As 2024 draws to a close, many investors may be looking to rebalance their investment portfolios to secure higher returns heading into 2025. Artificial intelligence (AI) continues to be a hot investment theme on Wall Street, so investors may want to consider buying a small stake in the stock. Essentially powerful, high-quality AI-powered stocks.
Against this backdrop, here’s why stocks like Nvidia are interesting. (NASDAQ:NVDA) and amazon (NASDAQ:AMZN) This could be an attractive stock heading into the new year.
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Nvidia continued its strong performance in its fiscal third quarter 2025 (ending October 27, 2024) earnings report, with revenue and profits easily beating consensus estimates. Unsurprisingly, AI continues to be the most important growth driver for Nvidia, positioning itself as an end-to-end data center-scale AI infrastructure company.
Nvidia’s Hopper architecture chips remain in high demand by cloud service providers, consumer internet companies, and companies building and running next-generation AI models. The recently launched H200 GPU (successor to the widely acclaimed H100 GPU) saw a double-digit sales increase to $1 billion in the third quarter, the fastest product increase in the company’s history.
Nvidia’s next-generation Blackwell architecture GPUs are also going strong, with 13,000 GPU samples already shipped to customers. Over the next few quarters, Nvidia will enjoy significant pricing power as demand for Blackwell GPUs far exceeds supply, especially since its chips are technologically superior to its competitors. . The company then expects to exceed Blackwell’s previous fiscal 2025 revenue guidance of several billion dollars.
Beyond AI-optimized chips, Nvidia is already seeing solid adoption of its cloud-native enterprise AI software suite. It includes a variety of microservices for generative AI development, application deployment across environments, and technology support. Many industry leaders are using the Enterprise AI Platform as their operating platform of choice for building AI agents and copilots. Enterprise AI is likely to emerge as a key growth driver for Nvidia in the coming years as billions of agents are expected to be deployed.
Additionally, Nvidia also expects industrial AI and robotics to be strong growth opportunities. As companies strive to design and simulate complex physical environments to improve productivity and efficiency, Nvidia Omniverse, a real-time 3D collaboration and simulation platform, stands to benefit dramatically in the coming years. Masu.
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Nvidia’s technological prowess is undeniable, but many investors seem intimidated by its high valuation multiple. However, the company’s strong growth prospects seem to justify that valuation. Nvidia’s price-to-earnings ratio (P/E) is currently 54.4x, well below the average P/E ratio over the past five years of 75.7x. The company’s price-to-earnings ratio (PEG) of 0.24x is also much lower than 1x.
So given the solid AI tailwinds and strong financial health, I believe Nvidia could be a smart choice for long-term investors.
Amazon also reported higher-than-expected sales and profits in the third quarter of 2024 (ending September 30, 2024). The company showed broad-based growth across all its businesses, but its Amazon Web Services (AWS) and advertising segments outperformed its other businesses.
As a global cloud infrastructure player with a 31% market share, AWS continues to benefit businesses as they modernize their IT infrastructure and move from on-premises environments to the cloud. Cloud computing businesses are also benefiting from the increasing large-scale adoption of generative AI technologies by enterprises. Generative AI technologies are more likely to be successful and competitive when enterprise data is in the cloud. Additionally, to attract customers, AWS has released nearly twice as many generative AI and machine learning capabilities compared to its competitors in the past 18 months.
AWS’ third quarter revenue was $27.5 billion, an increase of 19.1% year over year. Operating income for the cloud computing business increased by $3.5 billion to $10.4 billion. AWS’s annual revenue run rate has reached $110 billion and has re-accelerated significantly over the past four quarters. AWS’ AI business is growing even faster, already reaching billions of dollars in revenue. It’s growing at a triple-digit rate year-over-year, almost three times faster than AWS in its early growth stages.
Advertising revenue for the third quarter was $14.3 billion, up 18.8% year over year. This business has also proven to be a significant contributor to the company’s overall profitability. Amazon has been successful in offering full-funnel advertising services at scale thanks to its broad reach across products, services, geographies, and demographics. Amazon engages with customers at every step of the buying process and measures their success, making it an attractive advertising platform for brands of all types. We also launched several AI-powered generative creative tools to help advertisers design and create engaging and relevant ads.
Sponsored Products ads on Amazon’s e-commerce platform continue to show significant growth. Additionally, the company is also generating new revenue streams through advertising on Prime Video.
With a strong financial background, continued leadership in cloud computing, advances in AI, and strength in digital advertising, Amazon is poised for significant growth in 2025.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Manali Pradhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.
2 Monster Stocks to Buy Before 2025 was originally published by The Motley Fool.
