Key Points

• The Trade Desk is forecasting a significant slowdown in its growth in the current quarter.

• Its competitors continue to make inroads into The Trade Desk's territory.

• The Trade Desk sports an expensive valuation, which it may prove difficult to justify.

• 10 stocks we like better than The Trade Desk ›

Programmatic advertising specialist The Trade Desk (NASDAQ: TTD) is having a terrible 2025 so far. The year went from bad to worse for investors after the company released its second quarter results on Aug. 7.

The Trade Desk stock was hammered as the company's guidance indicated a slowdown in its growth. Though The Trade Desk has been integrating artificial intelligence (AI) tools into its programmatic advertising platform, it seems like the stiff competition from bigger players in the advertising industry is hampering its ability to sustain healthy growth levels.

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Let's look at the reasons why The Trade Desk has dropped an alarming 55% year to date, and determine whether that drop represents an opportunity to buy the stock in anticipation of a potential turnaround.

Execution issues and competitive pressures are weighing on The Trade Desk

The Trade Desk started 2025 on a negative note. The stock was clobbered after releasing its full-year 2024 results in February when sales execution issues led the company to miss its revenue target. The company's May quarterly report helped it win back investor confidence as Q1 revenue was up by 25% year over year and well ahead of consensus expectations.

However, inconsistency reared its ugly head once again in Q2. Revenue growth slowed to 19%, and earnings increased just a few cents to $0.39 per share. In the same quarter last year, The Trade Desk had reported much stronger revenue growth of 26%.

The guidance, however, is what really spooked the market. Management expects revenue growth in the current quarter to further decelerate to 14% for a total of $717 million. The adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast of $277 million would be an improvement of just 8% year over year.

It is easy to see why this slowdown has investors worried. The Trade Desk's competitors in the digital advertising market have been reporting solid growth. Amazon, primarily known for its e-commerce and cloud computing offerings, reported a healthy 23% year-over-year increase in its advertising business last quarter to $15.7 billion.

The tech giant struck a deal with streaming provider Roku to expand its footprint in the connected TV advertising space in the U.S., gaining access to 80 million households. Connected TV is one of the key areas that's driving growth for The Trade Desk, so Amazon's big move in this market is definitely a cause for concern.

On the other hand, social media giant Meta Platforms' focus on deploying AI tools is helping it win a bigger share of advertisers' wallets. Meta's tools are driving strong returns for advertisers, and the company has also been able to boost user engagement through AI-recommended content.

As a result, Meta's revenue increased 22% last quarter. It is worth noting that both Meta and Amazon are significantly larger companies than The Trade Desk, and they are achieving healthy growth levels while The Trade Desk is witnessing a slowdown. This doesn't bode well for the company, especially given its valuation.

Why investors could be in for more pain

Analysts are forecasting an improvement of just 8% in The Trade Desk's earnings this year to $1.79 per share. The company is expected to return to double-digit growth in 2026.

Data by YCharts.

However, The Trade Desk is trading at 66 times trailing earnings, which is double the average price-to-earnings ratio of the Nasdaq-100 index. Buying The Trade Desk stock at this expensive multiple doesn't look like a smart thing to do right now. The slowing revenue growth is going to negatively impact the bottom line as well, so it remains to be seen if the company is capable of matching Wall Street's earnings expectations going forward.

That's why investors would do well to focus on other tech stocks that are clocking faster growth rates while trading at more reasonable valuations, as The Trade Desk is likely to remain under pressure going forward.

Should you invest $1,000 in The Trade Desk right now?

Before you buy stock in The Trade Desk, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and The Trade Desk wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $649,657!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,090,993!*

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See the 10 stocks »

*Stock Advisor returns as of August 18, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Roku, and The Trade Desk. The Motley Fool has a disclosure policy.

Key Points

• BigBear.ai's latest quarterly report dented investors' confidence in the stock.

• The company is guiding for its top line to decline in 2025, while peer Palantir is making solid progress thanks to its focus on attracting commercial customers.

• There are solid opportunities in the artificial intelligence software platforms market that BigBear.ai serves, so the possibility of a turnaround in its fortunes cannot be ruled out.

• 10 stocks we like better than BigBear.ai ›

BigBear.ai (NYSE: BBAI) stock was in roaring form on the stock market for much of the past year, rising by a whopping 337% as of this writing, despite even wilder swings in its share price. The past month, however, has been one that the company's investors may wish they could forget -- the stock lost 31% of its value during the period.

Its second-quarter results, which it released on Aug. 11, made matters worse. BigBear.ai didn't just miss Wall Street's expectations -- it also trimmed its 2025 guidance, and the stock was hammered. Investors, however, should remember that BigBear.ai is operating in the artificial intelligence (AI) software market, which is on course to grow rapidly in the coming years.

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So, should savvy investors treat this stock's recent drop as a buying opportunity in anticipation of healthy gains over the next three years?

BigBear.ai's end market is growing at an incredible pace

BigBear.ai's AI-powered solutions enable its clients to analyze their data so that they can improve their decision-making ability, which can ultimately lead to improved operational efficiency and productivity. The company's AI solutions are already being deployed in such varied areas as cybersecurity, digital identity management, computer vision, and predictive intelligence.

BigBear.ai points out that these AI tools are being used in industries such as border security, defense, travel and trade, supply chain, healthcare, and academics. The good part is that demand for the type of AI software platform that BigBear.ai provides is growing at a tremendous pace. Market research firm IDC expects this market to generate $153 billion in annual revenue in 2028, up from just $28 billion in 2023.

The bad news, however, is that BigBear.ai isn't doing enough to make the most of this lucrative opportunity. Its revenue barely increased last year, and its updated 2025 guidance for revenue in the $125 million to $140 million range suggests that its top line will drop by between 12% and 21%. Meanwhile, competitor Palantir Technologies (NASDAQ: PLTR) has been making significant strides in the AI software platform market.

In the first half of 2025, Palantir's revenue jumped by 44%. Its backlog grew at a faster pace than BigBear.ai's. Palantir also ended the second quarter with a 65% spike in its remaining deal value (the total value of its unfulfilled contracts) to $7.1 billion. Meanwhile, BigBear.ai's $380 million backlog at the end of Q2 represented a 43% increase from the year-ago period.

In short, Palantir is growing at a much faster pace than BigBear.ai, even though it is the bigger company. A major reason why that's the case is that Palantir is successfully targeting commercial customers. The company started offering its Artificial Intelligence Platform (AIP) to commercial customers in April 2023, and it has been reaping the rewards ever since.

Palantir's commercial revenue increased by an impressive 47% year over year in the second quarter, driven by an almost identical increase in the commercial customer count. BigBear.ai, on the other hand, relies on federal government contracts for the majority of its revenue. The unpredictability associated with government spending is the reason why BigBear.ai's latest quarterly performance wasn't up to the mark.

Lower-than-expected revenues from its Army contracts led to an 18% year-over-year revenue decline in Q2 and also forced management to lower its guidance.

It's clear that BigBear.ai needs to take a leaf out of Palantir's playbook and more aggressively pursue commercial opportunities. CEO Kevin McAleenan realizes this. On the company's latest conference call, he said:

Coming into the role as CEO earlier this year, it was clear to me that our pipeline was narrow and relied on a few large contracts. We have taken steps this year to deepen and broaden that pipeline with additional customers, more prime contract targets, larger opportunities, and expansion into new markets, including internationally.

However, McAleenan added that these changes will take time to materialize.

The next three years could be difficult for this AI software specialist

Analysts significantly reduced their 2025 revenue expectations for BigBear.ai following its latest quarterly report. Their consensus revenue estimate for 2026 has also dipped significantly.

BBAI Revenue Estimates for Current Fiscal Year data by YCharts.

The company was previously expected to deliver healthy revenue growth next year. Though it is still expected to produce a double-digit percentage jump in its top line, the forecast for 2027 points toward another slow year. As such, BigBear.ai stock may remain under pressure. However, investors would do well to keep this stock on their watch lists.

That's because BigBear.ai's strategy of widening its customer base and accessing new markets could pay off, allowing it to potentially outpace Wall Street's expectations over the next three years. The stock is currently trading at 10 times sales, and it may become cheaper following its recent results. So if there are signs of a turnaround in BigBear.ai's business, savvy investors could consider buying this AI stock at a cheap valuation before the company steps on the gas.

Should you invest $1,000 in BigBear.ai right now?

Before you buy stock in BigBear.ai, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and BigBear.ai wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $650,499!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,072,543!*

Now, it’s worth noting Stock Advisor’s total average return is 1,045% — a market-crushing outperformance compared to 182% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 18, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Key Points

• One of the companies discussed in this article is using AI to win a bigger share of the lucrative digital advertising market.

• The other company in focus in this piece is enabling the AI revolution through its semiconductor manufacturing equipment, and it seems well-positioned to accelerate its growth.

• 10 stocks we like better than Meta Platforms ›

Artificial intelligence (AI) is projected to have a profound impact on the global economy in the long run by driving up productivity levels, spurring customers and businesses to spend money on AI-related applications. According to market research firm IDC, AI could account for 3.5%, or almost $20 trillion, of the global gross domestic product (GDP) by the end of the decade.

This explains why investors have been betting big on AI stocks over the past three years, and that's why many of the names benefiting from the rapid adoption of this technology are now trading at expensive multiples. Hardware giants such as Nvidia and Broadcom sport rich earnings multiples, while software specialists such as Palantir and Snowflake are also expensive.

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However, if you have missed the AI-fueled rally in shares of the above-mentioned companies in the past year, it would be a good time to take a closer look at Meta Platforms (NASDAQ: META) and Lam Research (NASDAQ: LRCX). These companies are making the most of the global AI rollout, and importantly, they are trading at attractive multiples right now.

Let's look at the reasons why buying these two AI stocks right now could turn out to be a smart long-term move.

1. Meta Platforms

AI is turning out to be a nice catalyst for digital advertising giant Meta Platforms, which has been offering its AI-powered advertising tools to advertisers and brands to improve audience targeting and reduce costs simultaneously. On the company's latest earnings conference call, management pointed out that AI tools have led to a 5% jump in ad conversions on Instagram, along with a 3% improvement on Facebook.

Moreover, Meta's users are now spending more time on its apps thanks to AI-powered content recommendations. The time users spent on Facebook and Instagram increased by 5% and 6%, respectively, in the previous quarter. These factors explain why Meta reported a solid increase of 22%, to $47.5 billion, in its Q2 revenue. Its bottom-line growth was even better, with adjusted earnings per share jumping by 38% year over year to $7.14 per share.

The numbers crushed Wall Street's expectations, fueling a big jump in Meta's stock price following the release of its results on July 30. Meta benefited from a 9% year-over-year jump in the average price per ad served during the quarter. Also, the AI-driven improvement in user engagement led to an 11% increase in ad impressions delivered by the company in the previous quarter.

Additionally, more advertisers on Meta's platform are now using its generative AI ad tools to create and optimize the performance of their campaigns. Meta says that almost 2 million advertisers are now using its AI video generation tools, while the adoption of its text generation tools is also improving. Looking forward, Meta's AI ad tools are likely to be adopted by more advertisers, as the company reports they significantly boost advertising returns.

A study conducted by the company earlier this year revealed that its AI advertising tools are delivering a "22% improvement in return on ad spend for advertisers." It won't be surprising to see advertisers funneling those savings back into Meta's advertising solutions to reach a bigger audience, thereby leading to further growth in the social media giant's revenue and earnings.

