Top 10 AI Stocks That Should Be On Your Watchlist for 2025

4. NVIDIA Corp (NASDAQ:NVDA)

Number of Hedge Fund Investors: 193

Jessica Lessin, The Information founder, editor-in-chief and CEO, recently discussed the state of AI space and her outlook on 2025. She mentioned the rising competition in the industry.

“I think 2025 is going to be the year where all bets are off—or rather, all gloves are off—in AI competition. NVIDIA Corp (NASDAQ:NVDA) will dominate GPUs, but you’re also seeing Broadcom and others partnering with tech companies to diversify. Last week, at The Information, we reported that Broadcom is now working with Apple on an AI chip for inference. While it doesn’t directly compete with NVIDIA Corp (NASDAQ:NVDA), there is significant competition in the space. I believe investors should stay very vigilant and try to understand the dynamics within each tech company. The key question inside these firms is: how can we build, build, build to create more optionality in AI technology?”

Simply beating earnings estimates is not enough for NVIDIA Corporation (NASDAQ:NVDA) anymore, and the impact of high expectations will continue to weigh on the stock as growth cools.

Nvidia’s forward P/E ratio for the fiscal year ending January 2026 is around 31. An EPS surprise of 8.5% was not able to help the stock. A similar trend occurred following the second-quarter earnings after a 5.6% EPS surprise. It’s difficult to see Nvidia maintaining a mid-70s gross margin by the end of 2026. Over the last two quarters, Nvidia has already reported a drop in its gross margin from 78% to 74.5%.

Then there’s competition. Amazon (AMZN) recently disclosed its Trainium 3 chip, which is set to be released by the end of 2025. The chip is expected to be twice as fast with 40% more power efficiency than the previous generation, manufactured on TSMC’s (TSM) cutting-edge N3 technology. Reportedly, technology giant Apple (AAPL) will be a consumer of Amazon’s new silicon.

Manole Capital Management stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:

“As of this publication, Nvidia is up roughly 150% year-to-date. NVIDIA Corporation (NASDAQ:NVDA) was the largest gainer in the S&P 500 last year and has more than tripled in value over the last year. It hit an eye-opening market capitalization of $3 trillion in June, less than four months after it eclipsed the $2 trillion mark. Enthusiasm for everything AI-related, especially for the primary chip maker whose products are essential to powering AI technology, continues to fuel the market. Last quarter, and for the fifth consecutive quarter, Nvidia reported sales and profits that blew past Wall Street expectations. The stock rose +37% in the second quarter alone.”