Want to secure huge growth potential with artificial intelligence stocks? The time frame can be short. While few expect AI spending to decline in the near term, stock prices often reflect a promising outlook long before expected gains materialize. With AI adoption about to become mainstream in the coming year, now is the time to stake your claim.

Below is a brief overview of the state of AI, followed by a list of six AI stocks that look promising for 2025.

Understanding the state of artificial intelligence in 2025

A McKinsey report calls 2023 the year “the world discovered generative AI.” In 2024, companies began to see the benefits of using genetic AI. Increasing adoption has led to extreme demand for AI-enabled computing power. Data centers, in turn, invested billions in hardware and software to operate, develop and train AI applications.

In 2025, companies like OpenAI will seek to transfer AI’s capabilities to increasingly complex tasks. Use cases for AI will expand across industries and into personal computing. Companies that have invested in AI will seek to quantify the business value of these investments.

Resolving these business value questions will impact the S&P 500. Stephen Wu, founder and managing partner of Carthage Capital Management, points out that nearly half of the S&P 500 is focused on technology stocks. “Because expectations for AI are high,” Wu explains, “it is crucial for AI to continue to meet expectations, otherwise there may be serious consequences.”

Spending on AI infrastructure is likely to continue, but the pace and focus of that spending may change. TechInsights predicts a greater emphasis on cost effectiveness over performance. This will put pressure on the dominant hardware vendors to evolve to meet these changing priorities.

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Methodology used for this AI stock selection

To capitalize on the trends, I looked for the best artificial intelligence stocks with acceptable valuations, profitable business models, positive outlooks, and healthy debt levels. These are the screening criteria:

1. Direct involvement in or exposure to AI technology
2. Price-earnings ratio (P/E ratio) below 55
3. Gross margin over 50%
4. EPS growth prospects for next year above 10%
5. Debt to equity ratio (DE) less than 1

Only two stocks on this list have P/E ratios above 40: Nvidia (NVDA) and Synopsis (SNPS). The higher valuation is an acceptable trade-off since these are also the only two stocks in the group with gross margins above 70%.

6 Best Artificial Intelligence (AI) Stocks to Buy in 2025

The following table presents the six largest AI stocks that meet the five criteria mentioned.

Table data source: Stockanalysis.com.

Now let’s examine each of these AI companies in more detail.

1. Nvidia (NVDA)

• Share price: $134.01
• PE ratio: 52
• Gross margin: 75.9%
• TTM EPS: $2.54
• EPS growth outlook for next year: 48.9%
• DE ratio: 0.16

Nvidia business overview

Nvidia develops and sells high-performance semiconductors and related hardware and software. The company’s hardware is used in AI-enabled data centers, gaming applications, robotics and automotive applications.

Why NVDA is a top choice

Over the last year, Nvidia has shown the world what is possible when it comes to AI monetization. Capitalizing on its reputation and extreme demand for AI-enabled chips, Nvidia has nearly tripled its enterprise value, making it one of the few $3 trillion companies in the world.

Nvidia’s expertise and AI positioning are unrivaled. The question for investors is whether the growth opportunity is already anchored in NVDA’s share price. The company’s P/E ratio is high, but NVDA also has the highest EPS growth outlook and second-highest gross margin among the stocks on this list. While NVDA’s greatest profit potential may have passed, the stock still has room to run higher.

2. Taiwan Semiconductor (TSM)

• Share price: $200.58
• PE ratio: 32
• Gross margin: 54.5%
• TTM EPS: $6.24
• EPS growth outlook for next year: 29.5%
• D/E ratio: 0.26

Overview of the semiconductor business in Taiwan

Taiwan Semiconductor manufactures semiconductors and related devices on behalf of its customers. The company has manufacturing facilities in Taiwan, China, Japan and the USA

Why TSM is a top choice

According to Statista, TSM is the world’s leading semiconductor manufacturer with an estimated market share of 61%. Its closest competitor is Samsung with a market share of 11%. TSM customers include leading chip designers that outsource manufacturing, such as Nvidia, AMD and Broadcom.

