Over the past two years, artificial intelligence (AI) has significantly influenced the stock market. Technological advancements have the potential to transform nearly every industry globally, and the pace of change has accelerated as major tech companies invest vast sums into AI development.
Investor enthusiasm about the potential of generative AI contributed to a 43% rise in the Nasdaq composite index in 2023 and a subsequent 29% increase in 2024. However, 2025 presented challenges as the Nasdaq entered correction territory in March and remained 13.5% below its peak by April 2. The decline is largely attributed to increasing economic uncertainty and declining consumer confidence. Despite these issues, several AI stocks poised for long-term growth appear attractively priced as 2025 progresses. Among these, three stocks stand out as potential investments.
1. Alphabet
Historically, Alphabet, the parent company of Google, faced potential threats from the emergence of AI chatbots like OpenAI’s ChatGPT. However, Alphabet benefited from the expanding AI landscape and substantial AI spending. Google’s AI-powered features, such as Circle to Search and Google Lens, have enhanced product search capabilities and user satisfaction. Additionally, AI Overviews in search results pages have proven monetizable at similar rates to traditional searches. Alphabet’s Google Cloud business significantly contributes to its growth, seeing a 30% increase in demand in its most recent quarter. Although an operating margin of 17.5% suggests room for growth, Alphabet is investing approximately $75 billion to expand its computing capacity. A recent plan to acquire the cybersecurity firm Wiz for $32 billion, pending approval, aims to enhance its cloud business further. Alphabet’s stock has declined over 20% from its peak at the year’s start and now trades at 17.6 times forward earnings estimates, offering potential value amid robust growth prospects driven by AI.
2. Adobe
Adobe, marked by a 3.82% decline in its stock price, is perceived by some investors as vulnerable to AI. However, Adobe’s generative AI capabilities promise added value to its renowned software suite for creatives. The company developed the Firefly AI model, which leverages a commercial stock image library, boosting adoption and user retention. The free Adobe Express software experienced notable user growth, and AI monthly active users increased fourfold in 2024. AI’s impact allowed Adobe to raise prices and reduce churn, with AI-linked annual recurring revenue surpassing $3.5 billion by late 2024. Adobe has also integrated AI into its Adobe Acrobat PDF software and its marketing line GenStudio. Management projects revenue to reach $30 billion by 2027, equating to a 13% compound revenue growth rate. Adobe’s shares, having dropped 35% from a 52-week high, currently trade at 18.7 times fiscal 2025 earnings expectations. Given the anticipated acceleration in earnings, Adobe appears attractively priced.
3. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing Company (TSMC) is central to developing AI technology, manufacturing advanced GPUs and AI accelerator chips for leading designers like Nvidia, Broadcom, and AMD. Holding a significant market share due to unparalleled technological capabilities, TSMC collaborates with top-tier customers who are willing to pay a premium for its products. TSMC’s technological advantage stems from a cycle of attracting premium customers, generating substantial revenue, and investing in manufacturing advancements. In 2025, AI-related revenue is expected to double, following a tripling in 2024. TSMC plans a 27% to 41% increase in capital expenditures, reaching around $40 billion, to support growth. Expansion plans in the United States include a $100 billion investment in Arizona, aimed at mitigating tariff risks. Despite geopolitical uncertainties tied to Taiwan, TSMC shares are down 24% from their peak, trading at 18.8 times forward earnings estimates, presenting a valuable opportunity given the company’s pivotal role in AI development.
In conclusion, while the Nasdaq has experienced fluctuations in 2025 due to economic factors, companies like Alphabet, Adobe, and TSMC present promising investment opportunities driven by AI advancements.
