Last year was fantastic for the markets in general, but the index that really stood out was the Nasdaq. It climbed 28%, while the S&P 500 rose 23% and the Dow Jones Industrial Average increased 12%. The Nasdaq, heavily weighted in technology companies, surged as investors piled into the industry’s hottest new area: artificial intelligence (AI) stocks.
Today’s $200 billion AI market is forecast to top $1 trillion by the end of the decade, and investors have sought to get in early on this high-growth story. The technology has the potential to transform many industries, saving companies time and money, while boosting earnings as a result. And earnings growth often leads to positive stock performance.
As 2025 gets started, it’s logical to ask this question: After two years of gains, will the Nasdaq keep up the momentum this year? History says it will. If we look at the past periods of gains since 1990, in five out of six cases, the Nasdaq has climbed for three consecutive years or more.
Of course, the market can surprise us and deviate from a trend, but in general, history has shown itself 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.
1. Meta Platforms
You may associate Meta Platforms (META 0.84%) mainly with social media. The company owns Facebook, Messenger, Instagram, and WhatsApp — which together have more than 3.2 billion users each
day.
But Meta also is becoming a giant in AI, developing its own large language model (LLM) to support tools we all can use, like the Meta AI assistant. The company made AI its biggest investment area last year and recently spoke of plans to continue increasing spending in this area. It aims to create AI that can assist all of its users with their daily tasks, work-related projects, and more.
This focus and the related investment could eventually make Meta a leader in this hot growth area and boost its revenue, too. For example, the company generates most of its revenue through advertising — and AI assistants may prompt us to spend more time on Meta’s apps, encouraging advertisers to spend more to reach us there.
Considering all of this, Meta shares — trading at only 24 times forward earnings estimates even after last year’s 65% gain — look like a bargain AI buy to snap up before the Nasdaq soars.
2. Alphabet
Alphabet (GOOG -1.14%) (GOOGL -0.98%), 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, its LLM Gemini is helping it improve search and make the experience better for those who advertise across 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 does face one risk: an antitrust case brought by the Justice Department. A U.S. district judge last year ruled Google hurt the competition in search. But the company says it will appeal — and it may be difficult for the government to apply the strictest of sanctions.
Like Meta, Alphabet stock represents a bargain today, trading for 21 times forward earnings estimates — especially considering its long track record of growth, its market leadership, and its focus on AI.
3. Nvidia
This list wouldn’t be complete without Nvidia (NVDA -3.00%). Yes, it already soared 171% last year and isn’t 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 not only is the top AI chip company, but it also has built an AI empire spanning various products and services. It has even created platforms for particular industries like healthcare and automaking.
The company’s chip dominance has helped it generate double- and triple-digit growth quarter after quarter in recent years, bringing revenue to record levels. Sales topped $35 billion in the latest quarter.
But the momentum is far from over. The company also is set to win in the next wave of AI growth: the area of software. Its enterprise software and tools that help customers build their own AI agents — AI that solves complex problems — could push revenue much higher in the years to come.
So Nvidia, the star of the early phase of AI, has what it takes to continue shining — and that’s why it makes a top buy before the Nasdaq soars in 2025.
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. Suzanne Frey, an executive at Alphabet, 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 in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