As such, it is easy to see why analysts have increased their earnings growth expectations for Meta.

META EPS Estimates for Current Fiscal Year data by YCharts. EPS = earnings per share.

The best part is that investors can buy this tech stock at an extremely attractive 27 times earnings, which is lower than the tech-laden Nasdaq-100 index's earnings multiple of almost 33. Buying Meta at this valuation looks like a no-brainer, as the company can gain a bigger share of the digital ad market thanks to the AI-powered gains it is delivering to advertisers.

2. Lam Research

Semiconductors are powering the AI revolution. Complex chip systems capable of tackling huge workloads are necessary to train and deploy AI models in data centers. This is why companies such as Nvidia, Broadcom, AMD, and Taiwan Semiconductor Manufacturing Company (TSMC) have seen healthy growth in their revenue and earnings in the past couple of years.

However, the chips that the companies mentioned above design and fabricate wouldn't have been possible without the semiconductor manufacturing equipment sold by the likes of Lam Research. The company sells wafer and fabrication equipment (WFE) to foundries such as TSMC and Intel and to memory manufacturers like Samsung, Micron, and SK Hynix.

These companies have been increasing their capital expenditure budgets to make more AI-focused chips. Unsurprisingly, industry association SEMI is projecting a 6.2% increase in WFE spending in 2025, followed by a bigger jump of 10.2% in 2026. It is worth noting that SEMI increased its WFE spending guidance last month.

The good part is that Lam is already benefiting from the improved spending on semiconductor equipment. The company released its fiscal 2025 results on July 30. It reported a 23% year-over-year increase in annual revenue to $18.4 billion. Its diluted earnings per share increased at a faster pace of 43% to $4.15 per share last fiscal year.

The stronger WFE spending forecast going forward explains why Lam's outlook was a solid one. It is expecting $5.2 billion in revenue in the current quarter, which is well ahead of the $4.63 billion consensus estimate. That would translate into a year-over-year increase of 25% in its top line. Lam seems capable of sustaining this healthy momentum throughout the year on the back of an increase in AI-focused semiconductor capacity.

As such, don't be surprised to see Lam's revenue growth in the current fiscal year exceeding the 8% increase that analysts are projecting. The following chart tells us that Wall Street analysts expect Lam to clock healthy double-digit earnings growth rates. That looks reasonable, considering the 24% annual growth that the AI chip market is expected to clock over the next five years, which should ideally lead to more investments in semiconductor manufacturing capacity.

LRCX EPS Estimates for Current Fiscal Year data by YCharts. EPS = earnings per share.

In the end, there is a possibility that Lam will grow at a stronger pace than Wall Street's expectations in the long run, and this should pave the way for more upside in this AI stock. With Lam trading at just 23 times trailing earnings, investors are getting a great deal on this stock right now, and they may not want to miss it, considering the AI-fueled gains it could deliver.

Should you invest $1,000 in Meta Platforms right now?

Before you buy stock in Meta Platforms, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Meta Platforms wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,563!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,108,033!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of August 4, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Lam Research, Meta Platforms, Nvidia, Palantir Technologies, Snowflake, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.

Key Points

• Arm Holdings stock dipped substantially after the release of its latest quarterly results.

• The company is investing heavily in R&D to make the most of promising growth opportunities.

• Its stock is expensive right now, but could justify its valuation by clocking strong earnings growth.

• 10 stocks we like better than Arm Holdings ›

British technology company Arm Holdings (NASDAQ: ARM) has witnessed a remarkable surge in its stock price since April 7, when its shares were trading at a 52-week low, driven by the broader rally in technology stocks.

However, its red-hot rally came to a grinding halt following the release of the company's fiscal 2026 first-quarter results (for the three months ended June 30) on July 30. Arm stock fell more than 13% in a single session. Investors weren't impressed with the company's in-line results and weaker-than-expected guidance, as they were expecting stronger numbers from the company to justify its expensive valuation.

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Let's take a closer look at Arm's numbers and check if the recent slide could be a buying opportunity for investors looking to add a technology stock to their portfolios.

Arm's aggressive spending is taking a toll on its bottom line

Arm Holdings gets its revenue from selling licenses for its chip architecture. Semiconductor companies use this architecture to design and develop chips that go into various applications, ranging from smartphones to personal computers (PCs) to data centers. Arm also gets a royalty from the sale of each chip that's manufactured using its architecture and intellectual property (IP).

The company's revenue in the first quarter of its fiscal 2026 increased 12% year over year to $1.05 billion. This was driven by a solid jump of 25% in its royalty revenue, which accounted for 55% of its top line during the quarter. Arm attributed the increase in its royalty revenue to the growing adoption of its artificial intelligence (AI)-focused Armv9 architecture for manufacturing data center chips, and its compute subsystems (CSS), which are used to develop chips for custom applications.

However, the company's non-GAAP net income fell to $0.35 per share during the quarter from $0.40 per share in the year-ago period. Arm witnessed a sharp contraction in its operating margin during the quarter, which was a result of a big jump in its research and development (R&D) expenses. Specifically, Arm's R&D expenses increased by 34% on a year-over-year basis in fiscal Q1.

Arm management remarked on the company's latest earnings conference call that it will continue to invest aggressively in R&D. As pointed out by CEO Rene Haas:

We are continuing to explore the possibility of moving beyond our current platform into additional compute to subsystems, chiplets and potentially full end solutions. To ensure these opportunities are executed successfully, we have accelerated the investment into our R&D. These investments include expanding engineering delivery across multiple levels, adding to the already significant product investments we have made to date.

Arm's stance isn't surprising, since the company's architecture is now being widely used in data centers to build and deploy custom AI chips. The company says that there has been a 14x jump in the number of data center chips that are manufactured using its designs since 2021. That's not surprising, as major cloud computing companies such as Amazon, Microsoft, and Alphabet's Google are using its architecture to design custom AI silicon.

Even Nvidia has used Arm's IP to design its Grace Blackwell server processors. Smartphone giants Apple and Samsung are also Arm's customers, using the British tech giant's chip architecture to manufacture AI-capable smartphone processors. The good part is that Arm's CSS licenses are now gaining traction among customers for developing smartphone, PC, and data center chips.

Arm says that it "signed three additional CSS licenses this quarter with existing CSS customers, including two for the data center and one for PCs, more than doubling our CSS licenses from a year ago." Importantly, Arm management points out that the royalty rate of its CSS license is double that of its Armv9 architecture.

So, it's easy to see why the company is looking to push the envelope on the product development front to provide end-to-end solutions to customers to help them design advanced chips capable of tackling complex workloads. Even better, Arm's spending on R&D is bearing fruit as the company is gaining impressive share in the data center and PC processor markets. Its smartphone revenue is growing at a faster rate than the end market, thanks to the use of its IPs to manufacture processors for flagship smartphones.

However, Arm's R&D spending is going to keep its bottom line under pressure. The company's earnings estimate of $0.33 per share for the current quarter (at the midpoint of its guidance range) is lower than the $0.35 per share consensus estimate. The positive thing to note is that earnings would increase in double digits from the year-ago period's reading of $0.30 per share at the midpoint, with revenue expected to increase by more than 25%.

But then, analysts are expecting an increase of just 5% in Arm's earnings this year, which can be attributed to the investments that it is making to secure its long-term growth. That could be a problem considering its expensive valuation.

The stock is richly valued, but the long-term picture seems bright

Arm trades at an expensive 208 times earnings as of this writing. It's easy to see why investors hit the panic button following its latest quarterly report. The decline in its earnings didn't justify the rich valuation, and the single-digit earnings growth that it's expected to deliver this year doesn't help matters either.

However, Arm's forward earnings multiple of 76 is way lower than its trailing multiple. That's not surprising, as its earnings growth is expected to accelerate nicely over the next couple of years.

ARM EPS Estimates for Current Fiscal Year data by YCharts. EPS = earnings per share.

Its forward price-to-earnings (P/E) ratio based on its fiscal 2028 earnings is even lower at 49 (calculated using the earnings estimate of $2.86 per share provided in the above chart). Moreover, there is a good chance that Arm's earnings growth could eventually turn out to be better than expected, thanks to the higher royalty from its CSS licenses and the Armv9 architecture.

That's why growth investors can consider buying Arm stock on the dip. Its bottom-line pressure shouldn't last for long, thanks to the secular growth of the lucrative end markets that it's serving.

Should you invest $1,000 in Arm Holdings right now?

Before you buy stock in Arm Holdings, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Arm Holdings wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,563!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,108,033!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Nebius and CoreWeave have been in red-hot form on the stock market this year thanks to the terrific demand for their cloud infrastructure solutions.

• Both companies seem to be able to sustain their impressive growth in the long run, thanks to the lucrative AI-related market that they are serving.

• 10 stocks we like better than CoreWeave ›

CoreWeave (NASDAQ: CRWV) and Nebius Group (NASDAQ: NBIS) have witnessed a rapid jump in their share prices this year. Investors have been buying these stocks hand over fist because they are benefiting big time from the growing demand for cloud-based artificial intelligence (AI) infrastructure.

CoreWeave stock has shot up a remarkable 224% in just four months since going public in March this year, and Nebius has clocked healthy gains of 84% so far in 2025. Both companies are in the business of renting out data centers powered by graphics processing units (GPUs), which their customers use to train AI models, build applications, and scale up those applications in the cloud.

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But if you have to choose one of these two stocks for your portfolio right now, which one should it be? Let's find out.

The case for CoreWeave

CoreWeave's rally since its initial public offering (IPO) can be attributed to the terrific growth in the company's revenue and backlog. Its top line jumped by more than fivefold in the first quarter to $981 million, and it's on track to sustain its outstanding momentum.

That's because the cloud infrastructure-as-a-service market in which CoreWeave operates is growing at an incredible pace. Grand View Research estimates that the cloud AI market could generate $650 billion in annual revenue in 2030, nearly 7.5 times the size of this market last year. CoreWeave is capitalizing on this lucrative opportunity by offering access to the top-of-the-line GPUs from Nvidia along with server processors from AMD.

The company claims that customers using its cloud AI infrastructure enjoy significant cost and performance advantages. It says its infrastructure is "purpose-built for compute-intensive workloads, and everything from our servers to our storage and networking solutions are designed to deliver best-in-class performance."

The demand for the company's AI infrastructure is outpacing supply, so it is focused on scaling up its capacity quickly to satisfy the strong demand. Management said on its May earnings conference call that it has raised over $21 billion to expand infrastructure and data center capacity.

The company recently announced the upcoming $9 billion acquisition of Core Scientific, which could bring another 1 gigawatt (GW) of data center capacity and help lower its costs from its existing leases with Core Scientific.

CoreWeave forecasts a reduction of over $10 billion in future lease liabilities once the acquisition is complete, followed by annual run-rate cost savings of $500 million by the end of 2027. Before this acquisition was announced, CoreWeave was projecting a fourfold increase in its data center capacity under its existing capacity contracts.

This focus on enhancing data center capacity should pave the way for outstanding growth for CoreWeave since it was sitting on a revenue backlog of almost $26 billion at the end of the first quarter -- 63% higher from the year-ago period. As such, analysts are expecting its revenue to continue increasing at a strong pace.

CRWV Revenue Estimates for Current Fiscal Year; data by YCharts.

