Investing

3 AI Stocks (NVDA, AMD, TSM) to Load Up On

Chris MacDonald

Published: February 19, 2025 2:37 pm

The Nasdaq continues on its incredible tear in 2025, with investors largely pricing in continued growth ahead. Whether it’s the rise of artificial intelligence as a key investing theme, or the increasing importance of higher-growth (and higher-margin) technologies that are set to power the U.S. economy for the decades to come, it’s clear investors want a piece of the future. Companies in the AI sector present perhaps the best risk/reward upside in this current environment, for those who have a broadly bullish view of this technological revolution and its potential impact.

Now, it’s also true that trees don’t grow to the sky. Investors are broadly now starting to question just how viable the existing valuations the market is pricing in for many top AI stocks may be. I think that’s healthy, and speaks to the idea that investors aren’t entirely purely being driven by “animal spirits” right now.

That said, price targets for 2025 continue to vary widely, with AI being one of the key drivers most macro analysts look to for clues on how the market may perform over the coming year. If AI adoption continues, and we don’t see any sort of major macro shock, here are three stocks that could be viewed as screaming buys a year from now.

Key Points About This Article:

• Investors looking to take advantage of the AI revolution have plenty of options to choose from, many of which have seen impressive appreciation of late.
• Here are three such AI stocks that could still have plenty of upside ahead, if AI adoption continues and we don’t see any sort of major shocks ahead.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Nvidia (NVDA)

No list of AI stocks to buy (in earnest) would be complete without discussing Nvidia (NASDAQ:NVDA). I’d be taken to the galleys by most investors if this stock wasn’t top of the list, so here it is.

Nvidia’s incredible surge of more than 170% last year was driven by skyrocketing demand for its AI-focused chips. CEO Jensen Huang’s CES keynote highlighted new advanced semiconductor products, with very bullish commentary around demand for the company’s existing chips as well as its new Blackwell chips which are being rolled out. This commentary, along with broader growth catalysts, has prompted analysts from Oppenheimer to recommend buying the stock with a $175 price target, suggesting 25% upside.

Nvidia’s continued innovation remains in focus for investors. The company unveiled next-gen gaming GPUs and enterprise solutions, including NVIDIA NIM for manufacturing and LLM frameworks like Nemotron and NeMo for AI applications. CEO Jensen Huang also introduced Project DIGITS, a desktop supercomputer for researchers, set for release in May. These innovations underscore Nvidia’s growth potential, making it a strong buy.

Nvidia’s commitment to annual GPU updates and its focus on agentic AI are key factors I think are important for investors to consider. These continued upgrades allow for increasingly customized AI solutions leading to ever-more efficient customer service, solidifying the company’s dominance. 

Advanced Micro Devices (AMD)

Advanced Micro Devices (NASDAQ:AMD) has long been a key player in semiconductors, designing chips for PCs and data centers, but it lags Nvidia in the AI boom. While Nvidia’s stock soared 414% over three years, AMD’s dropped nearly 8%. Still, AMD’s Q3 sales rose 18%, and data center revenue surged 122% year-over-year to $3.5 billion. Though benefiting from AI trends, AMD trails Nvidia’s dominant market position.

I think AMD is a unique company to consider in the AI space, since it’s not a company that most investors would consider a “pure play” on this trend. In other words, if the whole AI thing doesn’t pan out the way most investors expect, AMD is a company that can still perform reasonably well. The company’s MI300 accelerator chip continues to perform well (adopted by key clients such as Microsoft and Meta), and the company does have a roughly 10% market share in data center GPUs. So there’s a lot here. If AI infrastructure spending rises as many think, and AMD can pick up more share over time, this is a stock that could have even more upside than incumbents in my view.

AMD’s recent strides in the data center GPU market is the key growth catalyst I’m going to keep an eye on here. If record demand for the company’s Instinct AI GPUs and Epyc CPUs materializes, there’s a lot to like about AMD’s revenue and earnings growth potential moving forward.

Taiwan Semiconductor (TSM)

Most chipmakers like Nvidia and Broadcom focus on design, outsourcing complex, costly manufacturing to third parties. Intel and Samsung’s foundry struggles highlight the challenges, with losses and workforce cuts. However, Taiwan Semiconductor (NASDAQ:TSM) stands out from the crowd, benefiting from broader trends driven by AI chips. As the key foundry supporting most of the chip making sector, Taiwan Semi is a company I view as a picks-and-shovels play on a sector many view as a picks-and-shovels play for AI.

Indeed, Taiwan Semi’s importance to this high-growth area of the market was on display this past quarter. The company’s revenue grew 36% to $23.5 billion, with earnings per ADR rising 50% to $1.94.

TSMC shares have surged 107% in the past year but maintained a modest forward price-earnings ratio of 23-times, matching the S&P 500 average. Despite valuation growth, earnings outpaced share price gains, driven by its critical role in rising AI infrastructure spending. And to top it off, analysts broadly view TSMC as a long-term investment poised for significant growth.

The company has been pivotal to AI’s progress as the world’s top chip manufacturer, producing advanced 3nm chips and preparing to launch 2nm technology. AI-driven demand fueled significant growth, with 2024 AI revenue projected to triple. Analysts foresee 26% revenue and 27% EPS growth in 2025, while TSMC’s forward price-earnings ratio of just 23-times highlights its attractive valuation.