Is the artificial intelligence stock market boom still wired or tired amid the emergence of China’s DeepSeek? Top AI stocks such as Microsoft (MSFT) and Nvidia (NVDA) face high expectations. For many companies — such as Google parent Alphabet (GOOGL), Amazon.com (AMZN) and Facebook parent Meta Platforms (META) — the rise of generative AI poses both risk and opportunity.
Amid the rise of generative AI — which generates text, images, and video — it’s a good time to be cautious amid the hype, especially given recent developments at Super Micro Computer (SMCI).
Many companies suddenly tout AI product roadmaps. In general, look for AI stocks that use artificial intelligence to improve products or gain a strategic edge.
Further, China startup DeepSeek came out of nowhere to release a powerful AI training model developed with much less computing power. AI stocks sold off Jan. 27 amid new questions over the outlook for capital spending on artificial intelligence iinfrastructure. Nvidia stock plunged on the DeepSeek news.
DeepSeek Shakes Up AI Trade
Here’s IBD’s take on the key questions involving DeepSeek, including U.S./China competition in artificial intelligence and the pursuit of human-like AGI (Artificial General Intelligence). The commoditization of AI models could spur application development. Amazon has started offering DeepSeek models on its cloud computing platform.
Meanwhile, Google earnings are due Feb. 4. Amazon follows on Feb. 6. Google stock has gained nearly 8% in 2025 amid growing competition in internet search. But Alphabet continues to under-perform some Magnificent Seven stocks.Amazon stock has gained 8% this year.
Among other key earnings to look for: Arista Networks (ANET) reports on Feb. 18. Arista stock has edged up 4% in 2025.
Meanwhile, startups OpenAI and Anthropic are battling Google, Meta and others in developing large, multimodal and small language foundation models.
Microsoft is the biggest investor in generative AI leader OpenAI, having spent some $14 billion on the startup. But Oracle will now be a big provider of data center capacity to OpenAI for training AI models.
Best AI Stocks: Will Software Emerge?
In general, semiconductor plays have out-performed software companies as the best AI stocks. But software companies could gain traction in monetizing AI products by late 2025. One big issue for software companies is how fast customers ramp up pilot programs to commercial deployment.
Having struggled to generate new revenue from “copilots,” software companies are now turning to AI agents.
What’s more, data analytics software maker Palantir (PLTR) has bucked the trend that chipmakers and data center plays are the best AI stocks. PLTR stock soared 340% in 2024.Palantit stock has gained 9% in 2025. Earnings for PLTR stock are due Feb. 3.
In an IBD interview, ServiceNow (NOW) Chief executive Bill McDermott explained about how the enterprise software maker aims to be an AI winner.
Meanwhile, Meta hired away Salesforce‘s (CRM) top AI executive, Clara Shih, to head a new “Business AI” group.
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Nvidia Has Dominated The AI Revolution. Can The Chipmaker Stay At The Front Of The Pack?
Chipmaker Nvidia has been a bellwether for AI stocks. Earnings for Nvidia stock are due Feb. 26. Nvidia stock jumped 171% in 2024 after surging 239% in 2023. But Nvidia stock is down 10% in 2025, pressured by DeepSeek news. For Nvidia, ramping up production of next-generation Blackwell AI chips in 2025 has been a key issue.
Also, Nvidia has criticized new chip export restrictions announced by the Biden administration. The global AI chip control system gives priority to 20 U.S.-friendly countries and limits the computer processing power available to other countries.
It remains to be seen whether President Trump follows through on the new export rules.
Rival Broadcom (AVGO) soared on its AI chip demand outlook. Broadcom makes custom AI chips for cloud computing titans.
Qualcomm, ARM Holdings, and Marvell Technologies (MRVL) are other AI chipmakers to watch.
Key Issues For Top AI Stocks
Also, capital spending has boomed at cloud computing giants Amazon, Microsoft and Google. Tech giants are spending heavily on data center infrastructure, such as AI chips and servers, as well as research and development.
Further, Nvidia-based CoreWeave is a new AI cloud infrastructure provider that plans an IPO in 2025.
Capacity constraints in Microsoft’s data centers are limiting its ability to meet demand, resulting in a slower growth forecast for its Azure cloud-computing business.
