My Top 2 Artificial Intelligence (AI) Stocks for 2025 (Hint: Nvidia Is Not One of Them)

The size of the addressable market suggests that AI is likely to supercharge Broadcom’s growth in 2025 and beyond, especially considering that it controls an estimated 55% to 60% of the ASIC market, as per JPMorgan. Not surprisingly, analysts have raised their revenue estimates for the current and the next two fiscal years.

However, Broadcom may be able to deliver stronger growth than analysts expect following the potential addition of new customers. In addition, its price/earnings-to-growth ratio (PEG ratio) stands at just 0.7 right now based on its estimated earnings growth for the next five years, as per Yahoo! Finance.

A PEG ratio of less than 1 means that a stock is undervalued with respect to the earnings growth that it is expected to deliver, suggesting that growth investors can still consider buying Broadcom even after the impressive 108% gains that it has delivered in the past year.

While the likes of Broadcom and Nvidia produce chips that allow major cloud computing companies to train LLMs, Snowflake (NYSE: SNOW) gives customers an avenue to consolidate their data into a single platform. Its customers can then use this data to build generative AI apps, gain insights into their data, or solve business-related challenges by applying AI to that data.

So, Snowflake has a huge addressable market to tap in 2025, considering that IDC is expecting a big chunk of AI spending to go toward embedding AI capabilities in businesses’ operations. The good part is that Snowflake’s AI-focused solutions are already gaining healthy traction among customers.

The company’s Cortex AI platform, for instance, is “showing significant adoption,” as per management. Customers can use Cortex AI to analyze their data and build generative AI apps, find specific information within documents, and get access to popular LLMs such as Llama and Anthropic Claude. As it turns out, over 3,200 of Snowflake’s customers are already using its AI and machine learning (ML) features.

That’s impressive, considering that Snowflake started rolling out its AI offerings in mid-2023, and it has continued to add more services so it can give users access to a wider range of tools.

The company has also made a move into the fast-growing market for AI agents as well with the Snowflake Intelligence platform, which was announced in November last year. This platform will enable enterprises to create AI agents, which can analyze and summarize data in a secure environment and then take action using those insights.

With the agentic AI market expected to clock an estimated revenue of $45 billion in 2025, Snowflake’s AI-focused addressable opportunity should ideally expand. As a result, there is a solid chance that the company will be able to clock better-than-expected growth going forward.

After all, Snowflake’s remaining performance obligations (RPO) shot up an impressive 55% in the third quarter of fiscal 2025 (which ended on Oct. 31, 2024) to $5.7 billion. That was significantly higher than the 29% year-over-year increase in its quarterly revenue to $900.3 million. RPO refers to the unfulfilled contracts of a company that will be recognized as revenue in the future when those contracts are executed. So, faster growth in this metric, as compared to Snowflake’s top line, points toward a potential acceleration in growth.

Existing customers spent more on its platform, as evidenced by a net revenue retention rate of 127% during the quarter. The metric compares the spending by Snowflake’s customers in a quarter to the spending by those same customers in the prior-year period, so a reading of more than 100% indicates that the adoption of its services by existing customers grew.

This is a trend that’s likely to continue as more Snowflake customers start using its AI offerings. Snowflake had just over 10,600 customers at the end of the previous quarter, and 30% of them are using its AI/ML solutions. So, as the company upsells its AI products to more customers, it could witness a nice improvement in both revenue and earnings.

All this explains why Snowflake is expected to deliver 40%-plus earnings growth for the next couple of fiscal years.

As such, Snowflake looks like a top AI stock to buy, considering that its addressable market is likely to expand nicely in 2025 thanks to the addition of AI-centric tools in its data cloud platform, which should set the stage for outstanding earnings growth going forward.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, JPMorgan Chase, Meta Platforms, Nvidia, and Snowflake. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

My Top 2 Artificial Intelligence (AI) Stocks for 2025 (Hint: Nvidia Is Not One of Them) was originally published by The Motley Fool