Investors looking for the best artificial intelligence (AI) stocks might want to look at the companies Wall Street is overlooking right now. Some tech leaders in hardware and software are experiencing strong demand for their technology but, for whatever reason, are not seeing validation yet in their share price. More growth from these businesses will solve that problem.
Here are two AI stocks that could deliver explosive returns to investors over the next few years.
1. Advanced Micro Devices
At the time of this writing, Advanced Micro Devices (AMD +2.82%) stock is down 8% after it reported fourth-quarter earnings results. AMD is one of the leading suppliers of graphics processing units (GPUs), which are used for AI training, and it is also gaining market share against Intel in the consumer market. Both markets should continue to deliver strong growth for AMD in 2025, making the stock's recent dip a great buying opportunity.
NASDAQ: AMD
Key Data Points
AMD finished 2024 on a strong note, with Q4 revenue and adjusted earnings up 24% and 42%, respectively, year over year. But Wall Street might have been looking for more specific guidance relating to AMD's revenue it expects from data center GPUs in 2025.
There's been concern about the growth of capital spending in AI infrastructure. China's DeepSeek claims it built a state-of-the-art AI model for a low amount of money that can compete with the best models from OpenAI and other AI leaders. This prompted fears of less investment in data center AI, which brought in $5 billion in revenue for AMD last year, or 19% of its total revenue.
However, these fears appear overblown. The investment required to build these large language models like DeepSeek R1 and OpenAI's ChatGPT is not comparable to the investment required to build AI systems in data centers to support enterprise needs. For example, Meta Platforms, which uses AMD's Instinct MI300X GPU in its Grand Teton AI platform, said it would spend between $60 billion to $65 billion this year, with a significant portion allocated for generative AI and other business needs. AMD expects another year of strong growth in its data center business, and this is after a year when its data center segment grew 94% over 2023.
Meanwhile, AMD also reported a 58% year-over-year increase in revenue from its client segment in Q4, which includes sales of its Ryzen PC processors. AMD appears well positioned for continued momentum in the PC market after Dell announced it would offer a full lineup of commercial PCs powered by Ryzen for the first time.
Investors can buy shares of AMD at an attractive forward price-to-earnings (P/E) ratio of 23 at the current $112 share price, which is a bargain for this top chip supplier.
2. C3.ai
Investors interested in AI should consider stocks that are exposed to both the hardware and software opportunities. One of the best AI software stocks to consider for 2025 is C3.ai (AI 0.84%), which provides enterprise AI applications used by the U.S. military and Fortune 500 companies.
C3.ai's AI models provide highly accurate results to help businesses do more with less. Organizations are finding real cost savings using its software, which creates tremendous utility value and puts the company on a solid growth trajectory.
This is a relatively small business with just $346 million in trailing revenue, but it's scaling quickly. Revenue grew 29% year over year in the most recent quarter and accelerated over the last year.
NYSE: AI
Key Data Points
With a market cap of $4.4 billion, C3.ai shares are trading at 12 times sales, which is reasonable for a fast-growing software business. However, C3.ai's stock could be trading at a higher valuation if it wasn't dependent on a small number of companies for revenue. For example, its contract with Baker Hughes made up 18% of its revenue last quarter, and that contract is set to expire in June.
This risk is gradually fading as C3.ai diversifies its customer base. Toward the end of 2024, Microsoft announced a five-and-a-half-year deal with C3.ai to accelerate its investment in enterprise AI. The deal makes C3.ai the preferred AI application provider on the Microsoft Azure cloud service, which could lead to significant revenue growth. The growth from this deal could also help C3.ai scale its business to improve margins and turn a profit.
The stock is up 28% since C3.ai announced the deal with Microsoft. It may have room to run in 2025. The stock gives investors great exposure to the massive growth opportunity in AI software.