CoreWeave is likely to remain a top AI stock since it is serving a fast-growing market and is investing aggressively to capture a share of it.

The case for Nebius

Nebius shot up impressively last week after Goldman Sachs put a 12-month price target of $68 on the stock. The investment bank said that the company's full-stack AI infrastructure, which includes hardware and software tools, allows it to make the most of the impressive opportunity in this space.

Goldman's price target calls for a 31% jump in the stock in the coming year. And there is a good chance that the company could surpass that given its 385% revenue jump year over year in the first quarter to $55 million. More importantly, the growth in its annual revenue run rate was much faster at 684% year over year to $249 million.

That improved to $310 million in April, and the company forecasts an annual revenue run rate of $750 million to $1 billion by the end of the year, driven by the new data center capacity it is planning. In a letter to shareholders, CEO Arkady Volozh said:

We are rapidly expanding our capacity footprint. In just three quarters, we've gone from one location in Finland to five locations across Europe, the U.S., and now the Middle East. We are actively exploring new sites in the U.S. and around the world, and we expect to provide more news on this soon.

Unlike CoreWeave, Nebius provides more than just AI hardware infrastructure to customers. Its cloud platform also offers developer tools and services that customers can employ to refine their AI models, run inference tasks, and develop custom solutions. This is why Goldman believes that Nebius could be a leader in the cloud AI space.

The company's balance sheet -- with $1.45 billion in cash and $188 million in debt -- allows it to continue putting more money into its cloud infrastructure. This explains the healthy top-line growth it is projected to deliver.

NBIS Revenue Estimates for Current Fiscal Year; data by YCharts.

So, like CoreWeave, Nebius is likely to remain a high-growth company. But is it a better buy than its larger peer at this point?

The verdict

Both CoreWeave and Nebius are growing at healthy rates and are expected to sustain that. So, investors should look at their valuations to decide which is the better buy.

The two companies aren't profitable right now considering their aggressive infrastructure investments, so we need to compare their price-to-sales ratios (P/S).

NBIS PS Ratio (Forward); data by YCharts.

Nebius stock is way more expensive than CoreWeave when comparing sales multiples, indicating that the latter is a better buy even after its strong rally this year. Moreover, CoreWeave is growing faster, has a huge backlog, and is sitting on ample resources to continue expanding its data center footprint, making it the easy choice for investors considering which of these two AI stocks is worth adding to their portfolios right now.

Should you invest $1,000 in CoreWeave right now?

Before you buy stock in CoreWeave, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and CoreWeave wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,063,471!*

Now, it’s worth noting Stock Advisor’s total average return is 1,041% — a market-crushing outperformance compared to 183% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of July 21, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Goldman Sachs Group, and Nvidia. The Motley Fool recommends Nebius Group. The Motley Fool has a disclosure policy.

Key Points

• Nvidia has played a pioneering role in the proliferation of AI, but it wouldn't have been possible without this company.

• Nvidia, along with many other chip designers and consumer electronics companies, relies on the manufacturing expertise of this Taiwan-based giant.

• The wide range of industries that this Nvidia partner caters to makes it one of the best ways to play the global AI boom.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

Nvidia (NASDAQ: NVDA) is considered a pioneer in the artificial intelligence (AI) hardware market, and rightly so, as the chip designer's graphics processing units (GPUs) have allowed cloud computing companies and others to train AI models and run inference applications.

The parallel computing power of Nvidia's GPUs makes them ideal for performing a large number of calculations simultaneously, which is precisely what's required for training AI models. Also, these chips are now gaining traction in AI inference as well, thanks to their ability to quickly make predictions and decisions using the trained model.

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Not surprisingly, Nvidia has established a solid foothold in the AI chip market. It towers above its competitors with an estimated market share of 80% in AI data center accelerators. However, Nvidia's dominance wouldn't have been possible without its foundry partner Taiwan Semiconductor Manufacturing (NYSE: TSM), which is the real kingpin of the AI chip market.

Let's look at the reasons why TSMC is a bigger power player than Nvidia in AI chips.

TSMC's dominant foundry position makes it the go-to manufacturer of AI chips

TSMC operates semiconductor fabrication plants across the globe, which are used to manufacture chips based on designs provided by its customers. It is worth noting that TSMC doesn't design its own chips. It simply makes chips for fabless semiconductor companies that don't have production facilities of their own.

Nvidia is one such company that utilizes TSMC's facilities for manufacturing its AI chips. Equity research and brokerage firm Bernstein estimates that Nvidia could account for over a fifth of TSMC's top line this year, up significantly from around 5% to 10% a couple of years ago. That's not surprising, as Nvidia has been aggressively looking to secure more of TSMC's chipmaking capacity.

Taiwan-based business newspaper Economic Daily News pointed out earlier this year that Nvidia has reportedly secured more than 70% of TSMC's advanced chip packaging capacity for 2025 in a bid to meet the robust demand for its AI GPUs. However, Nvidia is not the only company that's in line to utilize TSMC's fabs.

Apple (NASDAQ: AAPL) is another major customer, and its contribution toward TSMC's top line is expected to be identical to that of Nvidia's in 2025. The consumer electronics giant taps TSMC to manufacture the processors that go into popular devices such as iPhones and iPads, and it has reportedly pre-booked the foundry giant's 2-nanometer (nm) capacity to mass produce chips for its next-generation iPhones.

It is worth noting that Apple had reportedly booked all of TSMC's 3nm supply in 2023 to make processors for the iPhone and other devices. And now that Apple is looking to bolster the on-device AI capabilities of its devices, it is expected to move to the 2nm node so that it can pack more computing power and increase energy efficiency.

Apple, however, has company, as another smartphone chip designer -- Qualcomm -- is expected to produce chips based on TSMC's 2nm process node as well. On the other hand, Nvidia's peers in the AI accelerator market are also partnering with TSMC to manufacture advanced chips.

Marvell Technology, for instance, is reportedly going to adopt TSMC's sub-3nm process nodes to manufacture the next generation of its custom AI processors, which are in tremendous demand from cloud computing giants to reduce costs. Meanwhile, AMD is getting its central processing units (CPUs) and GPUs that power both servers and personal computers (PCs) manufactured by TSMC as well.

Clearly, TSMC is the power player in the AI chip market. Its plants manufacture chips that go into a wide variety of applications, ranging from smartphones to PCs to data centers, and all of these markets are on track to record secular growth because of AI. Importantly, TSMC is taking steps to ensure that it can meet the incredible demand from all of these markets.

An aggressive expansion plan should help it satisfy the booming AI chip demand

TSMC's 2025 capital expenditure forecast of $38 billion to $42 billion points toward a significant increase over its 2024 outlay of $30 billion. It is going to invest 70% of its 2025 capex on advanced process technologies that are used for making AI chips, which isn't surprising.

Moreover, the company has aggressive long-term expansion plans as well. It has outlined an investment of $165 billion in the U.S. to build more plants, while it is also building factories in Taiwan and Europe. These expansionary moves should enable TSMC to capitalize on the AI chip market's impressive long-term growth.

According to one estimate, the global AI chipset market could clock an annual growth rate of 31% through 2033, which means that TSMC has the ability to sustain its terrific growth for years to come. Not surprisingly, analysts are expecting a pick-up in TSMC's growth going forward.

TSM EPS Estimates for Current Fiscal Year data by YCharts

That's why it would be a good idea to buy this AI stock hand over fist right now, as it seems undervalued. TSMC's earnings are expected to jump by 34% this year, which is nearly five times the projected increase in the S&P 500 index's average earnings. With the stock trading at 28 times earnings, investors are getting a good deal on TSMC based on the potential upside it could deliver.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,063,471!*

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.

Key Points

• Nvidia CEO Jensen Huang says that the company will be granted the licenses required to export its H20 AI chips to Chinese customers.

• The company was losing a chunk of revenue because of the restrictions on the export of its chips to China.

• Nvidia investors can now expect stronger-than-expected growth from the company this year.

• 10 stocks we like better than Nvidia ›

When Nvidia (NASDAQ: NVDA) released its fiscal 2026 first-quarter results (for the three months ended April 27) a couple of months ago, the company had bad news in store for investors as it was losing business in a key market thanks to export restrictions.

Specifically, Nvidia pointed out in its previous earnings report that it bore a multibillion-dollar charge because of its inability to ship its H20 artificial intelligence (AI) chips to China. Its revenue during the quarter took a hit, while the guidance could have been much better if there were no restrictions on the sales of its chips to Chinese customers.

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But now, it looks like Nvidia is set to resume its sales in China. Let's take a closer look at this latest development that could give its business a big boost.

Jensen Huang says that Nvidia is set to start shipments of its H20 chips to China

Nvidia was informed by the U.S. government in April that it needs a license to export its China-specific H20 chip into that market. The company took a $4.5 billion charge on account of the excess inventory of the unsold H20 chips that it was left with. Nvidia also lost $2.5 billion in revenue because of this restriction during the quarter.

Even worse, the company said that it will lose $8 billion in H20 revenue in the ongoing quarter thanks to the restrictions. However, a blog published by Nvidia on July 14 states that CEO Jensen Huang met with President Donald Trump and other policymakers, giving an update that the company "is filing applications to sell the NVIDIA H20 GPU again." More importantly, the blog points out that the U.S. government assured Nvidia that licenses will be granted and the company hopes for deliveries to begin soon.

Nvidia shipped $4.6 billion worth of H20 processors to China in fiscal Q1 before the export restrictions kicked in. Including the lost sales during the quarter, Nvidia's Chinese revenue would have been just over $7 billion. And when we consider the $8 billion revenue that the company was expecting from this market in fiscal Q2, Nvidia's revenue from that market would have hit $15 billion in the first half of the current fiscal year.

The Chinese business, therefore, was on track to generate $30 billion in annual revenue for the company this year before it was hamstrung by the export controls. Analysts are expecting $200 billion in revenue from Nvidia in the current fiscal year. That figure could have been significantly higher if the company were allowed to uninterruptedly sell its H20 processors into the Chinese market.

However, Nvidia was caught in the crosshairs of the tariff-fueled trade war between the U.S. and China. The good part is that both countries show\ signs of easing restrictions on exports of key products, and it looks like Nvidia has benefited from the same. As such, it won't be surprising to see the chipmaker finish the current fiscal year in a stronger-than-expected position.

The return of the lost business could be a tailwind for the stock in the second half of 2025

We already saw how much revenue Nvidia could have minted from China in the current fiscal year. Now that the company is set to receive licenses to export its chips, there is a good chance that it could get back that lost revenue.

Nvidia is going to be in a position to fulfill the $8 billion worth of orders that it had lined up for fiscal Q2, along with the $2.5 billion worth of shipments that it was unable to fulfill in the previous quarter. This could help Nvidia generate more revenue than what Wall Street is anticipating in the current fiscal year.

Assuming that Nvidia manages to sustain the run rate of its H20 business in China in the second half of the fiscal year, it could generate $15 billion in revenue from that market. Analysts at equity research firm Bernstein estimate that Nvidia has the potential to generate incremental revenue of $15 billion to $20 billion in the current fiscal year once it gets the H20 export licenses.

What's more, the company could generate an additional $0.40 to $0.50 per share in earnings based on the incremental revenue estimate. In the end, it can be concluded that Nvidia could deliver stronger-than-expected growth in fiscal 2026, which it can sustain in the long run as well thanks to the opportunities it is witnessing in other countries.

