2025 Nasdaq Boom Predicted: Top AI Stocks to Invest in Now

Over the past two years, the Nasdaq Composite has been on an upward trajectory, fueled by developments in artificial intelligence (AI), a U.S. presidential election, reduced inflation, and the initiation of highly anticipated interest rate reductions. After a 43% surge in 2023, the technology-heavy index has already risen by 33% in 2024, up to this point.

Historically, the market seems poised for more growth. Since the Nasdaq’s inception in 1972, following any year where gains topped 30%, the index has averaged a 19% increase the subsequent year, hinting at a potential continuation of the rally into 2025.

Recent breakthroughs in AI have played a significant role in buoying investor confidence. Predictions by Price Waterhouse Coopers, a leading accounting organization, estimate the economic impact of generative AI could reach up to $15.7 trillion by 2030, potentially leading to substantial profits for major industry participants.

Below are my top 10 AI stock picks to consider before the Nasdaq reaches new peaks in 2025.

1. Nvidia

Nvidia (NASDAQ: NVDA) is essential to any discussion on AI, having secured a dominant position in AI processing. Its graphics processing units (GPUs) are already crucial in gaming, cloud computing, data centers, and machine learning. The swift embrace of generative AI has particularly boosted Nvidia’s market performance.

Even now, two years later, Nvidia struggles to meet the relentless demand. The upcoming launch of its new Blackwell processors is highly anticipated, with CEO Jensen Huang describing the demand as “insane.” Nvidia has shifted to releasing new products annually, demonstrating its commitment to rapid innovation.

Despite facing more challenging comparisons after five straight quarters of triple-digit year-over-year growth, analysts still forecast a 50% growth for the next year. Given the immense opportunities ahead, Nvidia’s shares are attractively priced at only 31 times projected earnings for next year.

2. Palantir

Palantir Technologies (NASDAQ: PLTR), with over two decades of AI experience, was well-prepared when generative AI took off. The company swiftly introduced its Artificial Intelligence Platform (AIP). Palantir’s approach includes boot camps that team up clients with its engineers to kickstart AI initiatives, leading to a spike in deal conversions post-boot camp.

The company’s U.S. commercial segment, which includes AIP, expanded by 54% year-over-year and 13% sequentially, contributing to a 73% increase in its remaining deal value (akin to a backlog). Simultaneously, its customer base within this segment grew by 77%.

Palantir finalized 104 deals each worth at least $1 million during this period, with several exceeding $10 million. Notably, many of these seven-figure agreements were signed within weeks of participating in a boot camp.

Considering the vast potential, Palantir’s stock is reasonably valued with a forward PEG ratio of 0.65, indicating an undervaluation.

3. Microsoft

Microsoft (NASDAQ: MSFT) deserves credit for catalyzing the AI revolution, partly through its investment in ChatGPT’s creator OpenAI and the subsequent product integrations. Its flagship AI product, the Copilot suite, is projected to generate up to $100 billion in additional revenue by 2027, according to some Wall Street analysts. Microsoft’s Azure Cloud, benefiting directly from its AI strategy, saw a 30% revenue growth in fiscal 2024, surpassing its competitors.

The company has recently launched tools to measure the return on AI investments and is working on reducing AI adoption costs. Additionally, Microsoft is developing AI agents to address critical tasks.

The stock trades at 33 times forward earnings, a slight premium over the S&P 500’s average but reasonable given Microsoft’s growth prospects.

4. Broadcom

Broadcom (NASDAQ: AVGO), a major supplier of diverse chips and components essential for data center infrastructure and the broader internet ecosystem, found itself at the center of attention as AI gained traction, primarily because AI processing largely occurs in data centers.

In its most recent quarter, Broadcom not only exceeded expectations but also provided promising long-term guidance. The company anticipates a 500% growth in AI-related revenue by 2027. Additionally, Broadcom has recently secured agreements with two new hyperscale clients to develop custom AI accelerators, suggesting its projections might be conservative.

With its growth accelerating, Broadcom’s stock remains attractively priced with a PEG ratio of 0.09, indicating it is undervalued.

