The stock market had a solid 2024, powered by the technology sector, even as the outsized theme of artificial intelligence (AI) continued to feed investors' appetite for outsized returns. But the bull rally seems far from over.
While the stock market could take a breather over the next few months, technology stocks, riding on trends such as predictive AI, cloud computing, automation, digitization, cybersecurity, semiconductors, and other advanced technologies, should gain even in 2025. Investors can benefit from these trends by picking up small stakes in high-quality, fundamentally strong technology stocks. Here's why the following two stocks fit the bill.
Nvidia: Continuing to drive AI-based computing in data centers and beyond
Looking at Nvidia's (NVDA +1.73%) product roadmap and financial performance, there is a lot to be excited about.
NASDAQ: NVDA
Key Data Points
Nvidia is the indisputable leader in the discrete graphics processing unit (GPU) market, with a 90% share. While its Hopper architecture GPUs continue to be in high demand, the upcoming Blackwell architecture GPUs should also drive demand from hyperscalers, and are expected to far outpace supply.
With GPU-powered machine learning-based computing rapidly augmenting traditional CPU-based computing across data centers globally, CEO Jensen Huang expects at least $1 trillion worth installed base of data centers will need upgrading to accelerated computing by 2027. This will be a major growth opportunity for Nvidia. Plus, the chipmaker is also seeing huge scope presented by AI services that operate 24/7 -- also known as AI factories.
Furthermore, the company's Compute Unified Device Architecture (CUDA) software stack developed for parallel programming of GPUs is playing a critical role in helping Nvidia maintain dominance in the AI-optimized GPU space. Used by nearly 4 million developers across more than 3,000 applications, CUDA has emerged as a strong moat for Nvidia.
CEO Jensen Huang also made some major product announcements at CES 2025. The company released a personal AI supercomputer called NVIDIA Project DIGITS, which uses the new NVIDIA GB10 Grace Blackwell superchip. Priced at $3,000 apiece, this AI supercomputer enables developers to run inferencing for large language models (LLMs) up to 200-billion-parameters independently.
Expanding access to AI supercomputing capabilities can prove to be a major growth catalyst for the company in the coming years.
Besides digital AI capabilities, Nvidia is making rapid progress in the fast-evolving physical AI space. The company has launched the Cosmos World foundation model platform to ensure more effective development, training, and deployment of physical AI solutions such as autonomous vehicles and robots. Since physical AI models are complicated, costly, and time-consuming to develop and test, the Cosmos platform helps accelerate and simplify it for developers.
Nvidia's financials also continue to be impressive. Wall Street analysts expect the company's to be around $38 billion in the fourth quarter of fiscal 2025 (ending Jan. 31, 2025), implying a year-over-year upside of 72.1%. Earnings per share (EPS) are estimated to be $0.85, implying a solid year-over-year jump of 63%.
Since the start of 2023, Nvidia's shares have surged by a dramatic 830%. Hence, although Wall Street seems to have rewarded the company for its technological prowess, execution capabilities, and large addressable market, the upcoming growth potential hints at even more share appreciation in the coming months.
Meta Platforms: AI models supplementing its digital ad business
Meta Platforms (META 1.18%) stands out as a compelling technology pick in 2025, for several reasons.
NASDAQ: META
Key Data Points
First and foremost, Meta's core social media and digital advertising business has demonstrated impressive strength and monetization potential, with revenues rising 19% year over year to $40.6 billion in the third quarter of fiscal 2024 (ending Sept. 30, 2024). The company's Family of Apps (which includes social media platforms such as Facebook, Instagram, Messenger, and WhatsApp and accounts for nearly 93% of total revenues) reported a robust operating income of $21.8 billion with an operating margin of 54% in the third quarter.
In the third quarter, 3.2 billion or almost 40% of the global population used at least one of these applications daily. Meta is leveraging advanced AI technologies to power personalized recommendations on its video and feeds, which has translated into higher user engagement -- as is evident from 8% more time spent on Facebook and 6% more spent on Instagram. This, in turn, has led to more ad impressions and better ad pricing for the social media platforms.
Second, Meta is making rapid strides in the AI space by introducing a large concept model (LCM), which demonstrates better performance as compared to similar-sized large language models (LLMs). Unlike LLMs which rely on token-level processing or predicting one word at a time, LCMs work with discrete concepts for reasoning and planning. This enables LCMs to generate accurate responses using fewer computation resources -- thereby boosting cost efficiencies and productivity.
With $70.9 billion cash on its balance sheet at the end of the third quarter, Meta is also committed to investing heavily in innovative AI initiatives. After releasing Llama 3.2 LLM, the company is now training Llama 4 models on a cluster with more than 100,000 of Nvidia's H100 chips. Meta expects smaller Llama 4 models to be ready for launch in early 2025. Since Llama models are open source, it has helped build a more efficient and cost-effective model -- which can be a major strength for Meta in the coming years.
Third, Meta is gearing up for monetizing more opportunities, including X competitor Threads, Ray-Ban Meta smart glasses, and WhatsApp Business.
Finally, despite the strong business model and robust growth prospects, Meta is currently trading at a reasonable forward price-to-earnings (P/E) ratio of 23.9. Hence, although mounting losses of Reality Labs and rising capital expenditure investments pose a risk, Meta seems a smart pick for January 2025.