Investors, therefore, have another reason to buy Nvidia stock right now as a potential acceleration in its revenue and earnings growth following this latest development could lead to more upside.

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $680,559!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,005,670!*

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Key Points

• These two technology stocks are in red-hot form of late, and are set to deliver more upside going forward.

• Both are capable of sustaining their healthy growth momentum for a long time.

• Both are likely to outpace Wall Street's growth expectations as well.

• 10 stocks we like better than Nvidia ›

Technology stocks have made an impressive recovery in the past three months or so following a difficult start to the year when a variety of factors, including a tariff-induced trade war, lofty valuations, and the lack of interest rate cuts by the Federal Reserve this year, spooked some investors.

The tech-laden Nasdaq Composite index has jumped a remarkable 21% in the space of just three months (although it's up just 7% year to date). This broad market rally explains why many technology names have also shot up big time of late, recording a parabolic increase in their stock prices. A parabolic move refers to a rapid increase in the stock price of a company in a short time, identical to the right side of a parabolic curve.

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Two tech stocks in particular have been crushing the market of late and have the potential to make another parabolic move thanks to their stunning growth profiles.

1. Micron Technology

Memory specialist Micron Technology's (NASDAQ: MU) stock spiked 58% in the past three months. But even after this recent surge, you can buy the chipmaker at an extremely attractive valuation since it is trading at just 22 times trailing earnings. The forward earnings multiple of just 10 is even more attractive. Given the strong forecasted growth rates for Micron, it has strong potential to be a no-brainer buy.

Micron's revenue in the third quarter of fiscal 2025 (which ended on May 29) was up by 37% year over year to $9.3 billion. Its adjusted earnings grew by over 3x to $1.91 per share on the back of a massive jump in its margins. The memory chip manufacturer has received a big artificial intelligence (AI)-powered boost in recent quarters.

AI accelerators from the likes of Nvidia (NASDAQ: NVDA), AMD, Broadcom, and Marvell Technology are packing in huge amounts of high-bandwidth memory (HBM) so that large amounts of data can be transmitted at terrific speeds in AI data centers. Market research provider Yole Group estimates that the HBM market's revenue could double in 2025, leading to a 17% jump in the overall memory market's revenue to $200 billion.

Importantly, the booming demand for both compute and storage memory chips used in data centers and high-performance computing (HPC) could take the overall memory market's revenue to $302 billion in 2030, implying a 50% increase from this year's estimated revenue. Investors can capitalize on this lucrative incremental growth opportunity with Micron's help, as it controls 24% of the dynamic random-access memory (DRAM) market and around 12% of the NAND (short for NOT AND) flash storage market.

The company also seems to be gaining ground in memory chips. Samsung, which is one of the top three players in this market along with SK Hynix and Micron itself, seems to be struggling for traction in HBM. As such, it is easy to see why Micron's earnings growth estimates have received a major boost of late.

Data by YCharts.

The company's improved earnings power and its cheap valuation suggest that its parabolic run has plenty left in the tank to keep going. The market could reward Micron with a premium multiple, considering its outstanding growth.

2. Nvidia

After rising 43% in just three months, Nvidia is also on a parabolic run right now. However, Wall Street seems to be underestimating the company's growth potential -- and that's precisely why I believe that it can sustain its current rally going forward.

When Nvidia released its fiscal 2026 first-quarter results (for the three months ended April 27, 2025) almost two months ago, it exceeded consensus expectations despite being hamstrung by restrictions on sales to Chinese customers. Nvidia's guidance was also ahead of expectations, even though it is on track to lose $8 billion in potential revenue due to export restrictions to China.

Analysts expect Nvidia's revenue to increase by 53% in the current fiscal year to just under $200 billion. The company's top line jumped 69% year over year in fiscal Q1, and it won't be surprising to see it maintain that terrific momentum thanks to the new sales opportunities that are coming its way beyond China.

Nvidia is gaining business for its AI chips around the globe. It partners with 18 telecom companies globally to build sovereign AI (i.e., government-funded) infrastructure on five continents. Nvidia reportedly sold $17 billion worth of chips to China in the previous fiscal year. Its push into sovereign AI could help it mitigate the loss of Chinese business, as Bank of America estimates that sovereign AI could unlock a $50 billion annual revenue opportunity for the company.

Investment banking firm Oppenheimer, on the other hand, has a more ambitious forecast and expects the global sovereign AI market to generate a $1.5 trillion annual revenue opportunity. Given that Nvidia is reportedly involved in almost every deal for rolling out sovereign AI, as per Citi, investors would do well to look past the lost opportunity in China.

There is a solid chance of Nvidia outpacing consensus estimates going forward, and that could give its parabolic rally a nice shot in the arm.

Should you invest $1,000 in Nvidia right now?

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Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Bank of America, and Nvidia. The Motley Fool recommends Broadcom and Marvell Technology. The Motley Fool has a disclosure policy.

Key Points

• C3.ai stock has been sliding this year, and analysts aren't optimistic about its turnaround prospects in the coming year.

• Another cloud computing company, DigitalOcean, is capitalizing on the growing adoption of AI and has the potential to deliver impressive gains.

• The AI-fueled earnings gains that DigitalOcean could deliver in the next year could help it overtake C3.ai's market cap.

• These 10 stocks could mint the next wave of millionaires ›

Pure-play enterprise artificial intelligence (AI) software company C3.ai (NYSE: AI) has had a 2025 to forget so far. It lost almost 22% so far this year at this writing.

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Though the company has been delivering healthy growth on account of the rising adoption of its AI software solutions by both commercial and government customers, the market doesn't seem to have much confidence in the stock right now. Out of 17 analysts covering it, only four recommend buying it. Their 12-month median price target of $26 points toward a slight decline from current levels.

What's weighing on C3.ai's prospects?

One reason analysts aren't upbeat about C3.ai's prospects is that it has been performing poorly on the bottom line. The company isn't profitable yet and it hasn't shown much improvement on that front. Its non-GAAP net loss in its 2025 -- which ended April 30 -- contracted by just 13% while the top line grew by 25%.

Of course, C3.ai is investing in pursuit of growth so that it can capitalize on the immense opportunity in AI software. However, the one-year price target suggests that its market cap could decline further from the current level of about $3.4 billion. Meanwhile, there's another company in the space that's expected to jump nicely in the near term, and could even be worth more than C3.ai a year from now.

AI is all set to drive terrific growth for this company

DigitalOcean Holdings (NYSE: DOCN) provides a cloud computing platform that's mainly used by small companies and early-stage developers. This explains why its strategy of offering cloud computing servers powered by graphics processing units (GPUs) from the likes of Nvidia and Advanced Micro Devices is turning out to be a smart one.

For instance, DigitalOcean announced that it is offering its clients computing power from a broad range of Nvidia's GPUs, ranging from its older RTX series to popular AI accelerators such as the H100 and H200. Additionally, AMD's MI300 GPUs are also available through DigitalOcean's platform to customers who want to build AI applications, and the company makes it easy for clients to scale up their use of its services based on their needs.

DigitalOcean claims that its customers can save up to 75% in costs by running their AI workloads on its GPU-powered servers as compared to working with hyperscalers. Importantly, DigitalOcean's cloud-based platform can run a wide variety of workloads, including training large language models (LLMs), running inference applications, content creation, and 3D modeling.

The cost-effective nature of DigitalOcean's AI-focused offerings helps explain why its customers are now spending more money on its solutions. Its average revenue per user increased by an impressive 14% year over year in the first quarter of 2025. Importantly, it has tremendous opportunities in the GPU-as-a-service market, which is expected to more than 10 times from about $4.3 billion in 2024 to almost $50 billion by 2032.

As a result, DigitalOcean seems well-placed to benefit from new customers and also from winning more business from its existing customers. Specifically, management is expecting it to increase its customer base at an annualized rate of 13% over the next couple of years, and foresees existing customers increasing their spending by 5% to 7% every year. The company has targeted an annual revenue growth rate of 18% to 20% through 2027.

Moreover, with its anticipated increase in average revenue per user improving its margins, it should book robust bottom-line growth. It is worth noting that DigitalOcean's adjusted earnings increased by 30% year over year in Q1, outpacing the 14% growth in its revenue. So, the improvement in the revenue growth rate that DigitalOcean is forecasting has the potential to increase its earnings power as well.

All this helps explain why analysts have a consensus 12-month price target of $38 on DigitalOcean -- 32% higher than its current level. Its market cap today is about $2.60 billion, and the projected jump over the next year could take it to $3.5 billion. That's where C3.ai's market cap currently stands.

So if C3.ai shares remain under pressure over the next year and DigitalOcean delivers the growth that analysts and management are expecting, the latter's market cap could exceed the former's.

DigitalOcean is trading at just 15 times forward earnings. That's about half the tech-laden Nasdaq-100 index's average forward earnings multiple. Considering the potential for an acceleration in its earnings growth, the market may decide to reward the stock with a richer valuation multiple. With all that in mind, DigitalOcean looks like a top AI stock to buy right now, not only to hold for the next year, but for the long run as well.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, DigitalOcean, and Nvidia. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.

Key Points

• The booming demand for data center storage has supercharged Seagate Technology's growth in recent quarters, leading to tremendous upside for the stock.

• Seagate is trading at a discount to the broader market right now, and that could pave the way for attractive returns over the next several years.

Storage solutions provider Seagate Technology (NASDAQ: STX) has registered an outstanding rally on the stock market in 2025, rising an incredible 73% year to date and beating the Nasdaq Composite index's 7% return by a massive margin.

This impressive performance can be attributed to robust growth in the demand for storage in data centers running artificial intelligence (AI) workloads. Let's dig into how AI is fueling Seagate's growth and see how it could pave the way for more upside in this technology stock.

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Seagate Technology is growing at an incredible pace, and it can sustain its momentum

Seagate Technology's revenue in the first nine months of its fiscal 2025 increased almost 43% year over year to $6.65 billion. Even better, the company's non-GAAP (adjusted) income from operations has jumped more than fourfold during this period, thanks to higher margins.

Management attributes this fantastic growth to the healthy demand for mass capacity storage in the cloud, which has created a tight supply environment and led to an increase in prices. Management remarked on the company's April earnings call that the growing storage demand "aligns with the cloud capex investment cycle and ongoing build-out of data center infrastructure to support AI transformations."

Specifically, 90% of the storage in large-scale data centers is done with hard drives because of their cost efficiency and scalability. With the storage requirement in data centers expected to more than double between 2024 and 2028, Seagate estimates this could push annual revenue for the data center storage market to $23 billion by 2028, up from $13 billion last year.

Seagate is in a solid position to make the most of this growth opportunity considering its 40% share of the global storage market. Not surprisingly, Seagate's outlook for the recently concluded fiscal fourth quarter was an impressive one. The company guided for $2.4 billion in revenue at the midpoint of its range, along with $2.40 per share in earnings.

The top-line guidance is good for a 27% year-over-year increase, while earnings are on track to more than double from the prior-year period's reading of $1.05 per share.

A solid jump in the company's earnings points toward more gains

For the full fiscal year, Seagate could grow revenue 38%, while its adjusted earnings will jump more than sixfold to $7.91 per share. Importantly, the company should be able to sustain this momentum, thanks to the tailwinds discussed above, and that sets the stage for strong returns.

Data by YCharts.

