacancy rate for primary markets fell to a record-low 2.8%, and the average preleasing rate of new construction hit a record high in 2024." According to a recent report by Blackstone, "Artificial intelligence is powered by data, and in recent years, total data generation has been doubling every three years. Between 2010 and 2025, the amount of data created, consumed, and stored will increase over 100x. All of this data needs a place to live, which in turn has unleashed an enormous need for data centers. And it isn't just AI -- social media, cloud migration, content creation and media streaming are all contributing to more data. Meeting this demand and fully capturing the AI opportunity will require an estimated $2 trillion in global digital infrastructure investment by 2030." "AI focuses on reasoning, problem-solving, perception, language understanding and decision-making. AI can be categorized into two main types: 1. Narrow AI (Weak AI): This is designed to perform a specific task, such as voice assistants, recommendation systems, or image recognition. It is highly specialized and does not possess general intelligence. 2. General AI (Strong AI): This is a more advanced form of AI that would be capable of understanding, learning, and performing any intellectual task that a human can do. General AI is still a theoretical concept and has not yet been realized." Moving ahead... what is agentic AI A new, more advanced area of AI is starting to emerge, and it is called Agentic AI. Chat GPT describes Agentic AI as "artificial intelligence systems that can autonomously make decisions and take actions based on their programming or learned experiences, with the ability to achieve specific goals or perform tasks in dynamic environments. Related: One AI stock has become analysts' top pick for 2025 Some literature refers to these decision-makers as "Agents." Unlike traditional AI, which might require continuous human input or supervision, Agentic AI operates independently to pursue its objectives." In other words, compared with earlier technology, Agentic AI models represent a more sophisticated evolution that incorporates advanced reasoning capabilities, autonomous decision-making, and complex problem-solving. These agents can be used as tools, such as helping software engineers code faster. Or they may replace certain job functions, such as online customer service. Who could be the big agentic AI winners in 2025 Merrill Lynch recently released a research report on Agentic AI called "The New Wave: Agentic AI." Here are a few of the highlights within the report: According to a recent interview from the Wall Street Journal, companies such as Johnson & Johnson, Moody's, and eBay are all in various stages of testing and deploying Agentic AI. Looking ahead, many technology-related names are involved in developing, enabling, and helping to build out Agentic AI. There are many others, but this is a small list of names investors might want to watch in 2025 include: No. 1: The semiconductor companies Nvidia, Marvell Technology (MRVL) , Credo Technology Group (CRDO,) and Monolithic Power Systems Inc. (MPWR) . Related: Analyst who bet correctly in 2024 unveils top AI stock picks for 2025 These companies provide computer processing power, high-speed connectivity solutions, and power solutions for data infrastructure. No. 2: The diversified technology company Google (GOOGL) . Google provides a wide range of services, including cloud computing, online advertising, online search, email, and hardware. The company has incorporated AI into several of its services, including search, maps, ads, and more. No. 3: The software companies Microsoft (MSFT) , Oracle (ORCL) , IBM IBM, ServiceNow (NOW) and Salesforce Inc. (CRM) . Related: Analyst revisits IBM stock price target before earnings, investor day These large global technology software companies are all involved in either developing AI technology or providing end user applications that utilize AI. No. 4: The internet retailer Amazon (AMZN) . Amazon is a global technology and retail company that sells products online, offers cloud comptuing services and provides digital streaming and AI services. No. 5: The global IT services firm Accenture. Accenture is a global technology services company that provides consulting and outsourcing services and helps companies in advanced areas that include AI, analytics and automation. No. 6: The computer networking company Arista Networks (ANET) . Arista is an industry leader focused on networking, data centers and routing. This AI industry is rapidly evolving and moving forward as billions of dollars pour into the sector. 2025 is likely to follow in the footsteps of 2024 and bring lots of exciting news, new breakthroughs, and advances for a number of technology-related companies. Related: Veteran fund manager issues dire S&P 500 warning for 2025

