Wall Street has seen an astonishing rise over the past 24 months. The main driver of last year’s and this year’s rally has been the global rise of artificial intelligence (AI), particularly generative AI. Companies that have widely applied AI in their end products have become multi-baggers during this period.
Despite the overvaluation, the technology sector will remain dynamic in the long term, supported by its inexhaustible innovative power. No other industry evolves as frequently as technology. The main driver of the technology sector’s innovative power will come from generative AI technologies.
At this point, it should be prudent to invest in AI-focused stocks from a long-term perspective (1 year holding period) with a favorable Zacks Rank. Regardless of their high valuation, these stocks will maintain their momentum in 2025. Therefore, every 5-10% decline in these stocks will provide a lucrative buying opportunity.
Five of these actions are: NVIDIA Corp. NVDA, Broadcom Inc. AVGO, QUALCOMM Inc. QCOM, Innodata Inc. INOD and Marvell Technology Inc. MRVL.
The astonishing rally in US stocks that began in early 2023 was mainly driven by the technology sector. The unprecedented adoption of generative AI technology across the world has been the main driver.
Bloomberg Intelligence estimates that spending on generative AI will increase from $67 billion in 2023 to $1.3 trillion by 2032. UBS estimates that four US tech giants that are members of the “Magnificent 7” will allocate approximately $267 billion in capital expenditure on AI applications. in 2025, which suggests a jump of 33.5% year-on-year.
Additionally, on January 16, Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) – the largest maker of AI-based chipsets for the world’s top AI chipset developers – reported strong results for the fourth quarter of 2024. The company also issued strong guidance, supported by excellent demand for AI chips.
AI-powered data centers are now a booming industry. On January 7, Microsoft Corp. (MSFT) announced that the company will invest $80 billion in 2025 in AI data centers to train AI models and deploy AI and cloud-based applications.
The growth of data centers is so enormous that giant operators like Microsoft, Alphabet Inc. (GOOGL), Meta Platforms Inc. (META) and Amazon.com inc. (AMZN) have already collaborated with nuclear power producers to alleviate the massive need for electricity for data centers.
A research report from Rystad Energy predicts that the combined expansion of traditional and AI-enabled data centers, as well as chip foundries, will increase cumulative U.S. electric power demand by 177 TWh from 2023 to 2030, to reach a total of 307 TWh.
These five AI-focused stocks have strong growth potential for 2025 and have seen their earnings estimates revised positively over the past 30 days. Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks over the past year.
Zacks Investing Research
Image Source: Zacks Investment Research
Zacks Rank #2 NVIDIA – the undisputed global leader in the generative artificial intelligence (AI) chipset development space – delivers uninterrupted product innovation. At the Consumer Electronics Show 2025, NVDA introduced the GeForce RTX 50 series GPUs, powered by its flagship Blackwell architecture. These GPUs deliver significant improvements in AI-driven rendering, improving gaming and creative workflows.
NVDA is eyeing a $1 trillion market opportunity for its GPUs from growing AI-powered data centers. NVDA’s major customers have started receiving the next generation Blackwell AI chips. During the fourth quarter of fiscal 2025, NVDA expects to ship more Blackwell chips than expected.
NVIDIA forecasts a revenue and earnings growth rate of 48.7% and 43.1%, respectively, for next year (end of January 2026). The Zacks Consensus Estimate for next year’s earnings has improved 1% over the past seven days.
The brokerage firms’ average short-term price target represents a 29.6% increase from the last closing price of $133.57. The brokerage’s target price is currently between $135 and $220. This indicates a maximum increase of 64.7% and no decline.
Zacks Rank #2 Broadcom benefited from strong demand for its custom AI accelerators (XPUs) and networks. AVGO saw four-fold growth in AI connectivity revenue, driven by global shipments of its Tomahawk and Jericho solutions. AVGO provides a wide variety of chips and accessories that are essential components of data center infrastructure.
The acquisition of VMware benefited Broadcom’s infrastructure software solutions. VMware’s growing customer base, which includes Alphabet and Meta Platforms, is notable. AVGO’s strong partner base, including Arista Networks, Dell Technologies, Juniper and Supermicro, was a key enabler.
Broadcom forecasts a revenue and earnings growth rate of 18.3% and 29.4%, respectively, for the current year (ending October 2025). The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past seven days.
The brokerage firms’ average short-term price target represents a 7.8% increase from the last closing price of $229.41. The brokerage’s target price is currently between $175 and $300. This indicates a maximum increase of 30.8% and a decrease of 23.7%.
Zacks Rank #2 QUALCOMM has formed a strategic collaboration with Google to develop generative AI digital cockpit solutions. QCOM also recently introduced powerful automotive platforms to strengthen the in-car digital experience and facilitate automated driving. These initiatives are driving the growth of the automobile sector. The strength of the Android smartphone market is a tailwind.
QUALCOMM’s Cloud AI 100 chip can perform 227 server requests and handle a net of 3.8 requests per watt. In 2024, QCOM unveiled the Snapdragon 8s Gen 3 mobile chip supporting 30 generative models, including image generation and voice assistants. QCOM also launched the AI-enabled Snapdragon X Plus laptop processor, which offers faster processor speed and consumes less power.
QUALCOMM has an expected revenue and earnings growth rate of 8.3% and 9%, respectively, for the current year (ending September 2025). The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 30 days.
The brokerage firms’ average short-term price target represents a 24% increase from the last closing price of $161.43. The brokerage’s target price is currently between $160 and $270. This indicates a maximum increase of 67.3% and a decrease of 0.9%.
Zacks Rank #1 Innodata operates as a global data engineering company through three segments: Digital Data Solutions (DDS), Synodex and Agility. The DDS segment engages in the provision of AI data preparation, training data collection or creation, training data annotation and AI algorithm training services for its customers, as well as as AI model deployment and integration services.
DDS also provides a range of data engineering support services including data transformation, data curation, data hygiene, data consolidation, data extraction, data compliance and management of reference data. INOD focuses on supporting large technology companies in the development of generative AI models.
Innodata has an expected revenue and earnings growth rate of 34.6% and negative 5.1%, respectively, for 2025. The Zacks Consensus Estimate for 2025 earnings has improved by 1.2%. over the last 30 days.
The brokerage firms’ average short-term price target represents a 27% increase from the last closing price of $37.09. The brokerage’s target price is currently between $40 and $54. This indicates a maximum increase of 46% and no decline.
Zacks Rank #1 Marvell Technology is benefiting from strong demand in the data center end market. In the most recently reported quarter, MRVL’s data center end-market revenue grew 98% year-over-year and 25% sequentially, propelled by strong demand-driven revenue growth focused on AI for PAM products and ZR electro-optics.
MRVL is a promising player in the SSD controller market. The storage market is experiencing ever-increasing demand given the rapid growth in data volume, including the exponential growth of unstructured data. The completion of inventory digestion is likely to contribute to MRVL’s growth in the enterprise networks and transportation infrastructure end markets.
Marvell Technology has an expected revenue and earnings growth rate of 40.3% and 72.8%, respectively, for next year (end of January 2026). The Zacks Consensus Estimate for next year’s earnings has improved 0.4% over the past 30 days.
The brokerage firms’ average short-term price target represents a 9.5% increase from the last closing price of $117.58. The brokerage’s target price is currently between $95 and $160. This indicates a maximum increase of 36.1% and a decrease of 19.2%.
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