5. Arm Holdings

Arm Holdings (NASDAQ: ARM) may not be as recognizable as other names in AI, but its contributions are significant. The company licenses blueprints for “cores” used in a wide array of CPUs and GPUs essential for AI processing. For instance, Nvidia’s GH200 Grace Hopper Superchip utilizes 144 Arm version 9 (V9) CPU cores, which offer enhanced computing power and generate higher royalties than previous versions.

With Nvidia expected to sell around 4 million GPUs this year alone, and considering Arm’s numerous other clients, the scope of opportunity is substantial.

Arm’s stock is also reasonably valued, with a PEG ratio of 0.87.

6. Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC, is recognized as the largest and most sophisticated semiconductor foundry globally. This distinction highlights its pivotal role in AI’s expansion. TSMC counts Nvidia, Arm, and Broadcom among its clients.

The company expects its revenue from AI processors to triple this year, making up about 15% of its total revenue. To accommodate this surging demand, TSMC is constructing three new semiconductor fabrication facilities, which will enhance its production capabilities and cost efficiency.

The first of these facilities is set to start mass production early next year. TSMC notes that it collaborates with nearly every major AI innovator, underscoring the vast potential.

With its shares trading at 28 times next year’s earnings, TSMC’s stock is attractively priced.

7. Alphabet

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), an early proponent of AI, has used sophisticated algorithms to enhance the relevancy of its search results and digital ads. The company quickly leveraged generative AI capabilities, offering them to its Google Cloud customers.

This month, Alphabet unveiled Gemini 2.0, a large language model (LLM) that powers the next generation of AI agents:

• Jules assists developers with coding.
• Mariner navigates web browsers to perform complex tasks.
• Astra serves as a universal agent, interacting with Search, Lens, and Maps.

The growing demand for Google Cloud, one of the fastest-growing cloud infrastructure providers, represents Alphabet’s biggest opportunity. Its Vertex AI gives users access to over 160 foundational models, facilitating rapid deployment of AI applications.

Trading at 25 times earnings, Alphabet’s stock is arguably the most reasonably priced among major AI players.

8. Amazon

Amazon (NASDAQ: AMZN) has only recently started to be recognized for its AI capabilities, despite a long history of using AI to streamline its operations. The visibility of its generative AI strategy is increasing.

CEO Andy Jassy recently highlighted that Amazon Web Services (AWS) has launched nearly twice as many machine learning and generative AI features as its closest competitors combined over the past 18 months.

AWS gives users access to the most sought-after generative AI models through its Bedrock AI service. Additionally, Amazon offers its purpose-built AI chips, Inferentia and Trainium, as cost-effective alternatives to high-end GPUs.

With an improving economy likely to boost its e-commerce and digital advertising segments, Amazon’s stock, priced at approximately 3 times forward sales, is relatively inexpensive.

9. Meta

Meta Platforms (NASDAQ: META) has consistently utilized AI to curate relevant content across its social media platforms and enhance its targeted advertising. Its vast data repository has been pivotal in developing its LLaMA AI, which now ranks among the top foundational AI models. While cloud operators and hyperscalers pay to use LLaMA, it remains free for most individual users.

The latest version, LLaMA 3.1, sets a new standard, according to Meta. This system supports developers in creating various AI agents — autonomous models designed to perform specific tasks independently.

As the economy strengthens, Meta’s digital advertising is poised to gain significantly. With the stock trading at just 28 times earnings, it offers great value.

10. Tesla

Tesla (NASDAQ: TSLA) shares have surged recently, largely due to the anticipated policies of the incoming Trump administration, which are expected to favor the electric vehicle (EV) industry leader. The potential elimination of EV rebates and tax incentives could particularly benefit Tesla.

Wedbush analyst Dan Ives remains optimistic, predicting that Tesla’s market cap will reach $2 trillion by 2025, marking the next four years as a “total game changer” for the company. He anticipates that the Trump administration will expedite the approval of full self-driving (FSD) technologies, advancing Tesla’s robotaxi ambitions.

Despite its recent price increases, Tesla’s stock, trading at 173 times forward earnings and 12 times next year’s sales, might still be a bargain given the projected $28 trillion robotaxi market over the next decade, according to estimates by Cathie Wood’s Ark Invest.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends Broadcom and has the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

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