After a strong performance in recent years, top artificial intelligence (AI) stocks have faced headwinds in early 2025. Concerns about high valuations, economic uncertainty, including potential impacts from tariffs, and the direction of data center spending have negatively impacted investor sentiment. However, the semiconductor industry, though cyclical, has consistently expanded over decades, and AI is seen as a key driver for boosting prominent chip stocks over the next decade.
Dell’Oro Group projects that spending on data center infrastructure could exceed $1 trillion within five years. The following stocks are well-positioned to capitalize on this opportunity.
Nvidia
Shares of Nvidia (NVDA) have dipped from their recent highs. While the short-term impacts of potential tariff policies are still unknown, Nvidia’s dominance in graphics processing units (GPUs) creates numerous opportunities for consistent long-term growth and returns for shareholders. During its fourth-quarter earnings call in February, Nvidia reported accelerating demand for its chips used in AI inferencing. AI inferencing, where models independently make predictions from new data, is expected to generate significant value for chip companies in the long term, and it requires considerable computing power. Nvidia forecasts that AI models capable of high-level reasoning will require 100 times more computing power per task.
This is driving investment in its new Blackwell computing platform, which provides up to 25 times more throughput for data units, or tokens, while also lowering costs compared to previous hardware. Revenue from Blackwell reached $11 billion in the fourth quarter and is expected to increase as production ramps up this year. Major cloud service providers, including Amazon, Microsoft, and Alphabet’s Google, made up almost half of Nvidia’s $35 billion in data center revenue in the last quarter. However, many other tech companies are eager to acquire the company’s powerful GPUs.
xAI is utilizing Nvidia’s GB200 chip to power its Grok AI models. Meta Platforms is leveraging Nvidia’s Grace Hopper super chip for ad operations on Instagram and Facebook. Meta has indicated that it intends to spend between $60 billion and $65 billion in capital expenditures this year to support initiatives in generative AI and other business operations, which will benefit Nvidia. Overall, Nvidia’s total revenue grew by 12% over the previous quarter and 78% year-over-year, reaching $39.3 billion in Q4. Based on company guidance, Blackwell will be a critical factor in increasing Nvidia’s revenue to about $43 billion in Q1. The recent price decrease has brought the stock’s valuation to 24 times this year’s consensus earnings estimate. This is below the S&P 500’s trailing price-to-earnings (P/E) ratio of 29, which looks attractive considering Nvidia’s substantial $1 trillion opportunity in the data center market.
Marvell Technology
Marvell Technology (MRVL) produces a wide range of chip products that help companies transfer data more quickly and efficiently. It markets semiconductor products in the data center and wireless communications markets. The stock price has risen over the past year due to the growing demand for its custom AI chips and digital signal processors used in server racks and AI workloads. After the company released its fourth-quarter financial results, the stock is down 33% year to date. While the revenue surpassed expectations, investors were anticipating even higher revenue guidance for the first quarter. Despite this, the company is still positioned for continued growth in its data center business, making the decline a potential buying opportunity. From a long-term perspective, Marvell is in a strong position. The company is increasing production of its custom AI silicon programs, such as accelerated processing units (XPUs) and an Arm-based central processing unit (CPU), which could create significant demand over the next few years. Marvell is also developing more advanced methods for transferring data using optics instead of traditional cable wiring, which should create additional opportunities to expand its data center revenue over the long term. Revenue grew 27% year-over-year in Q4, driven by a 78% rise in the data center business, thanks to this kind of innovation.
Meanwhile, Marvell’s other markets show mixed performance. While chips sold into the enterprise networking and carrier infrastructure markets continue to recover, revenue in consumer end markets is declining. Overall, the stock sell-off appears to be driven more by valuation concerns than anything else. Before the start of the year, based on this year’s consensus estimate, Marvell shares were trading at a high 80 times earnings multiple. However, following the recent dip, investors can now buy shares at a more reasonable forward P/E of 26.
