Last year was great for the markets in general, but the index that really stood out was the Nasdaq. It rose by 28%, while the S&P500 rose by 23% and the Dow Jones Industrial Average increased by 12%. The Nasdaq, heavily weighted in technology companies, rose sharply as investors moved into the sector’s hottest new area: artificial intelligence (AI) stocks.
The current $200 billion AI market is expected to reach $1 trillion by the end of this decade, and investors have been trying to get in on this rapid growth story early. The technology has the potential to transform many industries, saving companies time and money and increasing profits. And earnings growth often leads to positive stock performance.
As 2025 kicks off, it’s natural to ask this question: After two years of gains, will the Nasdaq be able to keep the momentum going this year? History says so. Looking at past gains since 1990, five out of six times the Nasdaq has risen for three consecutive years or more.
Of course, the market can surprise us and deviate from a trend, but in general history has proven to be a good guide. Now let’s take a look at my best AI stocks to buy before the Nasdaq takes off.
You are allowed to associate Metaplatforms (NASDAQ: META) especially with social media. The company owns Facebook, Messenger, Instagram and WhatsApp, which together have more than 3.2 billion users
day.
But Meta is also becoming a giant in the field of AI and developing its own giant great language model (LLM) to support tools we can all use, like the Meta AI Assistant. The company made AI its largest area of investment last year and recently talked about plans to continue increasing spending in this area. It aims to create AI that can help all its users with their daily tasks, work-related projects and more.
This focus and related investments could ultimately make Meta a leader in this hot growth area and also increase revenue. For example, the company generates most of its revenue through ads – and AI assistants can prompt us to spend more time on Meta’s apps, encouraging advertisers to spend more to reach us there.
Taking all this into account, Meta stock only trades 24 times future earnings estimates even after last year’s 65% gain, it appears to be a bargain AI buy before the Nasdaq takes off.
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)like Meta, may not be a company you automatically associate with AI. You probably know this best from Google Search, a tool many of us use every day.
But it’s a win two ways in AI. First, the LLM Gemini helps improve search and improve the experience for those who advertise on Google. And second, Alphabet offers AI tools and services, including Gemini, through Google Cloud, its cloud computing business.