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Last year was great for the markets in general, but the index that really stood out was the Nasdaq. It rose by 28%, while the S&P 500 increased by 23% and the Dow Jones Industrial Average increased by 12%. The Nasdaq, heavily weighted in technology companies, rose as investors flocked to the sector’s hottest new area: artificial intelligence (AI) stocks.
The current $200 billion AI market is expected to top $1 trillion by the end of the decade, and investors have been looking to get in early on this huge growth story. The technology has the potential to transform many industries, saving businesses time and money, while increasing profits as a result. And earnings growth often leads to positive stock performance.
As 2025 begins, it’s only logical to ask this question: After two years of gains, will the Nasdaq maintain its momentum this year? History says it will. If we look at past periods of gains since 1990, in five out of six cases, the Nasdaq has risen for three consecutive years or more.
Sure, the market can surprise us and pull us out of a trend, but overall, history has proven to be a solid guide. Now, let’s look at my top AI stocks to buy before the Nasdaq takes off.
You can join Metaplatforms (NASDAQ: META) mainly with social networks. The company owns Facebook, Messenger, Instagram and WhatsApp, which together have more than 3.2 billion users each.
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But Meta is also becoming an AI giant, developing its own great language model (LLM) to support tools we can all use, like the Meta AI Assistant. The company made AI its biggest area of investment last year and recently discussed plans to continue increasing spending in this area. It aims to create AI that can help all its users with their daily tasks, work-related projects and more.
This approach and related investment could make Meta a leader in this hot growth area and increase its revenue as well. For example, the company generates most of its revenue through advertising, and AI assistants can prompt us to spend more time in Meta apps, encouraging advertisers to spend more to reach them.
Taking all of this into account, Meta’s stock trades at just 24x forward earnings estimates even after last year’s 65% gain, it looks like an AI bargain buy to grab before the Nasdaq rises.
alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)like Meta, it might not be a company you automatically associate with AI. You probably know it best for Google Search, a tool that many of us use on a daily basis.
But it’s winning in AI in two ways. First, his LLM Gemini is helping him improve search and improve the experience for those who advertise on Google. And second, Alphabet offers AI tools and services, including Gemini, through Google Cloud, its cloud computing business.
