Last year was fantastic for markets in general, but the index that really stood out was the Nasdaq. It rose 28%, while the S&P 500 increased by 23% and Dow Jones Industrial Average increased by 12%. The Nasdaq, heavily weighted by technology companies, rose as investors piled into the industry’s hottest new area: artificial intelligence (AI) stocks.
The current $200 billion AI market is forecast to reach $1 trillion by the end of the decade, and investors have sought to get in early on this high-growth story. Technology has the potential to transform many industries, saving businesses time and money and increasing profits as a result. And earnings growth often leads to positive stock performance.
As 2025 begins, it’s logical to ask this question: After two years of gains, will the Nasdaq maintain momentum this year? History says that it will be so. If we look at recent earnings periods since 1990, in five out of six cases, the Nasdaq has risen for three consecutive years or more.
Of course, the market can surprise us and deviate us from a trend, but in general history has proven to be a solid guide. Now, let’s look at my top AI stocks to buy before the Nasdaq takes off.
Image source: Getty Images.
You can join Metaplatforms(NASDAQ: META) mainly with social networks. The company owns Facebook, Messenger, Instagram and WhatsApp, which together have more than 3.2 billion users each. day.
But Meta is also becoming an AI giant, developing its own large language model (LLM) to support tools we can all use, like the Meta AI assistant. The company made AI its biggest area of investment last year and recently talked about plans to continue increasing spending in this area. Its goal is to create AI that can help all its users with their daily tasks, work-related projects, and more.
This approach and related investment could eventually make Meta a leader in this high-growth area and also increase its revenue. For example, the company generates most of its revenue through advertising, and AI assistants can prompt us to spend more time on Meta apps, encouraging advertisers to spend more to get there.
Given all this, Meta stock (trading at just 24 times forward earnings estimates even after last year’s 65% gain) looks like a cheap AI buy to take advantage of before the Nasdaq soars.
Alphabet(NASDAQ:GOOG)(NASDAQ:GOOGL)like Meta, may not be a company you automatically associate with AI. You probably know it best for Google Search, a tool many of us use daily.
But it is winning in AI in two ways. First, your Gemini LLM is helping you improve search and improve the experience for those advertising on Google. And second, Alphabet offers AI tools and services, including Gemini, through Google Cloud, its cloud computing business.
The focus on AI has helped Google Cloud reach milestones in recent quarters, surpassing $10 billion in revenue and $1 billion in operating income.
The company faces a risk: an antitrust case brought by the Department of Justice. Last year, a US district judge ruled that Google harmed competition in search. But the company says it will appeal, and that it may be difficult for the government to enforce the strictest penalties.
Like Meta, Alphabet stock represents a bargain today, trading for 21 times forward earnings estimates, especially considering its long history of growth, market leadership, and focus on AI.
This list would not be complete without NVIDIA(NASDAQ: NVDA). Yes, it’s already soared 171% in the past year and it’s not the cheapest stock on the block at 45 times forward earnings estimates. But I think it’s worth the price and has room to run, in light of its position in the AI landscape.
Nvidia is not only the leading AI chip company, but has also built an AI empire spanning various products and services. It has even created platforms for particular industries such as healthcare and automobile manufacturing.
The company’s chip dominance has helped it deliver double- and triple-digit growth quarter after quarter in recent years, driving revenue to record levels. Sales exceeded $35 billion in the last quarter.
But the momentum is far from over. The company will also win in the next wave of AI growth: the software space. Its enterprise software and tools that help customers create their own AI agents (AI that solves complex problems) could greatly increase revenue in the coming years.
So early-stage AI star Nvidia has what it takes to keep shining, which is why it’s making a major purchase before the Nasdaq soars in 2025.
When our team of analysts has a stock tip, it can pay to listen. After all, stock advisor The average total return is 865%, an overwhelming market outperformance compared to 173% for the S&P 500.*
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*Stock Advisor returns from January 6, 2025
Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Alphabet, Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.
History says the Nasdaq will skyrocket in 2025. My Top 3 AI Stocks to Buy Before It Does. was originally published by The Motley Fool
