3 AI Stocks Up 14% to 19% in 2025 That Should Continue Moving Higher
Rising chip demand and a low valuation bode well for TSMC.
Analysts expect AMD's sales to increase 23% in 2025.
10 stocks we like better than Taiwan Semiconductor Manufacturing ›
Many artificial intelligence (AI) stocks have had a rough start in 2025. Developments such as DeepSeek's breakthrough in low-cost AI modeling, as well as tariff and geopolitical concerns, weighed on these stocks.
Interestingly, President Donald Trump's "Liberation Day" announcement signaled a low for many AI stocks, so much so that some of them have eked out a net gain for the year to date. Additionally, some AI stocks are poised to continue moving higher, and the three stocks below should continue to surge despite recent gains.
Will Healy (Taiwan Semiconductor Manufacturing): Chip manufacturer Taiwan Semiconductor Manufacturing (TSMC) (NYSE: TSM) finds itself at the center of its industry and the geopolitical turmoil that has weighed on many AI stocks.
TSMC claims just over two-thirds of the foundry market, and top chip companies such as Nvidia (NASDAQ: NVDA), Apple, and Broadcom are among its customers.
Moreover, China is a critical customer of many of its clients. Still, that country remains an ongoing threat to the sovereignty of Taiwan, which is home to TSMC's headquarters and the majority of its chip production capacity. That weighed on the stock as trade-war tensions came to a head in early April.
Despite that drop, the stock has staged a dramatic recovery since then, so much so that it is now up 14% so far this year.
Furthermore, TSMC's revenue growth and valuation could mean the stock is at the beginning of a bull market. As customers scramble to adopt generative AI, demand for AI chips has skyrocketed. In the first quarter of 2025, revenue of $25.5 billion increased 42% from year-ago levels. Also, since TSMC kept operating expense growth in check, its net income surged 60% higher to $11 billion.
Additionally, the company forecasts second-quarter revenue between $28.4 billion and $29.2 billion, amounting to 38% growth at the midpoint, indicating that its massive growth is on track to continue.
Amid the fears of a takeover, TSMC sells at a P/E ratio of 29. Although investors should not dismiss such worries, China's dependence on the company's chips reduces the likelihood of such a geopolitical event.
It also probably means the stock is a bargain, and as rising chip demand continues to drive revenue, TSMC stock is likely to rise along with that trend.
Justin Pope (Nvidia): The world's dominant AI data center chip company isn't a flashy pick, but it seems likely that Nvidia, which fell 30% by late April, then rallied back to new all-time highs and a 16% gain year to date, will continue to shine through the rest of the the year.
Despite Nvidia's staggering investment returns over the past few years, the equally impressive growth in the underlying business has continued to sustain a reasonable valuation, leaving room for the stock to continue its upward journey. The company's annual revenue has increased from $27 billion in its fiscal year 2023 to $130 billion in its fiscal year 2025.
Chips used in AI data centers have become Nvidia's core business. The good news? It appears that AI will drive significant investments in data centers for the foreseeable future. Research by Dell'Oro Group estimates that annual global data center expenditures could grow by 21% annually, surpassing $1 trillion by 2029.
At the very least, there are no apparent near-term signs of a pullback in AI investments. Analysts anticipate Nvidia's full-year revenue will reach $200 billion this fiscal year and $250 billion next year. Meanwhile, analysts estimate Nvidia will grow its earnings by nearly 29% annually over the next three to five years.
The stock trades at a price-to-earnings (P/E) ratio of 50 today. That's a steep valuation for most stocks, but investors can probably make an exception for Nvidia. Its strong business momentum, leadership in AI data center chips, and a strong forecast for continued growth in data center expenditures combine to make the stock a buy at these levels, paving the way for continued gains through the coming months.
Jake Lerch (Advanced Micro Devices): My choice is Advanced Micro Devices (NASDAQ: AMD).
As of this writing, shares of AMD have advanced 19% this year, representing a real bounceback for a stock that declined by 63% between February 2024 and April 2025.
The company, which designs microprocessors, is at the forefront of the AI revolution, thanks to its new series of GPUs, which now compete with Nvidia's lineup of AI chips. There are reports that some shipments of Nvidia AI chips, including its top-of-the-line Blackwell unit, have been delayed, which might provide a further opportunity for AMD. AMD already has its MI300X unit available for sale and plans to launch two additional AI units (MI350 and MI400) within the next year and a half.
What's more, sell-side analysts are expecting AMD's sales to pick up as it rolls out these new lines of AI chips. According to consensus estimates compiled by Yahoo! Finance, AMD should generate $31.8 billion in sales in 2025 and $37.4 billion in 2026, representing year-over-year growth of 23% and 18%, respectively.
Moreover, as AMD ramps up sales of its AI chips, the company's gross margin is widening. As of its most recent quarter (for the three months ending on March 29, 2025), AMD's gross margin stood at 50%, up from 42% in late 2022. While the company's margin remains far behind Nvidia -- which has a gross margin of 61%, AMD has narrowed the gap considerably over the last year.
To sum up, AMD is on a roll. Its stock is soaring for the first time in more than a year, it has plans to deliver new, cutting-edge products, and analysts expect its sales to surge over the next 12 to 24 months. Investors looking for an AI stock positioned to move higher should strongly consider AMD right now.
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Jake Lerch has positions in Nvidia and has the following options: long July 2025 $150 calls on Advanced Micro Devices. Justin Pope has no position in any of the stocks mentioned. Will Healy has positions in Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
3 AI Stocks Up 14% to 19% in 2025 That Should Continue Moving Higher was originally published by The Motley Fool
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