History Says the Nasdaq Could Soar in 2025: 2 AI Stocks to Buy Before It Does
Sunday, Dec 22, 2024 8:02 pm ET
3min read The Nasdaq Composite has been on a tear in recent years, driven by the advent of artificial intelligence (AI), improving economic conditions, and a stable political environment. With the index up roughly 30% in 2024, history suggests that the rally could continue into 2025. As investors look for opportunities to capitalize on this trend, two AI stocks stand out: Advanced Micro Devices (AMD) and Amazon (AMZN).
AMD: A Chipmaker with a Diversified Business Model
AMD is a semiconductor company that has seen its data center segment soar 122% year over year, driven by sales of advanced graphics processing units (GPUs) for running and training AI algorithms. The company's diversified business model, with 51% of revenue coming from data center sales, makes it a great alternative to Nvidia, which is more heavily reliant on AI-driven growth. AMD's forward price-to-earnings (P/E) multiple of 25 is also lower than Nvidia's, indicating a more affordable valuation.
Amazon: A Holistic Approach to AI
Amazon takes a more holistic approach to AI, with footprints in e-commerce, cloud computing, and AI infrastructure. The company's cloud-computing segment, Amazon Web Services (AWS), continues to be the cornerstone of its bottom line, representing $10.4 billion in operating income. Amazon's AI strategy involves "renting out" Nvidia GPU computing power and developing its own AI chips, like Trainium and Inferentia, to reduce dependence on suppliers. This strategy shields Amazon from some AI industry risks while maintaining exposure to the AI opportunity.
Both AMD and Amazon offer attractive valuations and growth prospects compared to other AI stocks in the Nasdaq. AMD's data center segment grew 122% year over year in Q3 2024, while Amazon's AWS operating income soared 64% year over year. These strong performances indicate that both companies are well-positioned to capitalize on the AI opportunity.
In conclusion, history suggests that the Nasdaq could continue its upward trajectory in 2025, driven by the AI revolution. As investors look for opportunities to capitalize on this trend, AMD and Amazon stand out as attractive options with diversified business models and strong growth prospects. By investing in these AI stocks, investors can position themselves to benefit from the continued growth of the AI sector while maintaining a degree of diversification.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