The potential earnings growth combined with Seagate's incredibly attractive valuation makes the stock a no-brainer buy. It is now trading at just 21 times trailing earnings and 16 times forward earnings estimates. The Nasdaq 100 index, meanwhile, has an average forward earnings multiple of 29, which means the stock trades at a significant discount to the tech sector overall.

Investors looking for a fast-growing AI stock that's also reasonably priced would do well to buy Seagate before it flies higher.

Should you invest $1,000 in Seagate Technology Plc right now?

Before you buy stock in Seagate Technology Plc, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Seagate Technology Plc wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Key Points

• The demand for AI servers and edge devices like personal computers is growing at a strong pace, and Dell is on track to benefit.

• A solid backlog in AI servers and a strong share of the PC market are going to be tailwinds for Dell.

• Dell's valuation is too attractive to pass up right now, considering its impressive potential.

The demand for artificial intelligence (AI) infrastructure is booming as cloud service providers, hyperscalers, and countries across the world are spending aggressively on this technology to develop large language models (LLMs) and deploy them to increase productivity for themselves and their customers.

This explains the growth rate in sales of AI chips, servers, and edge devices such as smartphones and personal computers (PCs). Market researcher IDC says that the global sales for servers rose 134% year over year in the first quarter of the year to a record $95 billion, driven by investments in AI infrastructure. IDC now expects the server market to have 45% growth in 2025 to reach a record $366 billion in revenue.

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And shipments of AI equipped PCs are expected to jump by 165% in 2025, according to Gartner.

Let's take a closer look at one company that's a key player in both these markets and is trading at an extremely attractive valuation right now.

Dell is on track to win big from both these end markets

Dell Technologies (NYSE: DELL) sells servers and PCs, besides other computer peripherals. The booming demand for AI servers has given one half of the company's business a big boost in recent quarters.

When Dell released its first-quarter fiscal 2026 results (for the three months ended May 2) on May 29, it reported a 12% year-over-year jump in revenue for its infrastructure solutions group to $10.3 billion. And the company booked $12 billion in orders for its AI servers in the quarter.

That's higher than Dell's AI server shipments last year, indicating that this business is set to gain more momentum. Management expects to ship $7 billion worth of AI servers in the current quarter, which would be around four times its fiscal first-quarter shipments. That seems achievable considering that the company's AI server backlog was $14.4 billion last quarter.

And its AI server backlog has the potential to grow further, based on management's comments on the latest earnings conference call.

So Dell's AI server revenue still has a lot of room to grow -- not surprising considering that the company is the leader in the global server market with an estimated share of more than 19%. The pace of new orders -- and the revenue pipeline that it points toward -- indicate that it should capture its share of the global end-market opportunity in servers.

Dell's client solutions group (CSG) -- which includes sales of laptops, desktops, and peripherals -- has started seeing an uptick in growth. Its CSG revenue was up 5% in the previous quarter to $12.5 billion. Almost 90% of that figure was from the commercial segment, which is benefiting from the upgrade to AI-enabled Windows 11 PCs.

The company is the third-largest player in the PC market with an estimated share of 16.3% in the first quarter of 2025. Its shipments increased by 2.1% year over year in the first quarter, and sales could gain momentum as the year progresses because management says there are indicators that its installed base is upgrading to new Windows 11 PCs, many of them with AI.

With shipments of AI-equipped PCs expected to increase 32% annually over the next decade, the company has terrific room for growth in this market. That has led management to raise sales estimates for the current and the next two fiscal years.

DELL Revenue Estimates for Current Fiscal Year data by YCharts.

Dell's stock is too cheap to ignore right now

Dell stock is trading at just 19 times trailing earnings, while the forward earnings multiple of 13 is even more attractive. Buying the stock at this valuation seems like a no-brainer considering the healthy prospects in the AI server and PC markets discussed above, which is expected to lead to similar earnings growth.

Consensus analyst estimates project a 15% increase in earnings this year to $9.39 per share, followed by double-digit growth over the next couple of years as well.

DELL EPS Estimates for Current Fiscal Year; data by YCharts.

And Dell could do even better than that given the rate of improvement in its AI server revenue pipeline. Meanwhile, the stock's price/earnings-to-growth ratio (PEG) of 0.95 (based on analysts' five-year estimates as per Yahoo! Finance) suggests that Dell is undervalued considering its potential long-term bottom-line growth.

So, investors looking for an incredibly cheap AI stock with the potential for healthy upside in the long run should consider Dell before it flies higher following its 33% gains in the past three months.

Should you invest $1,000 in Dell Technologies right now?

Before you buy stock in Dell Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dell Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $692,914!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $963,866!*

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*Stock Advisor returns as of June 30, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

Key Points

• Nvidia is the dominant AI chipmaker thanks to the technological advantage it enjoys over rivals.

• However, one of those rivals has been making solid strides on the product development front.

• AMD could grab a bigger share of the AI chip market, setting it up for solid long-term gains.

Nvidia (NASDAQ: NVDA) has been the biggest beneficiary of the tremendous demand for artificial intelligence (AI) chips. This is not surprising, as the parallel computing ability of its graphics processing units (GPUs) makes them ideal for AI model training and inference.

It is worth noting that Nvidia has been running away with the data center GPU market, with an estimated market share of 92% at the end of last year. That's miles ahead of second-place Advanced Micro Devices' (NASDAQ: AMD) share of just 4%. However, it won't be surprising to see AMD taking market share away from Nvidia thanks to its upcoming chips.

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Let's see why that may be the case.

AMD is aggressively closing the gap

AMD recently unveiled its AI chip roadmap at an investor event. The chipmaker used the event to launch its MI350 series of data center GPUs, promising a "4x generation-on-generation AI compute improvement and up to 35x leap in inferencing performance." This new line of chips is manufactured on a 3-nanometer (nm) process node. That gives it an advantage over Nvidia's latest generation of Blackwell processors, which are reportedly manufactured using a 4nm node.

Chips manufactured using a smaller process node are theoretically more powerful and power-efficient, since they pack a higher number of transistors into a smaller area. As a result, the electrons need to travel in a smaller area to perform computing tasks, and they generate less heat. So, AMD's latest generation of AI accelerators could be better than Nvidia's offerings, at least on paper.

AMD points out that its MI350 series processors have stronger specifications compared to Nvidia's Blackwell offerings, packing in 1.6 times more memory. It also points out that the MI355X processor is 1.2 times to 1.3 times faster than Nvidia's Blackwell chips while running inference models such as DeepSeek R1 and Llama 3.1.

More importantly, AMD is aiming to hurt Nvidia big time with its MI400 series of accelerators that are set to be launched next year. The company is going to increase the high-bandwidth memory (HBM) capacity to 432 gigabytes (GB) on the MI400 from 288GB on the MI350 series chips. What's more, AMD is going to more than double the memory bandwidth in the MI400 processors, to 19.6 terabytes per second.

AMD points out that the MI400 will mark a significant leap in AI compute performance, which will be far greater than what it saw in the previous generational upgrade. Meanwhile, Nvidia's next generation of AI GPUs is expected to pack similar memory compared to the current generation Blackwell processors, which means that AMD could enjoy a spec advantage on paper.

A bigger memory stack will allow AMD's chips to transfer more data, while the higher bandwidth will enable faster transmission, at least theoretically. This potential advantage could spur stronger sales of AMD's AI GPUs, helping the company capture a bigger share of the market. Now, AMD doesn't need to overtake Nvidia to supercharge its growth. It simply needs to capture a double-digit share of the AI GPU market in the next three years.

Assuming AMD can capture 10% of the AI GPU market by 2028, its revenue from this segment could hit $50 billion (based on the projected $500 billion annual revenue that the AI accelerator market is expected to hit by 2028). This could be enough to help it deliver more upside than Nvidia.

Why AMD seems primed for more upside

AMD finished 2024 with just under $26 billion in total revenue. The company says that it sold more than $5 billion worth of data center GPUs last year, which means that the non-AI data center GPU businesses contributed $21 billion. Assuming it doesn't witness any growth in the rest of its segments over the next three years (and generates $21 billion in annual revenue from its non-AI GPU business in 2028), but manages to hit $50 billion in AI GPU revenue, its annual top line could hit $71 billion after three years.

The shares are currently trading at 8.4 times sales, which is almost in line with the U.S. technology sector's average sales multiple of 8.1. Assuming that AMD trades in line with the technology sector's multiple after three years, its market capitalization could hit $575 billion based on the revenue it is expected to generate in 2028. That points toward potential gains of 150% from current levels.

Nvidia, on the other hand, is trading at an expensive price-to-sales ratio of 26. However, with the company's top-line growth rate expected to slow down over the next couple of years, it won't be surprising to see Nvidia trading at a discount. As such, the possibility of AMD delivering more gains than Nvidia thanks to its upcoming chips cannot be ruled out. That's why AMD looks like a solid AI stock to buy right now.

Should you invest $1,000 in Advanced Micro Devices right now?

Before you buy stock in Advanced Micro Devices, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Advanced Micro Devices wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $692,914!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $963,866!*

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*Stock Advisor returns as of June 30, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.

Key Points

• Palo Alto has made impressive gains thanks to strong demand for its next-gen cybersecurity offerings.

• Its revenue pipeline is increasing at a nice clip, and its earnings growth is likely to accelerate.

• Investors will have to pay a premium valuation if they wish to buy the stock right now.

Palo Alto Networks (NASDAQ: PANW) stock has been in fine form on the stock market in the past three months, clocking healthy gains of 18% as of this writing. That's impressive, considering that investors were not impressed when the company released its fiscal 2025 third-quarter results (for the three months ended April 30) on May 20.

Though the company delivered better-than-expected results and guidance, investors were concerned about its margins. Palo Alto's non-GAAP gross margin of 76% was slightly lower than the 77.2% consensus estimate. However, it appears that investors are now looking past that margin miss and have regained confidence in Palo Alto stock.

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Let's see why that has been the case, and check whether the stock is worth buying following its recent rally.

Palo Alto Networks' growth is likely to accelerate

One of the reasons why investors are probably becoming bullish about Palo Alto is because of the company's fast-improving revenue pipeline. This was evident from the 19% year-over-year growth in Palo Alto's remaining performance obligations (RPO) in the previous quarter to $13.5 billion, which was higher than the 15% increase in its top line.

RPO is the total value of a company's contracts that are yet to be fulfilled at the end of a quarter. So, the faster increase in this metric is an indication that Palo Alto is winning more contracts than it is fulfilling right now. That should ideally lead to an improvement in the company's growth rate going forward. Importantly, Palo Alto expects to finish the current fiscal year with an increase of 19% to 20% in its RPO to just over $15 billion, which would be almost identical to the RPO growth it reported in the previous fiscal year.

A key reason why Palo Alto's revenue pipeline is increasing at a nice clip is because of the fast-improving demand for the company's next-generation security (NGS) offerings. These solutions include the company's Cortex extended security intelligence and automation management (XSIAM) platform, which uses artificial intelligence (AI) and machine learning (ML) to stop cyber threats and respond to security incidents, among other things.

Palo Alto says that the annual recurring revenue (ARR) of its XSIAM platform increased by more than 200% year over year in the previous quarter. That's not surprising. The company claims that this platform allows customers to reduce the median time to resolve security incidents to as low as one minute, compared to the earlier response time of two to three days before using XSIAM. What's more, 60% of XSIAM customers have a median time of less than 10 minutes in resolving security incidents.

The healthy traction of such products explains why Palo Alto's NGS ARR increased by an impressive 34% year over year last quarter to just over $5 billion, significantly outpacing the growth in its revenue and RPO.

