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Top Picks for Investing Heavily in Three Promising Artificial Intelligence (AI) Companies in 2025, Excluding Nvidia.
As we approach the end of 2024 and welcome a new year filled with unpredictable developments, artificial intelligence (AI) will undeniably remain a significant focus for investors in the upcoming year.
While Nvidia is generally regarded as the benchmark for assessing the AI sector's health, I've identified a few other potential investment prospects for 2025.
Advanced Micro Devices (AMD, 3.93%), Amazon (AMZN, 1.80%), and Tesla (TSLA, 8.22%) emerge as promising investment possibilities as the AI obsession persists.
Advanced Micro Devices
The GPU market is largely controlled by Nvidia, boasting an impressive 88% market share. Initially, this dominant position could be attributed to Nvidia's superior products. However, there's a more nuanced explanation attached to Nvidia's dominance - the absence of substantial competition during the past two years, effectively granting Nvidia a first-mover advantage.
Recently, AMD has positioned itself as a strong competitor in the data center GPU market, mainly because of its MI300 accelerators. The MI300 has driven significant growth for AMD in the data center services sector, even matching Nvidia's decelerating performance over the past few quarters.
For the next year, AMD plans to unveil a new architecture named MI325X, which is specially designed to challenge Nvidia's Blackwell GPUs. Additionally, AMD has a scheduled 2026 launch for their MI400 chipset, which might be an effective counter response to Nvidia's Rubin architecture slated for 2026.
Although I'm not implying that AMD may surpass Nvidia in terms of market share, its rapid innovation pace deserves acknowledgment. Consequently, the company can potentially accumulate incremental market share from Nvidia as AI infrastructure investments continue to flourish.
Regardless of investor disinterest in AMD's progress, overshadowed by Nvidia's achievements, the company currently presents a lucrative investment opportunity.
Amazon
As the industry's most profitable opportunity among mega-cap tech companies, Amazon's core operations span both e-commerce and cloud computing. Furthermore, the company boasts a subscription service (Prime), a streaming platform, and an expanding advertising unit. By integrating AI-powered features across its diverse operations, Amazon ensures a seamless AI impact on its broader business fabric.
Based on holiday shopping trends, increased corporate spending on AI, and additional investments in streaming services, Amazon looks poised for a remarkable fourth-quarter. Moreover, the company is investing in AI infrastructure through homegrown chips (Trainium and Inferentia) and lucrative partnerships with AI competitors such as Anthropic.
Despite Amazon's annual revenue growth of only 11%, its free cash flow has been escalating at an alarming 120% year-over-year. This financial flexibility provides the company with ample resources to reinvest in its growth. Eventually, Amazon is expected to exhibit accelerated revenue growth while simultaneously delivering remarkable profits.
Given its long-term commitment, Amazon represents a fascinating opportunity for investors.
Tesla
During the last few years, Tesla has faced challenges to maintain or exceed its historical growth rate amidst a challenging economic environment.
However, it appears as if Tesla's woes may be coming to an end. One of the primary growth catalysts for Tesla is its autonomous driving technology, Full Self-Driving (FSD). Although FSD has demonstrated considerable improvement over the past years, 2025 may symbolize a turning point in Tesla's self-driving ambitions.
Analyst Daniel Ives from Wedbush Securities believes that Elon Musk's connections with President-elect Donald Trump could speed up the FSD commercialization timeline. Moreover, if Trump decides to modify or abolish EV tax credits, Tesla could reap the benefits in the long run.
Although Tesla's stock has soared since the election and is hovering near all-time highs, there are still opportunities for long-term investors. Caution should be exercised when jumping on the momentum bandwagon, and it's recommended to wait for a more palatable entry point if a market correction occurs. Regardless, 2025 will prove to be a significant year for Tesla, thanks to FSD and the commencement of a new growth phase for the company.
In light of the AI sector's ongoing growth, investors might consider diversifying their portfolio by looking beyond Nvidia's dominance and exploring potential investments in companies like Advanced Micro Devices, which is challenging Nvidia's market share with its innovative products and upcoming chipset launches.
Given Amazon's integration of AI across its diverse operations and its significant investments in AI infrastructure, the company is well-positioned to capitalize on the AI trend, making it an attractive investment opportunity for those seeking long-term growth in the tech sector.