2 no-brainer artificial intelligence (AI) stocks to buy before 2025

This has been a very solid year for artificial intelligence (AI) stocks, as companies benefiting from the rapidly growing adoption of this technology saw solid improvement in their businesses, which also led to strong gains in their shares.

The good thing is that AI adoption is still in its early stages and spending on this technology is expected to continue increasing in 2025. Market research firm IDC estimates that global AI spending could rise to $337 billion next year from this year’s forecasts to $235 billion. That would be an impressive increase of almost 50% compared to the previous year.

There are several ways investors can benefit from this big surge in AI spending next year. Let’s take a look at two such names that are playing a key role in driving AI adoption and have seen a significant acceleration in their growth thanks to this technology.

1.Taiwan Semiconductor Manufacturing

The world’s largest semiconductor foundry, Taiwan semiconductor manufacturing (TSM 0.99%)is the preferred chip manufacturer for numerous chip designers such as: Nvidia, Micron technology, Marvell, Broadcom, Advanced micro devicesAnd Qualcommamong other things, but also produces chips for consumer electronics companies such as Apple And Sony.

All of these customers have increased demand for chips that can support generative AI applications across multiple industries. For example, Nvidia, Micron, Marvell, Broadcom and AMD are enabling TSMC to capitalize on the rapidly growing demand for AI data center chips. Market research company Gardener forecast a 14% increase in semiconductor sales next year, driven by strong demand for graphics processing units (GPUs) and memory chips that some of TSMC’s customers sell.

More specifically, AI GPU sales are expected to rise 27% next year, while demand for high-bandwidth memory (HBM), a type of memory used in AI chips, could rise 70% . Likewise, the adoption of AI in consumer electronics products will be another tailwind for TSMC. For example, Apple and Qualcomm are benefiting from the proliferation of AI-enabled smartphones, while AMD is seeing a surge in demand for central processing units (CPUs) that can power AI-enabled personal computers (PCs).

These markets represent another long-term growth opportunity for TSMC. According to IDC, shipments of generative AI-enabled smartphones could increase by 73% next year, while shipments of AI-enabled PCs are expected to see a huge increase of 165% next year . As TSMC’s customers prepare to meet rising demand for AI chips across multiple industries, the Taiwan-based foundry giant should be poised for solid performance next year.

It’s worth noting that TSMC saw a big increase in demand for its foundry services this year. The company’s revenue so far in the 11 months of 2024 is up 32% compared to the same period last year. TSMC looks poised to end the year on a solid footing as its revenue growth accelerated to 34% in November compared to the same period last year, compared to 29% growth in October. This also suggests that the company will start the new year with momentum.

The growth drivers discussed above tell us why the company’s revenue is expected to grow at a healthy pace of 25% next year.

TSM revenue estimates for current fiscal year data from YCharts

TSMC’s profits are also expected to increase by the same amount in 2025. Add in the company’s attractive valuation, and it’s easy to see why buying this semiconductor stock is a no-brainer. TSMC trades at 22 times expected earnings, a discount to that Nasdaq-100 The index’s expected earnings multiple is 28 (using the index as a proxy for technology stocks).

According to 47 analysts covering the stock (96% of whom rate it a Buy), the stock has a 12-month average price target of $240, suggesting a 25% upside from current levels. However, it should come as no surprise that TSMC is performing better thanks to the critical role it plays in the global semiconductor market. For this reason, investors should consider buying this stock as it appears poised for healthy gains in 2025.

2. Dell Technologies

Dell Technologies (DELL 1.67%) has been in the spotlight for all the wrong reasons lately, as the tech giant’s shares plunged following the release of its third quarter fiscal 2025 results (for the three months ended Nov. 1) on Nov. 26. Investors hit the panic button as Dell’s sales fell short of Wall Street’s expectations.

But that’s good news for smart investors. That’s because Dell shares can now only be bought at 21.6 times trailing earnings, while the stock’s forward earnings multiple of 12.5 is even more attractive. Buying Dell at this valuation seems like a no-brainer as the company is on track to benefit from two major AI-related catalysts in 2025 and beyond.

The first is the booming demand for AI servers. As reported by BloombergBy 2025, the AI ​​server market could see an outstanding growth of 55% and generate an estimated revenue of $252 billion. Dell is already capitalizing on this fast-growing AI niche. This was evident in the company’s most recent quarterly report, where Infrastructure Solutions Group (ISG) revenue increased 34% year-over-year to $11.4 billion.

More specifically, Dell’s revenue from sales of servers and networking equipment grew faster, by 58% to $7.4 billion. The company sold $2.9 billion in AI servers last quarter and received $3.6 billion in new orders. Dell ended the quarter with an AI server backlog of $4.5 billion. More importantly, Dell’s AI server pipeline grew over 50% sequentially over the next five quarters.

Therefore, Dell’s ISG revenue is expected to continue growing at an impressive pace in 2025 thanks to the huge opportunity in AI servers.

The second AI-related opportunity for Dell is AI-enabled PCs. We’ve already seen that this market is set to grow tremendously next year, and that’s a good sign for Dell as it’s the third-largest PC vendor in the world with a market share of just over 14%. Dell management noted in its most recent earnings call that it is “seeing an indication that customers are aligning their upgrade cycles with new AI PCs in the first half of next year.”

These catalysts explain why Dell’s earnings growth rate is expected to accelerate to $7.82 per share from its forecast of nearly 10% for this fiscal year.

DELL EPS estimates for current fiscal year data from YCharts

The chart above shows that Dell’s profits could rise over 20% in fiscal 2026 (which will begin in February 2025). Assuming Dell generates earnings of $9.40 per share next fiscal year and trades in line with the Nasdaq-100 index’s expected earnings multiple of 28 at that point, the stock price could reach $263 . That would be a 125% increase from current levels.

So, investors looking for an attractively valued AI stock may consider taking advantage of Dell’s decline to buy as it could post big gains in 2025.