Another factor that's helping Palo Alto build up a robust revenue pipeline is its platformization strategy, through which it is bundling its various products and services with the aim of simplifying the approach to cybersecurity. Palo Alto believes that platformization will enable customers to make cyber defenses more efficient by integrating different solutions into a single platform while reducing costs related to the training and management of security analysts. The good part is that this strategy is gaining traction among customers.

The company ended the previous quarter with 1,250 customers on its platformization contracts as compared to 900 in the year-ago period. Palo Alto points out that a fourth of its top 5,000 customers are currently on platformization contracts, indicating that it can score more platformization deals going forward. Importantly, platformization is helping Palo Alto score bigger deals, which should eventually aid its margins and drive stronger bottom-line growth.

This is precisely what analysts are expecting, as we can see in the following chart.

PANW EPS Estimates for Current Fiscal Year data by YCharts.

A potential red flag for investors

However, investors looking to buy the stock right now need to be aware of one problem.

While Palo Alto has been recording healthy double-digit growth and its earnings growth is set to accelerate, the stock's valuation suggests that it may have run ahead of itself. Palo Alto is trading at 117 times trailing earnings and 55 times forward earnings, which makes the stock quite expensive when compared to other cybersecurity companies that are showing a faster pace of growth.

Even if we look beyond the cybersecurity industry, there are other tech stocks that have been consistently delivering stronger growth and are trading at significantly cheaper valuations. As such, there are better bets for investors looking to add a tech stock to their portfolios right now.

Of course, keeping Palo Alto on your watchlist and accumulating it on the dips would be a good idea for the long run. This cybersecurity stock has the potential to justify its valuation by clocking stronger earnings growth rates. But buying it right now may not be the smartest thing to do thanks to its expensive valuation.

Should you invest $1,000 in Palo Alto Networks right now?

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The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palo Alto Networks wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $697,627!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $939,655!*

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.

Artificial intelligence (AI) is set to play a key role in driving global economic growth in the long run. The evolving technology is expected to boost productivity, create new revenue streams, and facilitate innovation.

Market research firm IDC, for instance, forecasts that in 2030, each dollar spent on AI-related services will generate $4.60 in value. And a report from the United Nations Trade and Development office suggests that the AI market could surge in value by 25x over the next decade, generating a whopping $4.8 trillion in revenue in 2033.

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With that in mind, it won't be surprising to see organizations and governments investing far more money in AI-focused hardware and software to become more productive and efficient. That's why investors would do well to take a closer look at a couple of names that are playing central roles in the proliferation of AI.

1. Broadcom

Broadcom (NASDAQ: AVGO) makes specialized application-specific integrated circuits (ASICs) and networking chips used in data centers, and demand for its processors has taken off thanks to the proliferation of AI systems. Several cloud computing giants have been deploying Broadcom's custom AI processors to lower the costs of AI training and inference, and to reduce their reliance on expensive graphics processing units (GPUs) from Nvidia.

ASICs are custom AI processors built to perform specific tasks, allowing them to deliver more computing power with lower energy consumption when compared to general-purpose GPUs. The advantages of custom AI processors make them ideal for large-scale deployment in data centers and are precisely the reason why Broadcom's AI business is taking off.

Currently, three hyperscale cloud customers use Broadcom's custom accelerators in large AI data centers to develop next-generation models. The chipmaker is deeply engaged with these customers to develop even more advanced custom processors and networking chips to support their product roadmaps for the next three years.

In Broadcom's view, these three hyperscalers alone should create a serviceable addressable market (SAM) worth $60 billion to $90 billion for it by fiscal 2027. The company's AI revenue jumped by 77% year over year in the first quarter of its fiscal 2025 to $4.1 billion, so it is currently clocking a more than $16 billion annual run rate.

Broadcom, therefore, has terrific room for growth in the custom AI chip market over the next three years. But it's also worth noting that the company is engaged with another four hyperscalers that are looking to build and deploy custom AI accelerators. Broadcom is in the final stages of chip development for two of those customers, while the other two recently selected the chipmaker to build their own custom chips.

So, Broadcom's addressable opportunity in custom AI chips could be much larger in the long run than what the company recently projected. As a result, it could end up delivering much stronger revenue growth over the next three fiscal years than what analysts currently expect.

Data by YCharts.

The semiconductor giant could easily exceed that $82 billion revenue forecast in three years, once it is producing custom AI chips in large volumes for all seven of its customers. This probably explains why the company trades at an attractive price/earnings-to-growth ratio (PEG ratio) of 0.64 based on its projected earnings growth for the next five years, according to Yahoo! Finance.

The PEG ratio is a forward-looking valuation metric that takes into account a company's expected earnings growth; a positive reading of less than 1 is generally viewed as an indication that a stock is undervalued. Broadcom's PEG ratio is well below that mark. As such, investors should consider buying this AI stock right away, before it flies higher following the 26% gain it clocked over the past month.

2. Lam Research

Lam Research (NASDAQ: LRCX) manufactures semiconductor manufacturing equipment -- machines used by foundries and chipmakers to make chips for everything from smartphones to cars to computers to data centers. And the market it operates in is on track to expand nicely due to the growing demand for AI chips.

According to one estimate, global spending on semiconductor equipment could jump to $121 billion in 2025 and to $139 billion in 2026. Those estimates point toward a nice improvement from last year, when spending stood at $113 billion. However, don't be surprised if semiconductor equipment spending increases at an even faster pace based on recent updates from key chip companies involved in the manufacturing of AI equipment.

Foundry giant Taiwan Semiconductor Manufacturing, popularly known as TSMC, plans to have eight new chip fabrication plants under construction this year, as well as one advanced chip packaging facility. Memory specialist Micron Technology, meanwhile, expects to lay out $50 billion in capital expenses in the U.S. through 2030. As such, it is not surprising that Lam Research saw an impressive acceleration in its revenue and earnings growth.

In its current fiscal year, analysts expect its sales to increase by 22% to $18.2 billion and its earnings to increase by 32%. What's more, management is confident that it will achieve revenue in the $25 billion to $28 billion range by 2028, indicating that its top line could jump by around 50% over the next three fiscal years.

Assuming Lam hits the midpoint of its 2028 forecast range and that the stock maintains its current price-to-sales ratio of 6.4 at that time, its market cap would increase to around $170 billion. That would amount to a jump of around 65% in the space of three years. However, Lam today trades at a cheaper price-to-sales ratio than the U.S. technology sector's average of 7.4. So it won't be surprising to see this semiconductor stock delivering even stronger gains than that, as the market could put a higher valuation on it in light of its robust growth.

Should you invest $1,000 in Broadcom right now?

Before you buy stock in Broadcom, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $828,224!*

Now, it’s worth noting Stock Advisor’s total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lam Research, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Apple supplier Cirrus Logic (NASDAQ: CRUS) has witnessed a big jump in its stock price in the past month, jumping 23% as of this writing after it emerged that its largest customer is getting a reprieve from the tariff turmoil.

Cirrus Logic supplies audio codecs, power amplifiers, camera controllers, haptics modules, and other types of chips that are used in smartphones and personal computers (PCs). Apple is its largest customer, accounting for 89% of the top line in the recently concluded fiscal 2025, which means that Cirrus' fortunes are closely tied to the iPhone maker.

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So, the Trump administration's decision to exempt imports of smartphones, computers, and chips from tariffs came as a welcome relief for Cirrus Logic investors. Tariffs could have dented Apple's sales since a large chunk of iPhones are produced in China, and the tech giant would have been forced to increase prices substantially to absorb the tariff impact.

And now, the agreement between the U.S. and China to substantially slash tariffs for 90 days further suggests that the trade war between the two economic giants is cooling off. It may be a good idea to buy shares of Cirrus Logic in such a scenario.

Cirrus Logic's growth is gaining momentum thanks to AI

Cirrus Logic's revenue in the recently concluded fiscal 2025 (which ended on March 29) increased by just 6% year over year. Its adjusted earnings, however, increased at a much faster pace of 14% from the preceding year to $7.54 per share.

Though Cirrus' growth may not seem all that great, it is worth noting that the chipmaker performed well during a difficult year for its largest customer. Apple's iPhone shipments in 2024 fell slightly from the previous year. However, Cirrus was able to overcome this challenge as it won more business from Apple.

The chipmaker is now supplying power management modules to Apple as well, apart from audio codecs, which should have allowed it to mitigate the slight drop in iPhone volumes. But now, the arrival of Apple's artificial intelligence (AI)-enabled iPhones is boosting sales. The tech giant's smartphone shipments shot up an impressive 10% year over year in Q1 this year, which was way ahead of the 1.5% growth of the overall smartphone market.

At the same time, the company is also witnessing growth in sales of MacBooks and iPads thanks to the rollout of Apple Intelligence in these devices. The good part is that the sales of generative AI-capable smartphones and PCs are expected to increase at a compound annual growth rate of almost 35% through 2029.

So, it won't be surprising to see an improvement in sales of Apple's iPhones, MacBooks, and iPads in the future, and that bodes well for Cirrus Logic considering its reliance on the tech giant. As it turns out, Cirrus' sales in the fourth quarter of fiscal 2025 (which coincided with the first quarter of calendar 2025) shot up 14% from the year-ago period, exceeding the growth in the company's revenue for the entire fiscal year. Even better, its earnings grew at a much stronger pace of 34%.

The discussion above suggests that this trend is likely to continue as the adoption of AI-capable consumer devices increases, which is why it could end up outpacing analysts' expectations.

The valuation makes the stock an attractive buy right now

Cirrus Logic is currently trading at less than 18 times trailing earnings, which makes it an attractive bet considering the healthy earnings growth it delivered last quarter. Not surprisingly, analysts have increased their earnings growth expectations following its latest report.

CRUS EPS Estimates for Current Fiscal Year data by YCharts

Assuming Cirrus achieves the earnings that analysts are expecting from it next fiscal year and trades at 29 times earnings at that time, in line with the tech-laden Nasdaq-100 index's earnings multiple, its stock price could jump to $221. That would be just over double the company's current stock price, which is why investors should consider buying this growth stock before it zooms higher.

Should you invest $1,000 in Cirrus Logic right now?

Before you buy stock in Cirrus Logic, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cirrus Logic wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $635,275!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,385!*

Now, it’s worth noting Stock Advisor’s total average return is 967% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends Cirrus Logic. The Motley Fool has a disclosure policy.

Palantir Technologies (NASDAQ: PLTR) stock has been crushing the market in 2025. It's up by 43% year to date as of this writing, which may seem a tad surprising considering its expensive valuation.

After all, technology stocks have been under pressure this year on account of President Donald Trump's tariff-induced trade war, which has threatened to tip the U.S. economy into a recession. The Nasdaq Composite index, though it has rebounded from a deeper slide, is still down by more than 8% so far this year.

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However, Palantir's lofty valuation caught up with the stock somewhat following the release of the company's first-quarter results on Monday.

The stock fell more than 12% on Tuesday even though Palantir beat Wall Street's sales expectations, delivered in-line earnings, and raised its full-year guidance. In my view, the drop in the share price looks like an opportunity for savvy investors to buy a top growth stock that they can hold for the next five years.

In fact, I think Palantir's market cap could reach $1 trillion by 2030.

