Technology stocks helped fuel a market rally that began in late 2022, when OpenAI’s ChatGPT was publicly launched. Since then, many tech stocks have thrived amid what has become an artificial intelligence (AI) boom. Companies are pouring billions of dollars into AI infrastructure, laying the groundwork for what some think will eventually become one of humankind’s most revolutionary technologies.
That enthusiasm has pushed the stock market to new all-time highs, but it also means there aren’t many bargains. Fortunately, there are still some high-quality companies trading at reasonable valuations, even after some impressive price action over the past month.
Here are three red-hot tech stocks trading at reasonable valuations that investors will want to consider in 2025.
Image source: Advanced Micro Devices (AMD).
Nvidia has dominated the AI chip space since early 2023, but don’t write off Advanced Micro Devices(NASDAQ: AMD). The stock’s share price has surged by more than 50% in the past month amid some potentially game-changing business developments.
Oracle said it plans to deploy 50,000 of AMD’s next-generation MI450 chips, starting before the end of next year. Additionally, International Business Machines announced plans to use AMD’s chips to process algorithms to correct errors on its quantum computers.
These could be signs that AMD is finally starting to chip away at Nvidia’s dominance in AI and related fields that require cutting-edge semiconductors (chips). That would bode very well for AMD, given that experts believe that data center investments will continue for the next several years, amounting to over $5 trillion worldwide through 2030.
AMD stock now trades at approximately 64 times its 2025 earnings estimates. Wall Street analysts’ expectation is that the company will grow earnings per share by an average of almost 35% annually over the next three to five years. Such growth would justify an admittedly high valuation, and AMD’s recent announcements are a promising sign that the company can deliver as needed.
The AI chip boom has been a tremendous opportunity for ASML (NASDAQ: ASML). The Dutch company is the world’s only manufacturer of EUV (extreme ultraviolet light) lithography systems, which print intricate circuit patterns on chips. That makes ASML a pivotal role player in AI, since the most complex and advanced AI chips require cutting-edge manufacturing processes.
Unfortunately, ASML’s stock started the year on a sour note. The company got caught up in international trade tensions between the United States and China, which cast a shadow over its business outlook as pressure mounted to restrict its dealings with China. Those concerns have somewhat dissipated amid stellar earnings results that featured robust EUV demand. ASML now trades near its 52-week high, including nearly 10% gains over the past month.
ASML’s forward P/E ratio is now 35 times its estimated full-year earnings. Again, that’s no bargain, but it’s also fair for a business that Wall Street believes will grow earnings at an annualized rate of almost 21% over the next three to five years. The future is bright for ASML, as chip innovation continues to drive increased investment in EUV lithography.
Digital advertising is a massive industry, worth nearly $700 billion and rising. The Trade Desk(NASDAQ: TTD) has been a standout performer as a leading independent advertising technology platform. Essentially, the company helps brands advertise in digital spaces outside walled-garden ecosystems like Alphabet‘s Google and Meta Platforms’ Facebook. As a result, The Trade Desk’s stock has outperformed the broader market over its lifetime.
But the stock plummeted earlier this year after the company’s poor earnings results snapped its years-long streak of topping growth estimates. The Trade Desk was navigating a transition to a new technology platform. On top of that, uncertainty about the economy and a potential trade war weighed on growth expectations. The stock seems to be building momentum again; shares have climbed nearly 11% over the past month.
Currently, The Trade Desk trades at approximately 30 times its 2025 earnings estimates. Meanwhile, analysts are looking for nearly 20% annualized earnings-per-share growth over the next three to five years. If the company can return to its former expectation-beating ways and rebuild the market’s trust, the stock’s current valuation leaves room to build on its recent hot streak.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Alphabet, International Business Machines, Meta Platforms, Nvidia, Oracle, and The Trade Desk. The Motley Fool has a disclosure policy.