TSM has a long track record of performance and growth based on technological expertise. The well-run company is also crucial for the expansion of the AI ​​infrastructure. While Nvidia, Apple and AMD develop the chips that will power the AI ​​revolution, TSM makes them.

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3. ASML Holding NV (ASML)

• Share price: $716.79
• PE ratio: 38
• Gross margin: 51.2%
• TTM EPS: $19.14
• EPS growth outlook for next year: 27.6%
• D/E ratio: 0.29

Business overview of ASML Holding NV

ASML Holding is a Dutch company that produces photolithography systems and related services. Photolithography uses light to transfer a pattern to another surface. The process is used with silicon wafers to produce semiconductors.

Why ASML is a top choice

ASML is the dominant market leader in semiconductor photolithography machines. The company has long-term relationships with major chipmakers including Taiwan Semiconductor, Intel and Samsung. These foundries cannot simply switch to another provider because changing tools would require expensive downtime.

ASML stock peaked in July 2024 and then fell 35%. Investors became nervous when the company announced conservative guidance for next year. The decline creates a good buying opportunity for a company that will be critical to semiconductor manufacturing for the foreseeable future.

4. Synopsys (SNPS)

• Share price: $504.13
• P/E ratio: 54Gross margin: 81.4%
• TTM EPS: $9.25
• EPS growth outlook for next year: 15.8%
• D/E ratio: 0.08

Synopsys business overview

Synopsys produces electronic design automation (EDA) software that supports the design, manufacturing and testing of integrated circuits. Customers span multiple industries, including automotive and semiconductor design.

Why SNPS is a top choice

Synopsys has been a high-performing stock for years. Morningstar puts its 15-year total return at 23.7%, outperforming its peers in the software infrastructure industry.

The performance record is reassuring, but looks even better together with Synopsys’ current positioning. The Company’s product suite will directly support the AI ​​revolution by enabling continued innovation in integrated circuit design and manufacturing. Synopsys is also in the process of acquiring engineering simulation provider Ansys (ANSS). The merger will expand Synopsys’ market position and have a positive impact on sales and earnings in 2025.

5. Teradyne (TER)

• Share price: $123.42
• PE ratio: 39
• Gross margin: 57.9%
• TTM EPS: $3.15
• EPS growth outlook for next year: 34.4%
• D/E ratio: 0.03

Teradyne business overview

Teradyne makes automated test equipment for semiconductors, electronic systems and wireless devices. The company also offers robotic equipment and technology.

Why TER is a top choice

Morningstar classifies Teradyne as a wide-moat company, meaning it has a significant and durable competitive advantage. At the core of this advantage is Teradyne’s expertise in testing high-performance semiconductors, which is rarely matched by competitors.

The company’s testing solutions will be critical as semiconductors continue to evolve to meet the performance and efficiency requirements of more mature AI applications. In its third-quarter earnings release, Teradyne reported earnings per share that beat forecasts, citing AI demand as a factor.

Teradyne also offers investors income diversification, high margins and good financial discipline. Since 2020, the company has reduced its debt by more than $500 million.

6. Shutterstock (SSTK)

• Share price: $31.90
• PE ratio: 31
• Gross margin: 58.4%
• TTM EPS: $1.02
• EPS growth outlook for next year: 13.0%
• D/E ratio: 0.58

Shutterstock business overview

Shutterstock licenses third-party graphics and images to corporations, broadcasters, small and medium-sized businesses, and individuals.

Why SSTK is a top choice

Shutterstock recently completed its acquisition of competitor Envato. Envato is expanding Shutterstock’s offering to include a subscription for unlimited downloads – previously a gap in SSTK’s product suite. The company is also experiencing organic momentum with improvements in content performance and growth in its data, sales and services segment.

At the time of its third-quarter results, Shutterstock’s data business had grown 40% year-to-date. This is how Shutterstock benefits from AI expansion. The company currently has about two dozen licensing deals for its content to train generative AI tools. As of August 2024, these deals had a total value of $238 million.

Conclusion

AI will be a driving force in financial markets in 2025. Well-managed, high-margin, and adaptable companies that support the development, training, and deployment of AI applications are well-positioned for growth as the technology evolves.

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