Palantir's growth is set to accelerate thanks to AI

Palantir Technologies made its name by supplying software platforms and analytics solutions to U.S. intelligence agencies and the Defense Department. It is now leveraging that expertise in the commercial market, and the good part is that customers have been queuing up to sign up for its Artificial Intelligence Platform (AIP) to improve the efficiency of their operations.

AIP allows Palantir customers to integrate large language models and other AI applications into their business operations in ways that reduce costs and improve productivity. This explains why the company isn't just attracting new customers for this solution but is also winning more business from its established ones.

On the latest earnings conference call, Palantir described several instances of how customers are using AIP to improve productivity. So, it wasn't surprising to see a 66% year-over-year increase in the value of contracts that Palantir booked in the first quarter. Specifically, Palantir booked $1.5 billion worth of new contracts, which took its total remaining deal value (RDV) to almost $6 billion, up 45% from a year earlier. (RDV refers to the total value of the revenue remaining to be recognized under the contracts that a company has already signed.)

It is worth noting that both the RDV and the total contract value booked by Palantir last quarter exceeded the 39% year-over-year growth in its top line. This is precisely the reason the company's growth has been accelerating in recent quarters: It has been winning new contracts at a faster rate than it is fulfilling them, thanks to AI. Moreover, the company's unit economics are strong since it is getting a growing volume of business from its established customer base. This is the reason Palantir's adjusted earnings rose by an impressive 62% year over year to $0.13 per share.

PLTR Revenue (Quarterly) data by YCharts.

The healthy demand for Palantir's AI software solutions also encouraged management to increase its 2025 revenue guidance to almost $3.9 billion from an earlier estimate of around $3.75 billion. If it hits that updated guidance, its top line will be 36% higher than in 2024. However, don't be surprised to see the company do better than that given the pace at which its revenue pipeline is growing. Further guidance increases are possible as the year progresses.

Why a $1 trillion valuation is possible in five years

Last year, market research firm IDC predicted that the AI software platforms market will grow at an annual rate of almost 41% through 2028 to $153 billion.

Palantir, therefore, is landing new contracts and growing its revenue pipeline at a much faster pace than its end market is expected to grow. Assuming Palantir's top line increases at even a 40% rate (in line with its end market) for the next five years, its revenue would jump to almost $21 billion in 2030 (starting from its projected 2025 revenue).

The stock currently trades at 87 times sales. Even if its P/S multiple contracts to 50 after five years, its market cap could touch $1 trillion in 2030 based on its projected sales figure. That would be more than triple its current market cap. Moreover, Palantir is the No. 1 vendor of AI software platforms (according to third-party estimates), so there is a good chance that it may be able to grow at an even faster rate.

Also, the combination of its position at the top of the AI software platforms space and its fast-improving revenue pipeline should allow it to continue commanding a premium valuation over the long run. And the company's favorable unit economics are likely to translate into faster bottom-line growth than top-line growth.

All this makes Palantir a potential candidate for the trillion-dollar market cap club. So investors looking for a growth stock should consider buying it following its latest slip.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $614,911!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $714,958!*

Now, it’s worth noting Stock Advisor’s total average return is 907% — a market-crushing outperformance compared to 163% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

The tech-laden Nasdaq Composite index hit its most recent high on Dec. 16, 2024, but it has pulled back since then on account of various factors such as the tariff-fueled turmoil and a potential slowdown in artificial intelligence (AI) spending.

Specifically, the Nasdaq Composite is down just over 12% since its most recent high. This puts the index in correction territory, as a stock market correction refers to a drop of 10% to 20% in a major index. However, AI adoption is currently in its early phases. Consulting firm PwC reports that the adoption of AI could boost the global economy by 15 percentage points by 2035, which is why it won't be surprising to see companies and governments continue to invest in this technology in the long run.

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That's why now would be a good time for investors to consider investing in shares of Broadcom (NASDAQ: AVGO). The stock is down 13% so far in 2025, but a closer look at the bigger picture will tell us that it can deliver healthy long-term gains thanks to the proliferation of AI.

Let's check out why buying Broadcom following its recent pullback is a good idea.

Broadcom is sitting on a massive growth opportunity

Though Nvidia is currently the leader in the AI chip market by a big margin, Broadcom is the second most important player in this space, according to JPMorgan. That's not surprising as Broadcom sold $12.2 billion worth of AI chips in fiscal 2024 (ended in November last year). That was a huge jump of 220% from the preceding year.

This terrific jump can be attributed to the rapidly growing demand for the custom AI processors that Broadcom designs. Customers have also been lining up to buy its networking chips to enable faster data transfer in AI data centers. Broadcom has carried forward this impressive momentum in the new fiscal year.

The company's AI revenue came in at $4.1 billion in the first quarter of fiscal 2025, a tremendous increase of 77% from the year-ago period. This red-hot growth streak is here to stay -- the demand for custom AI processors is set to grow substantially in the long run thanks to the advantage that these chips have over central processing units (CPUs) and graphics processing units (GPUs).

That's because custom processors are designed to perform specific tasks instead of general-purpose computing that's done by CPUs and GPUs. As a result, custom processors are more efficient at performing the tasks they are designed to do. This is the reason major cloud computing providers such as Meta Platforms, Alphabet, and others have been developing in-house AI processors to deliver improved AI performance and reduce costs simultaneously.

Alphabet, for instance, recently introduced its seventh-generation custom chip designed for tackling AI inference tasks. The company points out that this new chip, known as Ironwood, delivers a 10x increase in performance over its previous custom chip and is 2x more power efficient. Alphabet is reportedly a Broadcom customer, tapping the latter to design its custom AI chips.

And now, OpenAI and Meta Platforms are also expected to manufacture their custom AI processors with Broadcom's help. All this explains why more customers are interested in getting their custom processors designed by Broadcom. The company currently designs custom AI processors and networking chips for three customers, pointing out that they have opened a huge revenue opportunity worth $60 billion to $90 billion over the next three fiscal years.

Importantly, Broadcom is on track to bring an additional four AI customers on board, which could significantly expand the end-market opportunity it is sitting on. So, Broadcom's AI revenue seems on track for exponential growth in the long run, and that could translate to impressive stock upside.

The potential growth and valuation make this stock attractive

Based on Broadcom's massive growth opportunity, analysts are expecting the company's earnings to increase by an impressive 36% in the current fiscal year to $6.63 per share. What's more, its bottom line is expected to grow in the healthy double-digits over the next couple of years as well. This is evident from the chart given below.

AVGO EPS Estimates for Next Fiscal Year data by YCharts

However, Broadcom may be able to easily grow at a faster pace than that pace, considering the tremendous end-market opportunity it is sitting on. Another thing worth noting here is that Broadcom's price/earnings-to-growth ratio (PEG ratio) is at just 0.53 based on the annual earnings growth it is expected to deliver over the next five years, according to Yahoo! Finance.

A PEG ratio of less than 1 means that a stock is undervalued with respect to the growth that it is expected to deliver over the next five years. Broadcom's multiple indicates that it is well below that threshold, suggesting that investors are getting a good deal on an AI stock that seems primed to deliver terrific long-term gains.

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Before you buy stock in Broadcom, consider this:

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JPMorgan Chase is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, JPMorgan Chase, Meta Platforms, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Technology stocks are having a forgettable year so far, thanks to macroeconomic factors such as the tariff-fueled market turmoil, a contraction in the U.S. economy in the first quarter of the year, and the rising risk of a recession on account of the global trade war.

This explains why fast-growing companies have dropped substantially in 2025 despite reporting solid growth in recent quarters. Confluent (NASDAQ: CFLT) is one such stock that has dropped 30% this year, even though the cloud-based data streaming platform provider's growth has been impressive of late. Shares of the company received another blow following the release of its first-quarter results on April 30.

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Investors pressed the panic button, even though its numbers beat Wall Street expectations. The stock is now trading at just under $20 following its latest pullback. Let's see why that was the case, and why investors would do well to consider buying this growth stock hand over fist right now.

Confluent's conservative guidance sent investors into panic mode

Though Confluent's Q1 revenue increased an impressive 26% year over year along with a robust 60% year-over-year increase in earnings, it was the guidance that played spoilsport. Confluent expects its second-quarter subscription revenue to grow at a relatively slower pace of 19% from the year-ago period. Earnings, on the other hand, are projected to jump nearly 42% year over year at the midpoint of its guidance range.

The full-year subscription revenue growth guidance of 19.5% also represents a slowdown in growth when compared to the 26% growth it recorded in 2024. Confluent management attributed this slowdown to macroeconomic uncertainties that could lead its customers to reduce spending on its solutions. CFO Rohan Sivaram remarked on the latest earnings conference call:

In light of the uncertainties in the current environment, we are widening our revenue guidance range and embedding a modest decline in growth rates from Q2 through Q4. For our cloud business, some of our larger customers began slowing the pace of new use case addition and focusing on cost optimization efforts in March.

He added that Confluent isn't expecting "a near-term rebound in consumption" on account of the macroeconomic uncertainties. All this explains why Confluent stock dropped more than 18% in a single day following the release of its results. However, investors shouldn't miss the forest for the trees. Confluent's huge addressable market and growing customer base point toward a bright future for the company.

The company is sitting on a massive end-market opportunity

Confluent's data streaming platform allows customers to store, access, analyze, and manage data in real time instead of storing it in silos. This allows Confluent customers to act upon their data in real time, as opposed to storing it first and then processing that data later on in batches. As a result, Confluent's cloud-based platform is finding application in multiple use cases ranging from fraud detection, stock trading, and marketing to cybersecurity and artificial intelligence (AI), among others.

Not surprisingly, the company sees its total addressable market (TAM) growing to $100 billion this year -- double compared to four years ago. Even better, Confluent is witnessing an improvement in its customer base, along with stronger customer spending, despite facing macroeconomic pressures. This is evident from the 20% year-over-year increase in Confluent's customer base last quarter to 6,140. That's a major improvement over the year-ago period, when the company's customer base increased at a much slower pace of 9%.

Apart from adding new customers, Confluent is also winning more business from existing ones. This is evident from the dollar-based net retention rate of 117% in Q1. The company measures this metric by calculating the annual recurring revenue (ARR) of its customers at the end of a period to the ARR from the same customer cohort in the year-ago period. So, a reading of more than 100% in this metric means that the same customer cohort has decided to extend the usage of Confluent's offerings or is buying more solutions from the company.

Confluent's massive TAM suggests that it could continue attracting more customers and gain additional business from its existing customers in the long run. This is probably why analysts are expecting an acceleration in the company's earnings growth. Analysts are projecting a 24% increase in Confluent's bottom line in 2025 to $0.35 per share. The following chart points toward a much stronger level of earnings growth for the next couple of years.

CFLT EPS Estimates for Current Fiscal Year data by YCharts.

What's more, Confluent stock is undervalued when we take its earnings growth potential into account. The stock has a price/earnings-to-growth ratio (PEG ratio) of just 0.44, based on the annual earnings growth it's expected to clock for the next five years, according to Yahoo! Finance. A PEG ratio of less than 1 suggests that a stock is undervalued, and Confluent is well below that threshold.

So, if you have $20 with you to put into a growth stock, Confluent looks like the ideal long-term candidate based on the points discussed above.

Should you invest $1,000 in Confluent right now?

Before you buy stock in Confluent, consider this:

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $623,103!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $717,471!*

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*Stock Advisor returns as of May 5, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Confluent. The Motley Fool has a disclosure policy.

