The big run of artificial intelligence stocks has taken a breather in 2025 but a couple of plays are hanging in there, such as Palantir Technologies (PLTR). While semiconductor stocks ruled as the best AI stocks early on, there could be new options emerging.
Read more: AI Stocks Face ‘Show Me’ Moment. Nvidia Earnings Due With China In Focus.
To be sure, top AI stocks such as Microsoft (MSFT) and Nvidia (NVDA) face high expectations. For many companies — such as Google parent Alphabet (GOOGL), Amazon.com (AMZN) and Facebook parent Meta Platforms (META) — the rise of generative AI poses both risk and opportunity.
Amid the rise of generative AI — which generates text, images, and video — it’s a good time to be cautious amid the hype, especially given recent developments at Super Micro Computer (SMCI).
Many companies suddenly tout AI product roadmaps. In general, look for AI stocks that use artificial intelligence to improve products or gain a strategic edge.
Nvidia Stock Retreats In 2025.
“Top 5 hyperscale cloud customers make up about 50% of Nvidia sales, though management continues to diversify the topline,” said the Oppenheimer report.
Moreover, Nvidia has taken a $5.5 billion inventory write-down related to China products. China sales may recover in the second half of 2025 if the company develops redesigned chips that are compliant with export rules, analysts say.
Nvidia aims to broaden its customer base beyond big tech through “sovereign AI,” or deals forging partnerships with governments.
Nvidia stock rose on news the company will supply AI accelerators to Saudi Arabia’s Humain, which is building 500-megawatt AI data center. Humain is a new AI subsidiary of Saudi Arabia’s Public Investment Fund.
For Nvidia, margin pressure has been a key issue as it ramps up production of next-generation Blackwell AI chips in 2025. At GTC, Nvidia updated its AI accelerator roadmap. However, whether customers will really need “Rubin Ultra” GPUs in 2027 and “Feynman” GPUs in 2028 remains a big question.
CoreWeave, Palantir Stand Out.
What’s more, data analytics software maker Palantir reported first quarter earnings on May 5. Palantir stock has gained 63% in 2025 after soaring 340% last year. Palantir belongs to the IBD Leaderboard.
While software companies have been slow to monetize AI products, some analysts still expect long-term gains. RBC Capital puts AI stocks into four categories.
They include: 1) large incumbent vendors that can leverage their data and distribution to take advantage of the technology; 2) vertical software leaders that have not just significant data, but also the ability to verticalize GenAI solutions to accelerate the winner-take-all dynamics of vertical software; 3) mid-market challengers that can use GenAI as an innovation engine to narrow the gap with market leaders; and 4) companies that enable GenAI for others.
AI Stocks: Meta Five Pillars Of Growth
Among data center infrastructure plays, Arista Networks (ANET) reported earnings on May 6. Arista stock has retreated 17% this year. Meanwhile, Meta stock has gained 7% in 2025. On Meta’s Q1 earnings call, CEO Mark Zuckerberg laid out five pillars of expected AI growth. They include improved advertising, engaging social media experiences, business messaging, the Meta AI app, and AI devices, including spatial computing.
The social networking giant in April launched the Meta AI app, built with its Llama 4 training model, with chatbot and web-searching features. Previously, Llama had been embedded in Meta applications such as Instagram and WhatsApp. Meta in April released its open source Llama 4 AI model family. But Meta has delayed the roll out of its powerful Llama model, Llama 4 Behemoth.
Google I/O Announcements
Amid worries over AI competition, Google stock is down 11% in 2025. But Q1 earnings provided some upbeat news for Google stock on the AI front. Google recently released the Gemini 2.5 AI model, which has been getting good reviews. The new Gemini 2.5 family of models underpinned most of the Google I/O product updates. The Gemini app now has 400 million monthly active users, Google said. Meanwhile, revenue growth at cloud computing giants has been a big theme. That’s because capital spending on AI infrastructure has boomed at the cloud giants. Google’s cloud unit reported revenue growth of 28% on April 24, in-line with estimates.
But Microsoft crushed Wall Street’s fiscal third quarter targets amid strong sales of cloud computing and artificial intelligence services. Azure cloud revenue growth accelerated to 35% in constant currency, up from 31% in the prior quarter. Microsoft stock has advanced 7% in 2025.
Microsoft is the biggest investor in generative AI leader OpenAI, having spent some $14 billion on the startup. It cloud business benefits from handling OpenAI’s ChatGPT services. Meanwhile, Amazon’s cloud revenue growth decelerated to 17% from 19% in the prior quarter.
OpenAI Plans To Make Consumer Devices
OpenAI, a leader in developing generative AI models, plans to build consumer handheld devices with former Apple (AAPL) top designer Jony Ive. ChatGPT-maker OpenAI on May 21 agreed to buy Ive’s startup, called io, for $6.4 billion in stock.
The alliance will likely put further pressure on Apple to catch up in generative AI, though the new OpenAI device may not aim to replace iPhones. Ive played a key role in designing the iPhone and other iconic Apple products. OpenAI Chief Executive Sam Altman called a prototype device the “coolest piece of technology the world will have ever seen.”
Among AI stocks to watch, Apple has lagged in 2025. Apple stock has shed 22%. Apple Intelligence features in iPhone 16 models have not sparked a big upgrade cycle. With iPhone 17 models expected to debut in September 2025, it remains to be seen whether Apple Intelligence features are improved. Voice assistant Siri has yet to be upgraded with advanced AI technology.
