It hasn't been the best start to 2025 for many U.S. stock market indexes and top tech companies. The S&P 500 barely escaped a correction, the Dow Jones is down, and the Nasdaq Composite is officially in a correction after escaping its short-lived bear market.
There are a few reasons for these struggles, including President Donald Trump's new tariff plan and the anticipated pushback that comes with it. How it plays out remains to be seen, but it's apparent investors aren't assuming the best-case scenario.
Despite the current correction, there are two artificial intelligence (AI) stocks that are worth loading up on: Alphabet (GOOG 0.80%)(GOOGL 0.83%) and CrowdStrike (CRWD 0.46%).
Image source: Getty Images.
1. Alphabet
Alphabet -- which owns companies like Google, YouTube, Waymo, and AI research company DeepMind -- has experienced a large slump since hitting an all-time high on Feb. 4. On the positive side, that makes it a more intriguing choice at current prices.
NASDAQ: GOOGL
Key Data Points
Google Search is still Alphabet's bread and butter, with the $54 billion in revenue in the fourth quarter (up 12% year over year) accounting for 56% of its total. Alphabet's total revenue, which includes YouTube ads and Google Network, was 75% of Alphabet's revenue, leaving no doubt where the company's foundation lies.
GOOGL Revenue (Quarterly) data by YCharts.
However, AI developments have given Alphabet two key growth areas in its cloud and office software segments. Google Cloud is firmly in third place in market share, trailing Amazon Web Services (AWS) and Microsoft Azure, but its market share has improved impressively over the past six years, going from 4% to 12%.
One advantage Alphabet has regarding Google Cloud is its vertical approach to AI, where it handles research, training, and infrastructure building all in-house. This allows it to innovate and implement solutions faster than other competitors that may depend more on third-party companies.
Google Cloud still has a while before it catches up to AWS or Azure, but it's trending in the right direction, and the cloud service industry is growing rapidly enough that all three can thrive by holding a decent amount of market share.
Additionally, Alphabet's new contract with the U.S. government, offering its office software at a 71% discount to undercut Microsoft Office, is something worth keeping an eye on. The contract is short and only lasts until September, but if Alphabet proves its software is just as effective and user friendly (especially with new AI capabilities), it has a chance to win longer-term government contracts and attract more enterprise customers.
With a price-to-earnings (P/E) ratio under 20, Alphabet's stock looks like a bargain right now for long-term investors.
2. CrowdStrike
CrowdStrike was one of the first companies to approach cybersecurity from a cloud-native, AI-first perspective. It has been doing so since 2011, giving it a huge data advantage over competitors that have recently begun transitioning to cloud and AI-based solutions.
NASDAQ: CRWD
Key Data Points
There are tons of cybersecurity companies out there, but CrowdStrike has been able to build a solid customer base that's continuously growing.
Sixty-two of the Fortune 100 use it for cloud security; it landed over 20 deals of at least $10 million in the fourth quarter; 21% of customers use at least eight of its modules (the name given to individual solutions it offers); and to top it off, Google named CrowdStrike as its 2025 Google Cloud Security Partner of the Year for Workload Security.
There's no denying that CrowdStrike's platform is effective and getting better. It shows in its financials, too. In the fourth quarter, it achieved over $1 billion in subscription revenue for the first time, with 80% gross margins. Its free cash flow grew to over $1 billion in the past year, continuing an impressive four-year run.
CRWD Free Cash Flow (Annual) data by YCharts.
The need for cybersecurity is rapidly growing as the world becomes more digitally connected, and CrowdStrike should continue to be an important player for quite some time. It estimates the total addressable market (TAM) for AI-native security to be $116 billion this year. By 2029, it expects it to jump to $250 billion, a compound annual growth rate of 16.5%.
CrowdStrike's growth has outpaced the broader market for a while, but even growing at the expected rate of the AI-native security TAM should give it a nice trajectory to deliver good long-term returns. I'd expect volatility with its stock in the near term, but consistent investments should prove to be a good move in the long run.
