3 AI Stocks Set Up for Success in 2025
2024.12.24 12:22
Throughout 2024, the AI buzzword may have become oversaturated, but that doesn’t mean AI market growth should be underestimated. Although there are some elements of a market bubble, it remains the case that public-private partnerships (PPPs) are honed in to make AI happen.
After the most recent stock market correction, technology-oriented (NDX) is down 3.4% over the week. NDX outperformed (SPX) 29% vs 25%, respectively, owing largely to the AI boom.
Now that the market correction is here, which AI stocks should investors stake for the long haul?
1. Adobe Inc. (NASDAQ: NASDAQ:)
2024 has been tumultuous for Adobe. In early June, the SaaS company dominating the graphics app sector caused controversy by tweaking its Terms of Use. This received a wide backlash as users interpreted that Adobe has rights to all of its content to train its generative AI.
The Department of Justice compounded the negative press by launching a federal court complaint following FTC referral, purportedly because Adobe obfuscated subscription term plans “in fine print and behind optional textboxes and hyperlinks”. In turn, ADBE stock had a rough year, having dropped 23% year-to-date.
At the same time, ADBE stock has been volatile due to underlying fundamentals. In other words, every severe dip has been followed by a rally. At a press time price of $446, ADBE shares are under the 52-week average of $527.86, having peaked at $638.25 per share.
The most recent dip in December followed Adobe’s 2025 growth forecast, falling short of Wall Street expectations. Nonetheless, in Q4 earrings, Adobe tracked double-digit annual growth in all segments, Digital Media (12%), Document Cloud (18%), Creative (10%) and Digital Experience (10%).
Despite negative attention, this speaks to Adobe products as a go-to platform for digital content creation. And regardless of generative AI on other platforms, Adobe was among the first to integrate it meaningfully, giving users fine-tuned control.
Before ADBE stock rallies again, investors should consider this dip as an opportunity.
2. Advanced Micro Devices (NASDAQ: NASDAQ:)
As explained in July’s coverage of AMD/Intel/Nvidia, AMD is poised to increase its market share in the desktop market, owing to Intel’s multi-year fumble of CPU rollouts. In November’s Mercury Research report for Q3, AMD had already increased its quarterly desktop market share by 5.7% to 28.7%. In the x86 CPU market as of Q4, AMD’s share is now 35.5%, steadily increasing since 2017 (Zen rollout) at the expense of Intel’s market share.
In 2025, more is expected of AMD’s integrated graphics chips, AI chips, and cheaper GPUs, which will have significantly faster ray tracing performance. AMD’s year-to-date stock decline of 10% to the current $124.86 per share should be viewed positively from an investing perspective.
As Nvidia (NASDAQ:) took the public spotlight, AMD is heavily investing in its own full-stack AI offering, having acquired Silo AI, Europe’s largest AI lab, followed by the $4.9B acquisition of ZT Systems for AI data centers.
Although these heavy investments suppressed AMD’s bottom line in the short term, they paved the road for future growth. More importantly, AMD positioned itself as the only real competition to Nvidia regarding end-to-end AI infrastructure.
Against the current price of $124.86, AMD’s average price target is $183.91, per WSJ forecasting data. The bottom forecast of $145 is significantly higher than the current AMD price level.
3. Cognizant Technology Solutions (NASDAQ: NASDAQ:)
Workers from the IT sector are familiar with the complexities of upgrading enterprises, institutions and governmental organizations. After all, upgrades inherently draw disruptions, and people generally dislike change.
Cognizant specializes in tailored solutions to minimize these disruptions. Legacy IT systems are especially difficult to uproot, but Cognizant builds custom software to overcome hurdles for end-to-end IT management. Suffice to say, this niche offers a reliably profitable pipeline, especially as even more complex AI infrastructure rolls out.
In Q3 earnings ending October, the multinational company tracked growth across all sectors, notwithstanding the protracted recession in the Eurozone.
Image credit: Cognizant
At a forward price to earnings (P/E) ratio of 16, Cognizant is valued significantly lower than the currently estimated P/E ratio for S&P 500 index of 27.40. Although the company’s ytd returns of 6% are not that impressive, investors should take into account Cognizant’s low-risk profile (compared to peers) vs long-term gains.
Namely, the complexity of AI rollouts is yet in a very early stage. Presently, against the CTSH price of $79 per share, the median CTSH price target is 84.28, according to WSJ forecasting. The bottom forecast of $75 is not that far off, suggesting an optimal market entry.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