2 Red-Hot Growth Stocks to Buy in 2025 | The Motley Fool

Growth stocks helped major indexes soar last year, and two in particular stood out. Nvidia (NVDA -3.12%) posted the biggest gain in the Dow Jones Industrial Average, and Palantir Technologies (PLTR) delivered the top performance in the S&P 500. These players surged 171% and 340%, respectively. Why did investors pile into these stocks? Both have benefited from the artificial intelligence (AI) boom. Nvidia dominates the AI chip market, while Palantir uses AI as a key part of its software-as-a-service platform. As a result, revenue at both companies is soaring. After these successes, you may think it's too late to get in on these top AI players. But we're actually in the early days of the AI growth story, and these companies are well positioned to benefit through the next chapters. Let's take a closer look at these two red-hot growth stocks that remain buys in 2025. First, some background on this AI giant. Nvidia wasn't always linked to AI. In its earlier days, it was known for its work with the video games industry. The company's graphics processing units (GPUs) drove the lively images key to a great game (and they still do). But it soon became clear that GPUs could be useful in many other industries -- so Nvidia developed the CUDA parallel computing platform to make this a reality. Today, Nvidia serves various industries -- from healthcare to automobiles -- and its main focus is on AI. The data center business makes up the lion's share of revenue, and it looks as if there's a lot more growth to come. Here's why. Nvidia will continue to benefit from the ongoing buildout of AI infrastructure, supplying GPUs and other products. For example, the U.S. just announced a new $500 billion AI infrastructure project and named Nvidia a key technology partner. On top of this, Nvidia is set to gain from the next wave of AI growth: applying AI to real-world situations. Agentic AI -- the use of AI agents to consider problems, reason, and apply solutions -- is a big part of that, and Nvidia has already taken steps here. The company offers blueprints for customers to design their own AI agents. So, today, trading for 49 times forward earnings estimates, Nvidia looks reasonably priced and makes a great growth buy for 2025 and beyond. Twenty-year-old Palantir was once known for its contracts with governments, its biggest customer group. But recently, a new growth driver has emerged: the commercial customer. Palantir sells software that aggregates a customer's data and helps leverage that data to make often game-changing decisions. The company launched a new product, its Artificial Intelligence Platform (AIP), a little more than a year ago, and it's helped this transition happen. AIP integrates AI into the data collection and decision-making processes. Palantir's commercial customers, totaling 14 just four years ago, have increased to about 300 -- concrete evidence that AIP is driving growth at Palantir. In even more good news, government revenue continues to increase, too, showing that the company now has two strong growth drivers. In the recent quarter, government and commercial revenue each climbed in the double digits, and Palantir reached its biggest profit ever. AIP is still a relatively new product, and the number of commercial customers today leaves plenty of room for growth. In addition, as mentioned, AI is still in its early stages of growth. Today's $200 billion AI market may surpass $1 trillion by the end of the decade. And though Palantir looks expensive in relation to forward earnings estimates -- its forward price-to-earnings (P/E) ratio is 165 -- a metric that considers growth tells a different story. Palantir's forward price/earnings-to-growth (PEG) ratio of 0.3 is reasonable, considering ratios of more than 1 suggest a stock is overvalued. All of this means Palantir remains a solid buy for growth investors in 2025.

Palantir CEO's 10 Words About AI That Should Help You Invest Better in 2025 and Beyond | The Motley Fool