Also, Apple (AAPL) has been one of the top AI stocks to watch. The big question is whether Apple Intelligence features in iPhone 16 models will spur a big upgrade cycle.
The best AI stocks to buy span chipmakers, software companies, cloud computing service providers and technology giants.
What’s clear is that AI stocks are under more scrutiny.
“We expect AI to transition from a ‘tell me’ to a ‘show me’ story, with any disconnect between investments and revenue generation to come under increased scrutiny,” said a Bank of America report. “
Also, for most big application software companies, how to charge for AI-related products has been an issue. Many U.S. companies are pursuing custom AI software development projects, which will take longer to ramp up commercially.
Also, AI technology uses computer algorithms. The software programs aim to mimic the human ability to learn, interpret patterns and make predictions.
Until recently, machine learning was largely limited to models that processed data to make predictions. The AI models focused on pattern recognition from existing data. Corporate spending on AI projects was modest as companies mulled return on investment.
AI Stocks To Watch By Industry Group
Company | Symbol | Comp Rating | Industry name | AI angle |
---|---|---|---|---|
Nvidia | (NVDA) | 98 | Elec-Semiconductor Fabless | Cloud computing giants buying more chips to train AI models or run AI workloads. Big lead over rival Advanced Micro Devices (AMD). |
CrowdStrike | (CRWD) | 98 | Computer Software-Security | AI chatbots expected to automate more functions in security-operations centers and reduce the time to detect computer hacking. |
Arista Networks | (ANET) | 99 | Computer-Networking | Sells computer network switches that speed up communications among racks of computer servers packed into “hyperscale” data centers. With AI growth, internet data centers will need more network bandwidth. |
Microsoft | (MSFT) | 68 | Computer Software-Desktop | Biggest investor in generative AI startup Open AI, whose ChatGPT users require Azure cloud services. Microsoft’s business AI assistant, Office 365 Copilot, will have general availability on Nov. 1. |
Salesforce | (CRM) | 97 | Computer Software-Enterprise | Integrating conversational AI assistants within the user interfaces of all Salesforce apps. Expected to use a mix of subscription and consumption-based pricing. |
Amazon.com | (AMZN) | 99 | Retail-Internet | Alexa smart assistant lags in chatbot technology. Cloud computing unit working with OpenAI rivals Anthropic, Hugging Face and Falcon 40B. |
New generative AI models process “prompts,” such as internet search queries, that describe what a user wants to get. Generative AI technologies create text, images, video and computer programming code on their own.
Companies will aim to boost productivity by developing customized AI for specific industries. Proprietary company data will be used to train AI models.
AI systems require massive computing power to find patterns and make inferences from large quantities of data. So the race is on to build AI chips for data centers, self-driving cars, robotics, smartphones, drones and other devices.
For chipmakers, analysts expect a market for “edge AI” — on-device processing of AI apps to emerge.
While “training” AI models is now the biggest market for chipmakers like Nvidia, the market will shift to “inferencing,” or running AI applications, in the long run.
Will AI Startups Challenge Tech Giants
What’s more, one key question for investors is whether tech industry incumbents will be the big generative AI winners. Or, will a new wave of AI startups eventually dominate? OpenAI has told employees its now on an annual revenue run-rate of $3.4 billion, up from $2 billion in January.
OpenAI has raised $6.6 billion in new funding, valuing the startup at $157 billion, up from $86 billion early this year. The new round was led by venture-capital firm Thrive Capital. Microsoft again invested. New investors include SoftBank and Nvidia but not Apple as rumored.
Further, OpenAI recently laid out more details of its plans to adopt a for-profit business structure in 2025, amid negotiations with investor Microsoft and a feud with Tesla (TSLA) founder Elon Musk.
Large language models provide the building blocks to develop applications. Further, LLMs help AI systems understand the way that humans write and speak. Also, LLMs require training data for specific tasks. Companies with access to troves of data hold an edge.
OpenAI is part of a wave of LLM startups that includes AI21 Labs, Anthropic and Cohere. Anthropic introduced Claude 3, the newest version of its chatbot, and claimed its performance is better than OpenAI’s GPT-4.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
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