This has been a difficult year for semiconductor stocks, which is evident from the 23% decline in the PHLX Semiconductor Sector index so far. Investors have decided to book profits and preserve capital owing to the uncertainty caused by the tariff-fueled trade war. This, in turn, has led to an increase in the possibility of a global recession.

However, recent developments suggest there could be a reason for investors to remain optimistic. These include the 90-day pause in reciprocal tariffs to allow time for negotiations between the U.S. and its trade partners, the exemption of duties on imports of semiconductors, computers, processors, and some other electronic items, and news that the U.S. and China are engaged in trade negotiations.

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Favorable trade deals between the U.S. and its trading partners could bring the stock market out of the rut it is in. Moreover, disruptive trends such as artificial intelligence (AI) are here to stay thanks to the massive productivity gains they can deliver in the long run.

That's why now would be a good time for savvy investors to take a closer look at a couple of top semiconductor stocks that have pulled back of late but have the potential to fly higher in the next year -- and in the long run thanks to the massive AI-driven opportunity they are sitting on.

1. Broadcom

Shares of Broadcom (NASDAQ: AVGO) have retreated 28% in 2025, and that drop doesn't seem justified in light of the company's remarkably solid growth in recent quarters. Not surprisingly, analysts are upbeat about Broadcom's performance on the stock market in the coming year. The shares carry a 12-month median price target of $250 as per 44 analysts covering the stock, which points toward potential gains of 50% from current levels.

Also worth noting here is that 89% of analysts covering Broadcom recommend buying it. That isn't surprising considering the impact of AI on the company's business. The company's AI revenue increased an impressive 77% year over year in the first quarter of fiscal 2025 (which ended on Feb. 2) to $4.1 billion.

That was faster than the 25% growth in the company's overall quarterly revenue, which landed at $14.9 billion. AI, therefore, is now producing 27% of Broadcom's top line. Importantly, AI chips are likely to move the needle in a bigger way for Broadcom going forward as the company's custom processors are in tremendous demand from cloud hyperscale customers.

Broadcom is expecting a 44% year-over-year increase in its fiscal Q2 AI revenue to $4.4 billion. However, don't be surprised to see the company doing better than that as more customers are expressing interest in its custom AI chips. Each of Broadcom's existing three hyperscale cloud customers is expected to deploy AI server clusters powered by more than 1 million of its custom AI chips, known as XPUs, over the next three years.

Management says that "these three hyperscale customers will generate a Serviceable Addressable Market or SAM in the range of $60 billion to $90 billion in fiscal 2027." Considering that Broadcom is in the final stages of the development of custom AI accelerators for two more hyperscale customers, its AI-driven addressable market should ideally become bigger.

Even better, Broadcom's AI-focused customer lineup is about to get bigger as "two additional hyperscalers have selected Broadcom to develop custom accelerators to train their next-generation frontier models." So, the company could eventually sell its AI chips to a total of seven cloud hyperscale companies in the future.

That could open up the possibility for exponential growth in the company's AI revenue from fiscal 2024 levels of $12.2 billion. Its addressable market from the current three customers is quite huge already. All this explains why analysts are expecting Broadcom's earnings to jump by an impressive 36% in the current fiscal year to $6.64 per share.

However, Broadcom delivered stronger earnings growth of 45% in fiscal Q1, suggesting that it has the potential to beat Wall Street's expectations, especially considering the new AI customers that it is bringing on board. So, investors looking to add a top AI stock to their portfolios right now would do well to buy this chip designer before it starts flying higher.

2. Marvell Technology

Marvell Technology (NASDAQ: MRVL) is Broadcom's competitor in the custom AI chip market, and shares of the company have slipped a massive 55% this year. As a result, Marvell is now trading at just 22 times trailing earnings. Buying this chip stock at this valuation is a no-brainer given its phenomenal growth.

After reporting 27% year-over-year growth in fiscal 2025's Q4 (which ended on Feb. 1), Marvell is expecting its fiscal 2026 Q1 revenue to jump at a greater pace of 61%. Meanwhile, it is expecting earnings to jump by more than 2.5 times from the year-ago period. This tremendous growth makes it clear why Marvell's 12-month price target of $105 as per 39 analysts covering the stock points toward a potential jump of 112% from current levels.

What's more, 92% of the analysts suggest buying Marvell stock, which is not surprising considering its red-hot growth. Importantly, its growth seems sustainable going forward. Marvell is the second-largest player in the custom AI chip market after Broadcom, with the latter controlling an estimated 70% of this space. However, analysts are expecting both companies to be on equal footing in the future, driven by Marvell's recent wins in the custom AI processor market.

Marvell currently has two high-volume customers for its custom AI chips, and the good part is that it is expecting both customers to expand the adoption of its processors. Also, management pointed out on the company's March earnings conference call that it is on track to start production of custom AI chips for a third customer in 2026. The company points out that this third customer can drive "a very significant amount of incremental revenue for Marvell over the next several years."

What's more, Marvell is pushing the envelope on the product-development front. The company is working with its foundry partner TSMC to roll out custom AI processors and connectivity chips made using a 2-nanometer (nm) manufacturing process. The two companies have already developed a working sample of the 2nm silicon, according to an update issued last month.

This could give Marvell an advantage over Broadcom considering that the 2nm chip samples of the latter are expected in June this year. So, the possibility of Marvell gaining ground in the AI chip market is definitely solid. All this explains why analysts are expecting remarkable growth of 79% in the company's earnings in the current fiscal year, which could indeed help this semiconductor stock deliver the remarkable returns that it is expected to deliver over the next year.

Throw in Marvell's cheap valuation, and it is easy to see why it would be a good idea to buy this stock hand over fist following its big drop this year, as it may not be long before it regains its momentum thanks to its outstanding AI-fueled growth.

Should you invest $1,000 in Broadcom right now?

Before you buy stock in Broadcom, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,319!*

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See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Marvell Technology. The Motley Fool has a disclosure policy.

The broad market sell-off this year has weighed heavily on technology stocks. While the S&P 500 is down by about 11% from its peak, the tech-heavy Nasdaq Composite index is off by about 15%, and this more pronounced pullback isn't surprising considering that investors have become more risk-averse of late.

This is one reason why artificial intelligence (AI) stocks, which had been in fine form on the market for the past couple of years, have been heading lower even as many have been reporting solid quarterly results. However, AI adoption is set to increase at a robust pace in the long run: Grand View Research projects 36% annualized growth in this space through 2030.

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As a result, companies selling AI-focused hardware and software should ideally experience healthy growth over the long run. That's why now would be a good time to take a closer look at some solid AI stocks that have dropped in 2025 to attractive valuations, but that have the potential to fly higher in the long run thanks to the massive opportunities they are sitting on.

1. Advanced Micro Devices

Shares of chip designer Advanced Micro Devices (NASDAQ: AMD) are down by close to 29% in 2025 as of this writing. As a result, AMD now trades at an attractive 19 times forward earnings. That's well below the tech-laden Nasdaq-100 index's forward earnings multiple of 24. Even better, AMD is undervalued with respect to the growth that it is expected to deliver over the next five years.

This is evident from the stock's price/earnings-to-growth ratio (PEG ratio) of just 0.35 based on its projected five-year earnings growth, according to Yahoo! Finance. The PEG ratio is a forward-looking valuation metric that's calculated by dividing a stock's price-to-earnings ratio by the estimated annual earnings growth it could deliver over various periods. Stocks with positive PEG ratios of less than 1 are generally viewed as being undervalued with respect to their projected growth.

Consensus estimates are projecting a 36% increase in AMD's earnings to $4.51 per share this year. That's expected to be followed by healthy growth over the next couple of years as well, despite recent downward revisions in those estimates due to the economic headwinds created by President Donald Trump's tariffs and trade wars.

AMD EPS Estimates for Current Fiscal Year data by YCharts.

Of course, tariffs on semiconductors, computers, and raw materials could dent AMD's sales and earnings growth, as the company will be forced to increase the prices of its offerings, absorb higher costs, or both. However, Trump has -- at least for now -- exempted semiconductors from his tariffs, and put a 90-day pause on the comprehensive tariffs he imposed on most countries in the world to allow time for negotiations.

It remains to be seen how those various international negotiations will play out, but the administration's apparent willingness to negotiate with trade partners suggests that favorable outcomes may be possible. Additionally, tech companies' heavy investments in AI infrastructure are likely to continue despite the tariff-related turmoil. This explains why AMD is expecting to report next month that its first-quarter revenue increased by 30% year over year at the midpoint of its guidance range.

The company is on track to benefit from the growing demand for AI server CPUs (central processing units) and graphics processing units (GPUs), along with the growth in AI-enabled personal computers. Meanwhile, there are other catalysts, such as an increase in the number of design wins in the embedded chip market. Also, the upcoming gaming console upgrade cycle should be a key growth driver.

In sum, there is more to AMD than just AI, which is why investors looking for growth stocks trading at attractive valuations should consider buying it hand over fist right now.

2. DigitalOcean

DigitalOcean (NYSE: DOCN) provides on-demand cloud computing infrastructure to small businesses, developers, and start-ups, and it has recently started offering AI solutions as well. In October, the company released Droplets, an AI infrastructure platform through which customers can rent its cloud platform to train and deploy large language models (LLMs).

Demand for the platform was so strong that DigitalOcean was finding it difficult to provide enough capacity. That wasn't surprising as Droplets allowed its customers to deploy AI applications without buying expensive hardware. Not surprisingly, DigitalOcean is now investing more money to bolster its AI infrastructure.

DigitalOcean customers can also rent a more powerful version of its cloud infrastructure platform through the Bare Metal GPUs solution. The company notes that Bare Metal gives customers "maximum performance and control, ideal for sustained, high-throughput workloads that demand direct access to hardware resources and customization." So customers looking to run heavier AI workloads can also turn to DigitalOcean to fulfill their requirements.

DigitalOcean is doing the right thing by investing in AI hardware so that it can rent capacity on it to customers, as the market for that is on track to grow substantially in the long run. Goldman Sachs estimates that the cloud infrastructure-as-a-service (IaaS) market could be worth a whopping $580 billion by the end of the decade.

The addition of AI tools to its offerings is helping DigitalOcean drive stronger customer spending. In its fourth-quarter earnings release, it pointed out that the "continued traction in AI drove quarterly revenue for our top 500+ customers, representing 22% of total revenue, to grow at 37% year-over-year."

The company's average revenue per customer jumped 14% year over year. DigitalOcean is set to move deeper into AI with the addition of agentic AI solutions, which will allow its clients to build AI agents with the help of powerful LLMs on its GenAI Platform. As a result, it won't be surprising to see its customers spending even more with DigitalOcean, and even more customers signing up with it.

All this helps explain why analysts expect DigitalOcean's bottom-line growth to improve.

DOCN EPS Estimates for Current Fiscal Year data by YCharts.

Finally, with DigitalOcean trading at just 13.5 times forward earnings following its recent pullback, now is a good time for investors to buy this cloud computing stock. It could jump impressively in the long run thanks to the growing demand for AI services in the cloud.

Should you invest $1,000 in Advanced Micro Devices right now?

Before you buy stock in Advanced Micro Devices, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Advanced Micro Devices wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,319!*

Now, it’s worth noting Stock Advisor’s total average return is 859% — a market-crushing outperformance compared to 158% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, DigitalOcean, and Goldman Sachs Group. The Motley Fool has a disclosure policy.