In early November, Palantir Technologies (PLTR) released a robust third-quarter 2024 report. Alex Karp, CEO of the artificial intelligence (AI)-powered data analytics company, included a statement in the press release. It has a sentence I believe investors should keep at the forefront of their minds when they make investing decisions in 2025 and beyond. In the context of his full statement, he means the AI haves will be winners, and the AI have-nots will be losers. He's talking in a very broad sense -- from companies to countries. This black-and-white proclamation is much stronger than the usual comments one hears about how important AI will be. Why should investors give any power to Karp's word? Beyond his seemingly being extremely bright, even in Silicon Valley terms, here's a great reason: Palantir stock's gain of 341%, which crushed the S&P 500's 25% return, made it 2024's best-performing stock on the S&P 500 index. This performance stems from the company's robust quarterly results and guidance easily beating Wall Street's expectations and investor enthusiasm about its long-term growth prospects. Topping the S&P 500 index's best-performers list would be a great feat for any company at any time. But doing so soon after going public (Palantir's initial public offering was in September 2020) is extremely rare, perhaps even unprecedented. So, what stocks -- beyond Palantir, which is one of the best AI stocks -- do I think investors should favor if they keep Karp's statement in mind when choosing stocks to buy? If we accept that AI is so critical that "the world will be divided between AI haves and have-nots," it naturally follows that whatever company leads in supplying AI technology will be a massive winner, assuming the market does not get too fragmented and become commoditized. Currently, that company is Nvidia (NVDA -3.12%), whose stock has already been a huge winner. However, along with the AI market, it still has much room to grow significantly over the long term. The company's graphics processing units (GPUs) dominate the advanced AI chip market. But Nvidia is so much more than just a chip or hardware supplier. It supplies entire solutions or platforms comprising hardware, software, and other tools for its target markets (data center, professional visualization, gaming, and auto/robotics). This full-stack strategy, along with its partnering with numerous top companies, gives Nvidia a competitive advantage. Another thought that naturally flows to my mind from Karp's statement relates to the importance of company size. In many industries, larger companies have long had a competitive advantage over smaller ones as they benefit from economies of scale. They also usually have more resources to make acquisitions and fund research and development initiatives. If we accept that AI will be so critical that it separates the winners from the losers across the economy, the advantage that many large companies already enjoy should become turbocharged. Larger companies will generally have more resources to spend on obtaining the best AI capabilities -- and Nvidia's GPUs are very expensive, as is hiring top AI talent.

One Analyst Firm Just Ranked Nvidia and Alphabet as Its Top 2 "Magnificent Seven" Stocks for 2025. Are Both Stocks Buys? | The Motley Fool

Analysts at Jefferies recently ranked the so-called "Magnificent Seven" stocks based on which ones they thought would outperform in 2025. The name refers to a group of leading mega-cap tech stocks that have been helping lead the market higher the past couple of years. Its top picks among the group were Nvidia (NVDA -3.12%) and Alphabet (GOOGL 1.13%) (GOOG 1.16%). The group also includes, by order of Jefferies' rankings, Meta Platforms, Apple, Amazon, Tesla, and Microsoft. The firm's rankings were based on several quantitative measures, including growth, valuation, yield, earnings revisions, sell-side analyst sentiment, return on invested capital (ROIC), stock price momentum, and research and development (R&D) versus capex (capital expenditures) spending. Nvidia grabbed the top spot largely due to its strong growth, upward guidance revisions, attractive valuation, and strong analyst sentiment. Let's look at why I think both Nvidia and Alphabet stocks are attractive buys. Nvidia remains a great combination of incredibly strong growth at an attractive valuation. The company is on pace to report its second consecutive year of triple-digit revenue increases, which given its size is quite remarkable. Meanwhile, analysts are projecting more than 50% sales growth in 2025. And it is attractively valued with a forward price-to-earnings ratio (P/E) below 33 times and a price/earnings-to-growth ratio (PEG) of 1. PEGs below 1 are generally considered undervalued, although growth stocks will often have PEGs well above 1. Nvidia's growth comes from a combination of the frantic buildout of artificial intelligence (AI) infrastructure and the wide moat the company has created through its CUDA software platform. Its graphics processing units (GPUs), which were originally created to speed up graphics rendering in video games, have become the backbone of AI infrastructure given their superior processing speeds. As large tech companies and AI start-ups rush to improve their AI models, they need more and more computing power to train them, which is largely coming from GPUs. Through Nvidia's CUDA X collection of libraries, tools, and microservices, its semiconductors are easily programmable for various AI tasks, which has allowed it to take a nearly 90% market share in the GPU space. Elon Musk's xAI is a great example of the growing use of GPUs in AI model training. The company used 20,000 GPUs to train its Grok 2 model, while it originally was using 100,000 GPUs to train its Grok 3 model, but then increased it to 200,000 for phase two of its training. Meanwhile, Musk has talked about xAI's data center hosting a 1 million GPU cluster in the future. Meanwhile, Nvidia's largest customer, Microsoft, announced it will spend $80 billion on AI data centers this year. Not to be outdone, a consortium consisting of Oracle, SoftBank Group, and OpenAI has discussed spending up to $500 billion on AI infrastructure in Texas as part of the recently announced Project Stargate. A lot of this spending will undoubtedly go toward GPUs. These projects demonstrate the type of growth still ahead for Nvidia. While no mega-cap company can come close to matching Nvidia's recent growth, Alphabet is a strong growing company that has the cheapest valuation among the Magnificent Seven with a forward P/E of only 19.4. Last quarter, Alphabet grew its revenue a solid 15%, while its profits soared 34% and its earnings per share climbed 37%. The growth was led by its cloud computing division, Google Cloud, which grew its revenue by 35%. Cloud computing is a business with very high fixed costs that has a lot of operating leverage once the business reaches scale. That was seen in its last quarter, when the segment saw a profitability inflection point, with segment operating income surging from $266 million a year ago to $1.95 billion. With organizations scampering to build out their own AI models and applications, expect this business to continue to grow strongly as Alphabet adds more data center capacity. Meanwhile, the company could see even more operating leverage as it has developed its own custom AI chips with the help of Broadcom, which it has said in combination with GPUs is helping reduce AI inference processing times and lowering costs. As it continues to scale up as the smallest of the big-three cloud computing companies and with its custom chip advantage, Google Cloud's margins should continue to improve, leading to strong earnings growth. At the same time, Alphabet owns the world's dominant search engine in Google and YouTube, the most viewed streaming platform globally. These businesses continue to grow revenue by double digits, with sales for its overall Google Services segment climbing 13% last quarter. Segment operating income soared 29% to $30.9 billion. The company is looking to incorporate its new Gemini AI model throughout its businesses this year to help drive growth, while also looking to promote its Gemini app, which is its answer to ChatGPT. Management also has other emerging businesses that it is investing in, including quantum computing, where it recently announced a big technological breakthrough. It also owns Waymo, which is currently the only company offering paid robotaxi rides in the U.S. These are presently money-losing business, but they have big potential. Overall, Alphabet is a nice combination of growth and value with some solid longer-term optionality with its investments in robotaxis and quantum computing.

