History Predicts Nasdaq's Rise in 2025: Top AI Stocks to Consider

Last year was remarkable for the financial markets, especially for the Nasdaq. The index surged by 28%, outpacing the S&P 500 which climbed 23% and the Dow Jones Industrial Average which increased by 12%. The Nasdaq's dominant technology sector drove this growth as investors enthusiastically focused on the booming field of artificial intelligence (AI) stocks.

Currently valued at around $200 billion, the AI market is projected to exceed $1 trillion by the end of the decade. This rapid growth has attracted investors eager to get in early on this lucrative trend. AI technology promises to streamline operations across various industries, potentially saving companies both time and money while enhancing profits, which in turn can lead to stronger stock performance.

As we move into 2025, a pertinent question arises: Will the Nasdaq maintain its upward trajectory after two years of solid gains? Historical data suggests it is likely. Since 1990, the Nasdaq has managed to rise for three consecutive years or more in five out of six instances following a period of gains.

Of course, markets can be unpredictable, but historical patterns generally serve as reliable indicators. Let's explore my top AI stock picks to consider before the Nasdaq experiences a surge.

1. Meta Platforms

While Meta Platforms (formerly Facebook) is primarily recognized for its social media platforms, including Facebook, Messenger, Instagram, and WhatsApp, it is also making significant strides in the AI sector. The company is developing its own large language model (LLM) to enhance user tools such as the Meta AI assistant. Last year, Meta prioritized AI investments and has stated intentions to further this focus. This investment in AI could position Meta as a leading player in this rapidly evolving market and potentially boost its revenue. Since much of its revenue is generated through advertising, improved AI tools could encourage users to engage more with Meta’s services, attracting advertisers eager to reach these audiences.

Given its current valuation of just 24 times forward earnings estimates, even after a remarkable 65% increase last year, Meta shares appear to be a great AI investment opportunity before the anticipated Nasdaq rise.

2. Alphabet

Alphabet (which encompasses Google), while primarily known for its search engine, is also making impressive advancements in AI. This is apparent through its LLM Gemini, which enhances the search experience for users and benefits advertisers using Google’s platform. Furthermore, Alphabet’s Google Cloud has introduced AI tools and services, which have contributed to recent revenue milestones, exceeding $10 billion with over $1 billion in operating income.

There are some challenges, as Alphabet faces an antitrust lawsuit from the Justice Department concerning competition in search. While a U.S. district judge ruled against the company, Alphabet plans to appeal, and it is unclear if tough penalties will be enforced.

Currently, Alphabet stocks trade at a reasonable 21 times forward earnings estimates, considering the firm's historical growth, market position, and AI initiatives.

3. Nvidia

No discussion about top AI stocks would be complete without mentioning Nvidia. Although it surged by 171% last year and trades at 45 times forward earnings, its pivotal role in the AI sector justifies this premium. Nvidia is the leading company in AI chips and has built a robust ecosystem of products and services extending into sectors like healthcare and automotive.

The company continues to achieve remarkable revenue growth, with recent sales reaching $35 billion, driven by consistently strong demand. The next wave of AI growth is expected to stem from software, with Nvidia's enterprise tools helping clients develop their own AI solutions, potentially driving revenue even higher in the years to come.

Overall, Nvidia remains a standout choice for investors looking to secure top AI stocks ahead of a potential Nasdaq rally in 2025.

Nasdaq, AI, Investing