After more than a year of solid growth, many artificial intelligence (AI) stocks have pulled back. High valuations and elevated expectations seemed to have sparked sell-offs, as some investors begin to question the state of the economy.
Despite those challenges, some AI stocks are secular growth stories in the making. Thus, investors should not dismiss the possibility that winners will emerge no matter what happens to the economy. Knowing that, I believe the following three stocks will move higher in 2025.
1. Palantir
At first glance, Palantir Technologies (PLTR 6.85%) might look like the last AI stock that belongs on a list of stocks moving higher. With its share price at multiyear highs, and a recent forward price-to-earnings ratio (P/E) at 86, it might appear priced for perfection in a time of uncertainty.
However, that earnings multiple could become meaningless with investors reaping the benefits of Palantir's Artificial Intelligence Platform (AIP), which has delivered impressive productivity gains to organizations, sparking increased interest.
Moreover, a partnership with Microsoft looks to give that growth another boost. Palantir can capitalize on Microsoft's large language models through Azure OpenAI Service, combining them with its own analytical capabilities.
NASDAQ: PLTR
Key Data Points
Palantir might have just begun to reap the financial rewards. After yearly revenue growth for the quarter fell into the teens last year, revenue in the second quarter of 2024 was $678 million, an increase of 27%.
The company reported its seventh profitable quarter in a row, reaching $134 million in net income attributable to common shareholders, well above the $28 million in the year-ago quarter. It all points to accelerating growth that should take the stock higher regardless of the economy.
2. Qualcomm
Like Palantir, Qualcomm (QCOM +10.86%) is in a position to benefit from surging AI growth. As a semiconductor stock, Qualcomm is highly cyclical and has suffered declining sales as the 5G upgrade cycle ran its course.
But it could have its next upgrade cycle thanks to its Snapdragon 8 Gen 3 chip, which can bring AI capabilities to smartphones, giving users a reason to replace their devices.
The company has also expanded into other product lines, selling chips that support the Internet of Things, automotive applications, and PCs. These should continue to foster revenue gains over time.
NASDAQ: QCOM
Key Data Points
In the fiscal third quarter of 2024 (ended June 23), revenue rose 11% yearly to $9.4 billion, the first double-digit increase since the pandemic. Also, it earned $2.1 billion in net income, rising 18%, as it held the line on expenses.
Despite this potential, Qualcomm's P/E is only 21. So if you assume an AI upgrade cycle for smartphones can drive growth, the stock may not stay that cheap for long.
3. Super Micro Computer
Super Micro Computer (SMCI 0.14%) makes servers and other IT hardware. The company (Supermicro for short) received little attention for most of its history, but while it gained some traction with the growth of the cloud, its partnership with Nvidia was game-changing. With Nvidia AI chips now in its servers, demand went through the roof, especially in the last year. Over the last five years, the stock is up more than 3,000%.
NASDAQ: SMCI
Key Data Points
That includes a retracement of approximately 55% since March. The tech stock pulled back after rising by more than 300% between New Year's Day and mid-March.
The decline has taken its P/E to 28 -- which is low considering revenue in the fourth quarter of fiscal 2024 (ended June 30) was $5.3 billion, a yearly gain of 142%. A fast-rising cost of revenue reduced the bottom line, though net income of $353 million still grew by 82% over the last year.
That increase makes its valuation cheap, a bullish sign as Supermicro seeks to recoup the value it lost over the last few months.