DeepSeek Roils AI Stocks
Meanwhile, OpenAI was valued at $300 billion as part of a new $40 billion fundraising round led by SoftBank. OpenAI builds large, multimodal foundation models. The OpenAI funding round was good news for infrastructure AI stocks because OpenAI has plenty capital for future data center build-outs. Investors should keep a close watch on the fierce competition in AI models. One view is that competition between U.S. and open source AI models from DeepSeek and others would heat up amid a U.S.-China trade war.
Meanwhile, China-based DeepSeek is readying the next version of its controversial open-source models. Generally, the AI models are battling in reasoning capabilities and other performance yardsticks as well as computing power needs. Here’s IBD’s take on the key questions involving DeepSeek, including U.S./China competition in artificial intelligence. Meanwhile, Alibaba Holdings (BABA) has its Qwen AI models and Baidu (BIDU) has Ernie AI models.
Software Makers Ramp AI Agents
Having struggled to generate new revenue from “copilots,” software companies are now turning to autonomous, goal-driven AI agents. One big issue for software companies is how fast customers ramp up pilot programs to commercial deployment. Palantir — as well as Snowflake and privately held Databricks — are focused on helping companies use proprietary data to build their own AI models. Here’s a look at Databrick’s strategy. Snowflake stock has gained 29% in 2025.
In an IBD interview, ServiceNow (NOW) Chief executive Bill McDermott explained about how the enterprise software maker aims to be an AI winner. ServiceNow recently set new AI revenue targets for fiscal 2026. Meanwhile, software maker Salesforce (CRM) reported Q4 earnings that disappointed. The software maker’s fiscal 2026 outlook came in light even though it’s ramping up new AI agents. Salesforce has agreed to buy Informatica (INFA) for $8 billion to boost its AI strategy. Salesforce Q1 earnings are due May 28. The commoditization of AI models could spur application development. While “training” AI models has been the biggest driver of capital spending, the market will shift to “inferencing,” or running AI applications, in the long run.
Meanwhile, AI chip export restrictions remain a wild card on Nvidia stock as well as Advanced Micro Devices (AMD).
On the earnings front, Broadcom (AVGO) reported fiscal Q1 results on March 6. Broadcom stock popped on its AI chip demand outlook. Broadcom makes custom AI chips for cloud computing titans. Qualcomm (QCOM), ARM Holdings (ARM), and Marvell Technologies (MRVL) are other AI chip makers to watch.
Also, AI technology uses computer algorithms. The software programs aim to mimic the human ability to learn, interpret patterns and make predictions. Until recently, machine learning was largely limited to models that processed data to make predictions. The AI models focused on pattern recognition from existing data. Corporate spending on AI projects was modest as companies mulled return on investment.
AI Stocks To Watch By Industry Group
| Company | Symbol | Comp Rating | Industry name | AI angle |
|---|---|---|---|---|
| Nvidia | (NVDA) | 96 | Elec-Semiconductor Fabless | Cloud computing giants buying more chips to train AI models or run AI workloads. Big lead over rival Advanced Micro Devices (AMD). |
| CrowdStrike | (CRWD) | 98 | Computer Software-Security | AI chatbots expected to automate more functions in security-operations centers and reduce the time to detect computer hacking. |
| Arista Networks | (ANET) | 92 | Computer-Networking | Sells computer network switches that speed up communications among racks of computer servers packed into “hyperscale” data centers. With AI growth, internet data centers will need more network bandwidth. |
| Microsoft | (MSFT) | 93 | Computer Software-Desktop | Biggest investor in generative AI startup Open AI, whose ChatGPT users require Azure cloud services. Microsoft’s business AI assistant, Office 365 Copilot, is another potential revenue source. |
| Salesforce | (CRM) | 72 | Computer Software-Enterprise | Pivoted to autonomous, goal-driven AI agents from conversational co-pilots. Expected to use a mix of subscription and consumption-based pricing. |
| Amazon.com | (AMZN) | 93 | Retail-Internet | Alexa smart assistant upgraded. Cloud computing unit working with OpenAI rivals Anthropic, Hugging Face and Falcon 40B. |
New generative AI models process “prompts,” such as internet search queries, that describe what a user wants to get. Generative AI technologies create text, images, video and computer programming code on their own.
Companies will aim to boost productivity by developing customized AI for specific industries. Proprietary company data will be used to train AI models.
AI systems require massive computing power to find patterns and make inferences from large quantities of data. So the race is on to build AI chips for data centers, self-driving cars, robotics, smartphones, drones and other devices. For chipmakers, analysts expect a market for “edge AI” — on-device processing of AI apps to emerge.
Will AI Startups Challenge Tech Giants
What’s more, one key question for investors is whether tech industry incumbents will be the big generative AI winners. Or, will a new wave of AI startups eventually dominate? OpenAI has told employees its now on an annual revenue run-rate of $3.4 billion, up from $2 billion in January. Further, OpenAI recently laid out more details of its plans to adopt a for-profit business structure in 2025.
Large language models provide the building blocks to develop applications. Further, LLMs help AI systems understand the way that humans write and speak. Also, LLMs require training data for specific tasks. Companies with access to troves of data hold an edge. OpenAI is part of a wave of LLM startups that includes AI21 Labs, Anthropic and Cohere. Anthropic’s latest funding round values it at $61.5 billion.
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