3 Red-Hot Growth Stocks to Buy in 2025

Key Points

• Broadcom has a huge potential opportunity with custom AI chips.

• AMD, meanwhile, is looking to carve out a meaningful niche in the fast-growing inference market.

• Alphabet is showing that AI can be a big growth driver for the company.

• 10 stocks we like better than Broadcom ›

The hottest area of growth in the market is artificial intelligence (AI). This is being led by big tech companies, which continue to see strong demand stemming from AI.

Let's look at three red-hot AI growth stocks to buy this year.

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1. Broadcom

Broadcom (NASDAQ: AVGO) has become one of the most important suppliers in the AI buildout. The company's networking business is already booming, as its Ethernet switches and optical interconnects are needed to move the heavy traffic inside massive AI clusters. That side of its business saw revenue jump 70% last quarter, and the runway here is still long as AI clusters keep increasing in size and complexity.

The bigger story for Broadcom, though, is custom AI chips. The company has carved out a leadership role in helping customers design application-specific integrated circuits (ASICs) for AI data centers. These are not small projects. Management says its top three customers are preparing to deploy as many as 1 million chip clusters each by its fiscal 2027, which could translate into a $60 billion to $90 billion market opportunity. It's also added more customers beyond those initial three, with Apple now also in the mix.

Broadcom is also broadening out through VMware. That acquisition gave it a strong software business, with VMware Cloud Foundation becoming an important tool for companies trying to manage AI workloads across multiple cloud computing environments.

With a portfolio of products and solutions all tied to AI demand, Broadcom has multiple growth drivers.

2. Advanced Micro Devices

Nvidia (NASDAQ: NVDA) dominates the market for graphics processing units (GPUs), which are the chips more commonly used to power AI workloads. However, investors shouldn't write off the stock of its smaller rival, Advanced Micro Devices (NASDAQ: AMD), as the company is starting to carve out a role in inference. That's the stage where AI models are deployed, and eventually, it's expected to become a much larger market than training. One of the world's biggest AI players is already using AMD's GPUs for a meaningful share of inference, while many of the largest cloud computing operators are using AMD chips as part of their workloads.

The company is also working to loosen Nvidia's lock around high-performance interconnects in data centers. In addition to the CUDA software advantage Nvidia has, its proprietary NVLink solution also gives it an edge, as it allows its GPUs to communicate with each other at high speeds to basically enable them to function as a single unit. Alongside Broadcom and others, AMD helped form the UALink Consortium to build an open standard for linking chips in clusters. If that effort takes off, it would give customers more flexibility to use multiple vendors, creating a tailwind for AMD.

Meanwhile, AMD's central processing unit (CPU) business is also putting up strong numbers. Its Epyc processors have been winning share in data centers, while it's also seen steady demand in gaming and PCs.

AMD doesn't have to knock Nvidia off its perch to be a long-term winner. Along with its strong position in CPUs, it just needs to win a steady piece of the rising inference demand to see strong growth ahead.

3. Alphabet

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has flipped the AI disruption story on its head. Instead of AI eating into its search business, it's actually driving more usage. Over 2 billion people now use Google's AI Overviews each month, and global query volume has been climbing. Last quarter, search revenue rose 12% to $54.2 billion, with the company still rolling out new features like AI Mode that blend chatbot and search functions into one interface.

Its cloud computing segment, meanwhile, is firing on all cylinders. Google Cloud revenue climbed 32% year over year to $13.6 billion last quarter, with operating profit more than doubling as customers turn to its Gemini foundational models and AI tools to help create and deploy their own AI models. Demand is running so hot that the company said capacity could outstrip demand well into next year. That's why Alphabet recently upped its capex budget by $10 billion to $85 billion this year to add more new data center capacity.

What's overlooked is that Alphabet isn't just a one- or two-tick pony. The company was the first to develop a custom AI chip with the help of Broadcom, which gives it a cost and performance advantage. Meanwhile, its Waymo robotaxis are quickly expanding to more cities, putting distance between it and rivals like Tesla. The company also has a quantum computing program that continues to make solid progress.

With search, cloud, and multiple bets on emerging technologies, Alphabet has more ways to win than almost any other large-cap tech stock. And with its shares trading at a forward price-to-earnings (P/E) multiple of 19.5 times expected 2026 earnings, investors are getting all of that at a valuation that still looks far too cheap.

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

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Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Nvidia, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.