Top AI Stocks to Watch in 2025

These stocks are high-quality picks even after the technology boom of 2024.

In 2024, the U.S. stock market has shown impressive growth, with the S&P 500 achieving a total return of approximately 25% as the year concludes. A key driver of this rally has been the technology sector, particularly stocks related to artificial intelligence (AI).

As December 2024 unfolds, there has been increased market volatility due to the Federal Reserve signaling fewer interest rate cuts than anticipated for 2025. Despite these challenges, several high-quality stocks stand out as promising investments for 2025.

Here are three top picks to keep an eye on.

Nvidia

Nvidia (NVDA) has emerged as a leading stock in 2024, showcasing exceptional financial performance and innovation. The company's AI-focused ecosystem, which includes hardware, software, and partnerships, is critical to its impressive growth.

Nvidia reported a remarkable 94% increase in revenue year over year, reaching $35.1 billion in the third quarter of its fiscal year 2025 (ending Oct. 27). This growth was largely driven by a 112% rise in its AI data center segment.

The company expects this upward trend to persist, fueled by the overwhelming demand for its customizable AI data center systems, known as Blackwell. Nvidia has already delivered 13,000 samples of these next-generation systems to key clients, including OpenAI, the developer behind ChatGPT.

With its dominance in AI training, Nvidia is now well-positioned to tap into the increasing demand for AI deployment in production environments. The company has successfully adapted its hardware and software solutions, allowing existing customers to continue using its products without needing to switch to competitors.

Furthermore, Nvidia's enterprise AI software is seeing adoption from major corporations like Salesforce, SAP, and ServiceNow. This creates a stronger competitive advantage for Nvidia. The myriad growth opportunities within the AI sector and robust financial prospects suggest that Nvidia is poised for solid returns in 2025.

Advanced Micro Devices

Advanced Micro Devices (AMD) ranks as a significant player in the global AI chip market and is positioned to gain substantially from the rapidly evolving AI landscape, which has a projected market value of $500 billion by 2028.

The company reported a staggering 122% increase in its data center revenue, reaching $3.5 billion in the third quarter, largely due to the successful sales of its Instinct GPUs and EPYC server CPUs. AMD revised its expectations for data center GPU revenue in 2024 to over $5 billion, up from $4.5 billion.

Companies like Microsoft and Meta Platforms are using AMD's chips to enhance their AI services, particularly for demanding AI tasks. AMD is also planning to improve performance with its newly launched MI325X GPUs, which offer 20% better inferencing performance than the previous H200 chips. The company has an exciting launch on the horizon with its MI350-series GPUs set for release in the latter half of 2025.

An analyst forecast for AMD in 2025 anticipates revenue of around $32.56 billion, reflecting nearly a 27% growth year over year. With the company maintaining profitability and positive cash flow, AMD is a stock worth monitoring in 2025.

Alphabet

Alphabet (GOOGL, GOOG) has established itself as a major force in the AI landscape, already generating revenue from its AI initiatives. While the company faces various challenges, including antitrust issues and recent legal challenges related to its Chrome browser and Android operating system, its core business remains strong.

Alphabet's Google remains the leader in the global search market, holding a 89.9% market share. The introduction of AI features in its search engine has expanded its reach to over a billion users monthly across more than 100 countries.

This expansion leads to more complex search queries, driving higher engagement and revenue for Alphabet. Google Search revenues increased by 12% year over year to $49.4 billion, accounting for 57% of the company's total revenue in the third quarter.

Additionally, Google Cloud is gaining momentum, with a 35% year-over-year growth in revenue to $11.4 billion and a significant jump in operating income of 631% to $1.9 billion. The growing adoption of AI-driven infrastructure and generative AI technologies has been a key contributor to this growth.

With strong market positioning in AI-powered search and robust prospects in the cloud sector, Alphabet shines as an attractive investment opportunity.

Suzanne Frey, an executive at Alphabet, serves on The Motley Fool's board of directors. Randi Zuckerberg, a former director at Facebook and sister of Meta Platforms CEO Mark Zuckerberg, also holds a board position. Manali Pradhan does not have positions in any mentioned stocks. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Meta Platforms, Microsoft, Nvidia, Salesforce, and ServiceNow.

stocks, AI, investments