2 Great Artificial Intelligence (AI) Stocks to Buy in 2025

The artificial intelligence (AI) investment sector is a goldmine for finding companies with market-leading potential. Nvidia (NASDAQ:NVDA) And Taiwan semiconductor manufacturing (NYSE:TSM) are among the stocks that I think can outperform the market over the next five years.

Nvidia is a stock that has made many people rich. If you invested $10,000 in Nvidia a decade ago, you would have about $2.7 million now. Unfortunately, we don’t have a time machine to capture these returns, but Nvidia’s future looks bright.

Nvidia makes graphics processing units (GPUs) that perform the intensive calculations needed to train AI models. GPUs have the unique ability to process multiple calculations in parallel, making them outperform traditional CPUs. While there are other competitors in the GPU market, Nvidia’s products outperform them.

Wall Street analysts expect Nvidia’s revenue to rise about 51% in fiscal 2026 (ending January 2026). This suggests that Nvidia’s growth is far from over. This growth is driven by higher customer spending and the expansion of the next generation architecture, Blackwell. Blackwell GPUs significantly outperform previous generation Hopper GPUs and provide a major reason to upgrade. Additionally, GPUs typically have a lifespan of around three to five years, so a replacement cycle may begin soon.

Additionally, Nvidia is no longer the expensive stock it was once portrayed to be. The stock trades at 54 times trailing earnings, which isn’t much of a premium compared to some of its big tech rivals. Nvidia is growing significantly faster than Amazon (48 times income), Apple (42 times income) and Microsoft (36 times earnings), but has only a small valuation premium to these three.

Nvidia is still a great AI stock, and I’m confident it can deliver the above-average returns investors expect over the next five years.

In the value chain, Taiwan Semiconductor makes microchips for Nvidia GPUs. TSMC makes chips for many more customers than Nvidia, but AI-related chips have given the company a huge boost.

In the second quarter of 2023, management forecast that AI-related hardware would grow at a compound annual rate of 50% over the next five years and then represent a low percentage of sales. However, TSMC’s results have far exceeded this forecast, with AI sales expected to triple by 2024 and now represent a mid-teens percentage of sales.

Taiwan Semi doesn’t see any signs of slowing down in AI sales (similar to Nvidia), so it’s pretty obvious that the company is in for a great 2025. Wall Street analysts are forecasting 25% sales growth in 2025, but further sales growth is on the horizon for 2026. In 2026, the next-generation 2-nanometer (nm) chip is expected to enter mass production. These chips can reduce power consumption by 25 to 30% when configured with the same processing power as previous generation 3nm chips. Since electricity costs are a significant cost factor in running a data center, this may lead some customers to upgrade their computer hardware based on energy cost savings alone.

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Taiwan Semiconductor’s shares are also fairly cheap compared to big tech stocks and are growing faster than all others.

There are many reasons to be optimistic about Taiwan Semi stock, and I am confident that it can continue to deliver above-average returns over the next five years.

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Keithen Drury holds positions at Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

“2 Great Artificial Intelligence (AI) Stocks to Buy in 2025” was originally published by The Motley Fool