Even though 2024 is drawing to a close and a new year full of surprises is upon us, artificial intelligence (AI) will surely remain a top priority for investors next year.
While Nvidia is widely considered the ultimate barometer for the health of the AI ecosystem, I see a few other candidates as top investment choices for 2025.
Advanced Micro Devices (AMD 0.10%), Amazon (AMZN -1.45%), and Tesla (TSLA -4.95%) are opportunities to buy hand over fist next year as AI mania continues.
Advanced Micro Devices
Industry trends suggest that Nvidia owns a staggering 88% share of the GPU market. On the surface, such a strong foothold might suggest that Nvidia simply has the most superior products in the marketplace. While some customers would argue that this is very much the case, there is a more nuanced reason for Nvidia's dominance -- namely, a lack of competition over the last two years essentially provided Nvidia with a first-mover advantage.
However, over the last year or so, AMD quietly emerged as a formidable competitor in the data center GPU realm, thanks in large part to its MI300 accelerators. The MI300 has been such a bellwether for AMD that its own data center services business is growing at essentially the same rate as Nvidia's (which has been decelerating over the last few quarters).
Next year, AMD is scheduled to release a next-generation architecture, dubbed the MI325X, which is geared toward competing with Nvidia's new Blackwell GPUs. Furthermore, AMD's GPU roadmap also includes a planned launch in 2026 for its MI400 chipset, which is likely an answer to Nvidia's Rubin architecture, which is also planned for 2026.
While I'm not insinuating that AMD will become a larger enterprise than Nvidia, the company's pace of innovation needs credit. With that, I could easily see AMD beginning to acquire incremental market share away from Nvidia as investment in AI infrastructure continues to boom.
AMD is a screaming buy right now as investors appear to be overlooking the company's progress, which is currently overshadowed by that of Nvidia.
Image source: Getty Images.
Amazon
Amazon as the single most lucrative opportunity among mega-cap tech. While Amazon's core operations sit between e-commerce and cloud computing, the company also has a subscription business (Prime), a streaming platform, and a fast-growing advertising unit. Amazon is an incredibly unique business, as its diverse model allows it to stitch AI-powered features across the company's broader fabric.
Between holiday-driven shopping trends, corporate budgets focusing more on AI, and new investments in its streaming services, Amazon looks poised for a blowout fourth-quarter performance. On top of that, the company is making some notable investments in AI infrastructure -- namely in the form of homegrown chips (Trainium and Inferentia) as well as through a lucrative partnership with OpenAI competitor Anthropic.
Even with all of these exciting moving pieces, Amazon's revenue is only growing at 11% annually. Although this may appear mundane, Amazon's free cash flow is growing at over 120% year over year, providing the company with heaps of cash that it can use to reinvest back into the business. This level of financial flexibility is hard to match, and it's only a matter of time before Amazon begins to show material acceleration across the top line while continuing to mint profits.
Amazon is a no-brainer opportunity for investors with a long-term time horizon.
Tesla
Over the last couple of years, Tesla struggled to match or exceed historical growth levels as demand for its electric vehicles (EV) became protracted on the heels of a tough macroeconomic environment.
Those days may be in the rearview mirror, though. Perhaps the biggest near-term tailwind for Tesla is its foray into autonomous driving, known as Full Self-Driving (FSD) technology. While FSD has made notable progress over the last few years, there is reason to believe that 2025 could be the beginning of a generational growth narrative for Tesla's ambitions in self-driving.
Wedbush Securities analyst Dan Ives thinks that Elon Musk's close relationship with President-elect Donald Trump could significantly speed up the timeline to bring FSD to widespread commercialization. Furthermore, if Trump decides to remove or change regulations around EV tax credits, Tesla could benefit from such action in the long run.
Although Tesla stock has been soaring since the election, and shares are hovering around all-time highs, it's still a compelling opportunity for long-term investors. For now, I'd caution against buying into the momentum and look for a more reasonable entry point should a sell-off occur. Nevertheless, 2025 will be a milestone year for Tesla thanks to the narrative surrounding FSD, and the start of a new growth narrative for the company.
