2 AI Stocks I'm Buying in January 2025

Heading into 2025, I didn't have a ton of AI exposure in my portfolio. Sure, I own a few stocks that should benefit from long-term AI tailwinds, but as far as direct artificial intelligence plays, there aren't many.

One of my 2025 investing New Years resolutions is to increase my exposure to the massive opportunity in AI, and in January, I plan to buy two stocks in particular, one of which I already own, and another that could be an excellent long-term investment regardless of who the winners in the AI chip race are.

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A big winner that could keep winning

Sea Limited (NYSE: SE) was the best-performing stock in my portfolio in 2024, and it wasn't even close. Shares were up by more than 160% for the year, a stunning turnaround after profitability concerns sent them plunging more than 90% from its 2021 peak.

The strong performance was well deserved. All three sides of Sea's business looked fantastic. The Shopee e-commerce business grew gross merchandise volume by 25% year over year in the third quarter, expanded its take rate, and achieved adjusted EBITDA profitability for the first time ever. The Sea Money digital finance platform grew its loan portfolio by 70% while simultaneously lowering its percentage of non-performing loans. And finally, the Garena digital entertainment business grew both daily active users and bookings by 25%.

Overall, Sea's revenue grew by 30% over the third quarter of 2023 and the company went from negative-$144 million in net income to a profit of more than $150 million. However, there is still plenty of room to grow margin and scale all three parts of the business. Sea also has tons of AI potential, especially when it comes to optimizing its e-commerce business. With about $10 billion in cash on the balance sheet, Sea Limited has plenty of firepower to pursue opportunities as they arise.

An under-the-radar AI play at a good value

Much of the attention surrounding the AI revolution is focused on chipmakers such as Nvidia, and for good reason. But there are some excellent behind-the-scenes companies that could also be excellent investments, and Applied Materials (NASDAQ: AMAT) is one in particular that I have my eye on.

If you aren't familiar, Applied Materials produces the equipment that allows Nvidia, Intel, and other chipmakers to manufacture their products. As AI chips get more complex, the equipment needed to make them becomes more specialized, and Applied Materials is the leader in this industry. The global semiconductor manufacturing equipment market is expected to more than double in size by 2032 and Applied Materials could be the biggest winner from this trend.

In addition to selling its equipment, Applied Materials also generates a nice revenue stream from servicing its equipment, and this has been a fast-growing component of the business in recent years. After all, the more complex and specialized manufacturing equipment is, the more specialized maintenance it requires.

Applied Materials is a highly profitable business and has been for years, and management has a solid history of prioritizing capital return to shareholders, both as buybacks and dividends. With shares about 35% below their 52-week high and close to their lowest price-to-sales ratio in a year, I'm planning on adding this AI winner to my portfolio in January.

Just a starting point

To be clear, I plan to add to my portfolio's AI exposure throughout 2025, and these are probably not the last two AI stocks I'll be purchasing this year. And that's especially true if the recent market turbulence persists and top AI stocks start trading at more attractive valuations.

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Matt Frankel has positions in Sea Limited. The Motley Fool has positions in and recommends Applied Materials and Sea Limited. The Motley Fool has a disclosure policy.