Nvidia Stock Got Incredible News From This Hot AI Start-Up | The Motley Fool

Heading into 2025, the biggest question for Nvidia (NVDA -3.12%) is whether the artificial intelligence (AI) chip superstar can continue to grow at a breakneck pace. Some investors have argued that an AI bubble is forming, and there is evidence that the new technology is following in the footsteps of earlier bubbles due in part to the dramatic growth in some AI stocks. Nvidia has been the flag bearer for the AI boom thus far after posting several quarters of triple-digit revenue growth, and there were news reports earlier this month that should reassure investors that the company and the broader AI sector still have a long runway of growth in front of them. ChatGPT creator OpenAI might be a household name by now, but there's a lesser-known AI start-up that is starting to make waves. That's Anthropic, the creator of the Claude AI chatbot, which counts Amazon and Alphabet among its backers, having raised billions of dollars from the tech giants. Anthropic is now in talks for a massive new funding round, and it's a bullish signal for Nvidia and the broader sector as well. According to multiple media outlets, Anthropic was in advanced talks earlier in January to raise $2 billion at a price that values the company at $60 billion, up from a valuation of $16 billion less than a year ago. The news is the latest sign of skyrocketing valuations for privately held AI start-ups, which show growing investor enthusiasm for AI and confidence that companies like Anthropic will justify that valuation over the long term, eventually generating billions in profits. Ultimately, the frenzy over AI start-ups will benefit Nvidia as a significant chunk of that $2 billion is likely to be spent on Nvidia chips to power Anthropic's AI models. Anthropic has a history of working with Nvidia and buying its chips, though the company said it would use Amazon's Trainium and Inferentia chips to train future foundation models when it took $4 billion from Amazon last November. The details of the current funding round aren't clear as it hasn't closed, but the deal is likely to yield a windfall for Nvidia in some capacity as it is widely recognized as the leader in AI chip technology, and fully tying itself to Amazon could make Anthropic less competitive. Even Amazon Web Services CEO Matt Garman has said that the company views its AI processors as a "supplement" to Nvidia's GPUs rather than a replacement. The funding round also adds fuel to the AI arms race among start-ups and should encourage investors in rival companies to shell out billions more. OpenAI, for example, completed a $6.6 billion funding round valuing the company at $157 billion in October. OpenAI has been a major customer of Nvidia, and Nvidia CEO Jensen Huang hand-delivered the first H200 AI supercomputer to OpenAI. The Sam Altman-led start-up has visions of developing its own AI chips, but that's likely years away. For the foreseeable future, it will be reliant on Nvidia's chips, and its recent funding round could mean billions more flowing into Nvidia's coffers. Nvidia was also an investor in the round, which could strengthen its relationship with the AI start-up. While big tech companies like Amazon and others are working on their own AI chips, it's going to be difficult to dethrone Nvidia, whose market share in data center GPUs is estimated to be around 95%. Nvidia continues to rapidly innovate, preparing its Rubin platform as a more advanced version of the recently released Blackwell. Nvidia also benefits from a flat management structure that makes decision-making faster and easier and avoids the kind of siloing that has plagued competitors like Intel. Finally, it has an advantage over potential rivals like Amazon as it's a dedicated pure-play semiconductor company, while businesses like Amazon have other priorities. Nvidia's AI foundation arguably began in 2006 when it launched its CUDA parallel computing model that now contains hundreds of software libraries and AI models, showing it has a significant technological advantage. CEO Jensen Huang has long been regarded as a visionary in AI as well. Overall, what's good for AI is good for Nvidia, and the billions flowing into start-ups at soaring valuations show the AI boom and Nvidia's AI-driven growth still have a long way to run. Expect Nvidia to deliver another strong year for investors in 2025.

