Three Notable AI Companies Worth Monitoring in 2025
Three Notable AI Companies Worth Monitoring in 2025
The United States stock market has shown remarkable strength in 2024, with the main index, the S&P 500, recording a total return of approximately 25% as the year comes to a close. Unsurprisingly, the technology sector, particularly stocks centered around artificial intelligence (AI), have been the driving force behind this market surge.
There has been a noticeable increase in market volatility in December 2024 due to the Federal Reserve hinting at fewer interest rate cuts in 2025 than initially anticipated. However, despite these fluctuations, there are several high-quality and financially sound stocks that investors should keep an eye on in 2025.
In this context, these picks could prove to be appealing choices for astute investors in 2025. Let me explain why.
Nvidia
Nvidia (NVDA -2.09%) has stood out in 2024, with exceptional financial performance and technological innovation. It is undeniable that the company's AI-optimized ecosystem (comprising hardware, software, and partnerships) has played a significant role in this impressive growth trajectory.
In the third quarter of its fiscal 2025 (which ended on October 27), Nvidia's revenue increased by a solid 94% compared to the previous year, largely due to a 112% year-over-year growth in its AI-focused data center segment.
This positive revenue trend is likely to continue for several quarters, primarily due to the high demand for Nvidia's full-stack, full-infrastructure, and highly customizable AI data center scale Blackwell systems. The company has already shipped 13,000 samples of its next-generation Blackwell systems to customers, including ChatGPT developer OpenAI.
After establishing a strong presence in the AI training market, Nvidia is now poised to benefit greatly from the growing demand in the inference market (deploying complex AI models in production environments) due to its extensive installed base and robust software ecosystem. The company has successfully transformed its hardware chips and software from training to inference workloads, implying that existing customers won't need to switch to competitors.
Nvidia's enterprise AI software solutions are also gaining traction with prominent companies such as Salesforce, SAP, and ServiceNow. These trends have further strengthened Nvidia's competitive advantage. Given Nvidia's diverse growth triggers in the AI market and its promising financial prospects, the company appears well-prepared to deliver substantial returns in 2025.
Advanced Micro Devices
As the second-largest AI chip manufacturer globally, Advanced Micro Devices (AMD 0.10%) is well-positioned to capitalize on the rapidly expanding AI market (estimated to be worth $500 billion by 2028).
In the third quarter, AMD's data center revenue skyrocketed by 122% compared to the previous year, mainly due to the robust adoption of its Instinct GPUs and EPYC server CPUs. AMD now expects its data center GPU revenue to exceed $5 billion in 2024, an upgrade from its previous estimated $4.5 billion, which it announced in July 2024. Despite trailing behind Nvidia, AMD is steadily expanding its presence in the AI market.
Microsoft uses AMD's MI300X chips to power numerous copilot services. Meta Platforms has also selected these chips for its large-scale inferencing infrastructure, primarily for its most demanding open-source Llama model. AMD is working on performance enhancements to boost adoption of its GPUs further.
The recently launched MI325X GPUs have demonstrated a 20% improvement in inferencing performance compared to H200 chips. AMD is also preparing for the launch of its upcoming MI350-series GPUs, scheduled for the second half of 2025.
Looking ahead to 2025, analysts anticipate AMD's revenue to be around $32.56 billion, implying a year-over-year growth of 26.88%. Moreover, the company is profitable and cash flow positive, making it an interesting stock to observe in 2025.
Alphabet
Alphabet (GOOG -1.55%) (GOOGL -1.45%) has established itself as a major player in the AI space and is already earning revenue from its AI offerings. Despite facing several challenges, such as antitrust concerns and unfavorable Department of Justice rulings (including a recent one demanding the divestiture of its Chrome browser and Android mobile operating system), Alphabet's financials remain solid.
Google continues to dominate the global search market with an 89.9% share. Additionally, the company has introduced AI Overview features in Search across 100 new countries and territories, reaching over a billion users every month.
This translates into increased query frequency and complexity for the company's search business, leading to higher user engagement. Google Search revenue increased by 12% compared to the previous year to $49.4 billion in the third quarter, representing 57% of the company's total revenue.
Google Cloud is also becoming a significant catalyst, with revenue growing an impressive 35% compared to the previous year to $11.4 billion and operating income expanding by nearly 631% compared to the previous year to $1.9 billion in the third quarter. The robust adoption of AI infrastructure and generative AI technologies across various industries and use cases has contributed to Google Cloud's growth.
Consequently, Alphabet appears to be an intriguing choice based on its market leadership in the AI-powered search market and its growth prospects in the cloud business.
Investors looking ahead to 2025 might want to consider allocating a portion of their funds into high-potential stocks like Nvidia and Advanced Micro Devices. Both companies have demonstrated remarkable performance in the rapidly expanding AI market, with Nvidia's AI-focused data center segment showing a 112% year-over-year growth in its third quarter, and AMD's data center revenue skyrocketing by 122% in the same period.
With Nvidia's diverse growth triggers in the AI market and promising financial prospects, and AMD steadily expanding its presence in the AI market, these tech giants could offer attractive investment opportunities for those diligent enough to keep an eye on their financial performance in 2025. Additionally, companies like Alphabet, with its dominant position in the global search market and growing cloud business, also presents an interesting investment opportunity, despite facing antitrust concerns.