Artificial intelligence (AI) has been the hottest buzzword in 2024, and rightly so. With AI being increasingly adopted across industries and functions globally, it has become a major investment theme. While several AI-powered stocks soared in 2024, there is still money to be made in this technological revolution.

Purchasing either of these two AI-driven stocks can be a smart move for astute investors in 2025. Here's why.

Nvidia

For several reasons, Nvidia (NVDA -2.33%) remains a Wall Street favorite. The company has demonstrated exceptional prowess and execution capabilities in the fast-expanding AI computing infrastructure space (AI-optimized hardware and software). Nvidia's third quarter of fiscal 2025 (ended Sept. 30, 2024) is testimony to its AI market dominance. Revenue soared 94% year over year to $35.1 billion, driven mainly by AI-focused data center revenue of $30.8 billion.

Nvidia's hardware business is benefiting mainly from two fundamental trends in computing. The transition from central processing unit (CPU)-based coding to graphics processing unit (GPU)-based machine learning and AI algorithms requires nearly $1 trillion worth of data center infrastructure to be upgraded globally. Plus, the widespread adoption of digital intelligence has led to the emergence of a multitrillion-dollar industry of AI factories (each requiring tens of thousands of GPUs).

Data centers and enterprises are widely adopting Nvidia's Hopper architecture GPUs for running complex AI workloads. However, the company says the "staggering demand" for its next-generation and customizable "full-stack, full-infrastructure, AI data-center scale" Blackwell architecture systems is expected to be its key growth catalyst in 2025. Blackwell has proved to be 2.2 times faster in training AI models as compared to Hopper chips. Not surprisingly, demand for the cutting-edge Blackwell chips is far outpacing supply -- even though the company has been focused on ramping production capacity. This implies Nvidia will enjoy significant pricing power and robust revenue momentum in the coming months.

Nvidia is also seeing major clients such as Salesforce, SAP, and ServiceNow using its AI Enterprise platform (software platform for agentic AI) to build customized copilots and AI-powered agents. With billions of agents expected to be deployed in the coming years, this can prove to be a major growth driver for Nvidia in the long run.

Finally, despite Nvidia's exceptional growth, its valuation is not overtly expensive. The stock trades at about 54 times trailing-12-month earnings, lower than its five-year average price-to-earnings (P/E) multiple of 75.9. Furthermore, its price/earnings-to-growth (PEG) ratio is only 0.23 -- implying that the pace of future growth is stronger than that of multiple expansion.

Considering that the AI revolution is still in its early stages, Nvidia has much scope to grow in the coming years.

Broadcom

Broadcom (AVGO -1.59%) has emerged as a standout stock in 2024, driven by its prowess in both customized AI chips and infrastructure software – a differentiated approach compared to Nvidia's general-purpose GPU strategy. By designing custom AI accelerators (XPUs) suitable for the specific requirements of its three major hyperscaler clients, the company has joined their multi-generational AI infrastructure roadmaps. Broadcom is also using advanced 3-nanometer process technology for next-generation AI chips.

Furthermore, the company's networking solutions are also in high demand, thanks to Broadcom's deep understanding of scaling AI clusters from thousands to millions of XPUs. Plus, the company also expects a rise in resources allocated to networking content from 5% to 10% of that allotted to computation content to 15% to 20%, as hyperscaler customers expand AI clusters from 500,000 XPUs to 1 million XPUs.

Subsequently, Broadcom management now expects a serviceable addressable market for its XPUs and networking components to be between $60 billion and $90 billion by 2027, just from three hyperscaler customers.

The success of Broadcom's AI strategy is evident, considering that the company's AI revenue was up by 220% year over year to $12.2 billion in fiscal 2024 (ended Nov. 3). AI revenue now makes up nearly 41% of Broadcom's semiconductor revenue.

Broadcom has also successfully integrated the data center virtualization software player VMware in a very short time frame, while improving profitability. VMware's operating margin rose from 30% pre-acquisition to a solid 70%. Broadcom is also ahead of the three-year schedule for delivering incremental adjusted earnings before interest, taxes, depreciation, and amortization of more than $8.5 billion.

Broadcom's non-AI semiconductor business is also expected to grow at a steady mid-single-digit rate. The stock is currently trading at 21.6 times trailing-12-month sales, higher than its five-year average price-to-sales ratio of 11.8. However, in the backdrop of explosive growth of AI business and strong financials, the stock may prove to be a smart pick even at the current elevated levels.