Why Nvidia's New Graphics Cards Could Be Bad News for AMD and Intel | The Motley Fool

Nvidia (NVDA -3.12%) is the undisputed leader in the artificial intelligence (AI) chip market these days. It has been generating fantastic growth in both its revenue and earnings, and the expectation that there's much more growth ahead is why many investors aren't shying away from buying the stock, despite its high valuations. Two of Nvidia's key rivals, Advanced Micro Devices and Intel, are hoping to chip away at its market share. While it's possible that some of its customers may want to diversify their supply chains and explore cheaper options, Nvidia's recent announcement of its new graphics cards is a sign that it isn't about to relinquish any of its market share easily. One way AMD and Intel could potentially win over customers is by offering them more modestly priced chips. While Nvidia's high-performing chips are in heavy demand, they don't come cheap. Tech companies developing AI models and chatbots have shown that they are willing to pay a premium for the chips, but price could play a bigger role in purchasing decisions down the road, especially if AMD or Intel can prove that their chips aren't significant downgrades from Nvidia's latest offerings. But Nvidia is showing that it's willing to be a bit more aggressive on price. On Jan. 6, the company unveiled its latest GeForce RTX 50 cards, and what took some analysts by surprise was that many of them will be priced lower than the previous RTX 40 series, despite offering significant performance upgrades. Nvidia also announced Project Digits -- the first desktop computer it will make. But at a price tag of $3,000, it isn't cheap, and is designed primarily for programmers. When a company is as big and profitable as Nvidia is, it's in an excellent position to compete on price and also pursue more aggressive opportunities. Not only has the company drastically grown its revenue over the years, it has done so while increasing its profit margins. With such strong margins, the company can afford to offer some of its wares at lower prices, knowing that it can still maintain a high level of profitability. Doing so could potentially thwart competitors, as chips from AMD or Intel may not be comparatively cheap enough to win over customers. There are reports that AMD is holding back the official launch of its new Radeon RX 9000 series chips due to Nvidia's announcement and the pricing pressure that has come as a result of it. Nvidia's stock has plateaued in the past three months, and investors appear to be having some hesitancy about buying it at its current levels. The company, which has a market cap of $3.4 trillion, is trading at a forward price-to-earnings multiple of 32, which is slightly higher than the Technology Select Sector SPDR Fund's average of 30. However, given the growth beast that Nvidia is, a bit of a premium over the average tech stock may certainly be warranted. Given the long-term growth opportunities ahead for Nvidia, it's hard not to like the stock as a long-term buy. The company's financials are in excellent shape, and with Nvidia looking to be more aggressive on pricing and expanding its growth opportunities, it's not unreasonable to expect that its sales and profits can go even higher in the years ahead. Overall, it could be a good growth stock to buy and hold onto, despite its high valuation.