Two Outstanding Shares to Acquire Prior to 2025
As we bid farewell to 2024, it's time for investors to reassess their portfolios with an eye towards the promising year ahead. Artificial Intelligence (AI) has consistently been a red-hot investment theme, and smart moves now could yield higher returns in 2025. Two such appealing options might be well-established AI titans Nvidia (NVDA 2.49%) and Amazon (AMZN 1.77%).
Nvidia
With their third quarter of fiscal 2025 earnings report, Nvidia reaffirmed its reputation for stellar performance. Beating consensus estimates handily, they further cemented AI as their primary catalyst for growth. Data center scale end-to-end AI infrastructure is Nvidia's main focus, with in-demand Hopper architecture chips driving demand from cloud service providers, consumer internet companies, and enterprises. The H200 GPU, launched as the successor to the widely acclaimed H100 GPU, witnessed record-breaking sales, making for the company's swiftest product ramp-up ever.
Next-generation Blackwell architecture GPUs are seeing strong momentum as well. With demand far outpacing supply for several upcoming quarters, Nvidia expects to enjoy considerable pricing power. That, coupled with the chips' superior technology, should bolster the company's financial prospects.
However, Nvidia's valuation multiples may give some investors pause. But as its robust growth prospects continue to emerge, its current P/E ratio of 54.4 times appears more than warranted, especially given its previous five-year average of 75.7 times. With a PEG ratio of 0.24 times, Nvidia could be an attractive long-term investment.
Beyond their AI-optimized chips, Nvidia's cloud-native Enterprise AI software suite is also gaining traction. With a selection of tools for generative AI development, deployment, and technology support, Nvidia's platforms are serving as popular pick-me-ups for industry leaders.
Enterprise AI has the potential to be a significant growth driver for Nvidia in the coming years, with industry analysts expecting millions of agents to be deployed. Moreover, Nvidia's projected gains in Industrial AI and robotics through its Omniverse platform could also add to the company's bottom line in the near future.
Amazon
Amazon surpassed expectations with its top-line and bottom-line results for the third quarter of 2024. The tech giant boasted impressive growth across each business segment, with AWS and its advertising services leading the charge. At 31% market share, AWS remains the market leader in cloud computing, seeing increased adoption from companies modernizing their IT infrastructure. This growth, in turn, is also benefiting from the enterprise adoption of generative AI technologies.
AWS revenues reached $27.5 billion in the third quarter, a 19.1% year-over-year increase. Operating income also grew by $3.5 billion to $10.4 billion, with significant reacceleration in the last four quarters. Amazon's AI business even outpaced the company's early growth stages, marking an impressive triple-digit year-over-year percentage increase.
Amazon's advertising segment also saw record growth, reaching $14.3 billion in the third quarter. As an increasingly attractive advertising platform for brands, Amazon is able to engage and gauge outcomes at every stage of the consumer journey. With the launch of several generative AI-powered ad creation tools, the company's advertising business is set for continued growth.
Prime Video ads, a new revenue stream for Amazon, is also making waves in the AI-driven marketing space. As the demand for AI-powered marketing services in retail shows no signs of slowing, Amazon is well-positioned to capitalize on this emerging market.
With its strong finances, industry leadership, and innovative strategies in AI, Amazon looks set to continue its growth trajectory into 2025.
Additional Insights
Both Nvidia and Amazon have been active in their respective AI development and investment strategies. Nvidia has recently been acquiring companies to expand its capabilities, while Amazon has committed significant resources to building out its AI infrastructure. Amazon is also focusing on AI-driven customer service with Rufus AI, an assistant designed to enhance user experience through generative AI and voice interaction. In mid-February, both companies will be holding conferences to discuss their fourth-quarter and fiscal year 2025 financial results.
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Other AI Investments and Developments
- Nvidia's AI Developments: Recent acquisitions of AI companies, including Run and Octo AI, have helped Nvidia expand its AI hardware and software solutions. The company is ramping up its investments in AI and expects to continue an aggressive acquisition strategy in 2025.
- Amazon's AI Advancements: Amazon is focusing on generative AI, with tools like the Nova series and enhanced AI capabilities for Alexa. The company has also committed to building state-of-the-art data centers to support its AI applications, while also investing in AI for its healthcare and retail sectors.
Investment Opportunities
Investing in Nvidia and Amazon can provide opportunities in the rapidly evolving AI landscape. Their strategic position in the AI market and significant investments in AI infrastructure present promising growth prospects for both companies. Considering the expected increase in AI-driven marketing and the wider use of AI in retail, Nvidia and Amazon could see substantial revenue and market value growth in 2025.
Investors looking to capitalize on the AI boom in finance might consider allocating funds towards Nvidia and Amazon. Nvidia's investment in AI hardware and software solutions, such as the acquisition of companies like Run and Octo AI, is expected to boost its growth prospects in 2025. Similarly, Amazon's focus on generative AI and its significant investments in AI infrastructure have the potential to drive substantial revenue and market value growth.
