Two AI-focused corporate entities might witness astronomical earnings increases of 178% and 140% by 2025, as suggested by Wall Street analysts. Is it advisable to invest in them?
2024 was a standout year for the market, with the S&P 500 index scoring a impressive 23% gain. The broader market saw a rise of over 53% in the past two years. One major contributor to this market surge was artificial intelligence (AI). While numerous AI stocks are currently trading at lofty valuations, investors remain optimistic about the expanding market for AI and anticipate robust earnings growth for AI companies in 2025.
When assessing stocks, investors tend to focus on future earnings projections, which significantly impact valuations. For stocks of considerable size and interest to broad investors, several sector-focused analysts typically release their predictions for future earnings. The average of these individual projections is referred to as consensus.
Two considerable chipmakers have captured the attention of Wall Street analysts as they anticipate these companies can boost their earnings by 178% and 140% year over year. Should you invest in them?
1. Marvell Technology: 178% projected earnings growth
Marvell Technology (MRVL 2.91%) enjoyed a 90% gain in 2024 as AI hype fueled its journey. As per Visible Alpha, analysts forecast Marvell will post a loss of $1.08 in diluted earnings per share for its fiscal year 2025, ending on Feb. 3, and then generate earnings of $0.84 in its fiscal year 2026. This impressive growth trajectory might explain why Marvell currently trades at an eye-popping 71 times forward earnings.
Marvell focuses on providing semiconductor infrastructure, supporting data services that include AI. The company targets data centers, enterprise networks, carrier infrastructure, consumers, and the auto industry. In fiscal 2024, Marvell generated approximately 40% of its revenue from supplying infrastructure to data centers, a critical component in the AI value chain. Another 22% came from enterprise networking, and 19% from carrier infrastructure. The growing demand for AI is expected to result in significant growth for data centers and associated computer infrastructure, making Marvell an attractive investment for many.
According to TipRanks, 28 analysts have issued reports on the company in the past three months, and 26 have rated Marvell as a buy. However, the average price target implies only a modest 11.4% upside. While Marvell showcases strong potential and operates in a fast-growing market, investors might find more attractive risk-reward propositions elsewhere.
2. Advanced Micro Devices: 140% projected earnings growth
Established in 1969, Advanced Micro Devices (AMD 1.15%) is another AI stock Wall Street is bullish on this year. AMD also develops essential AI infrastructure, namely graphics processing units (GPUs), accelerated processing units (APUs), and data processing units (DPUs). Interestingly, AMD struggled in 2024, with its stock falling by around 13%.
One challenge AMD faces is its direct competition with AI chip giant Nvidia. Nvidia's dominance in the AI processor market is evident, with an estimated 80% market share, and 90% share in the GPU market, according to Forbes. For the fiscal third quarter of 2025, Nvidia's gross margin stood at nearly 75%, while AMD reported a gross margin of 50% in its most recent quarter.
Although AMD may never reach Nvidia's level of domination, its position in the rapidly-growing AI market could eventually translate into long-term success. Experts have raised concerns over a potential shortage of servers and AI accelerators that could last for several years, placing great importance on companies developing and providing this kind of infrastructure.
Recently, analysts have expressed concerns about Advanced Micro Devices' AI revenue guidance, which is allegedly below investor expectations. Nevertheless, analysts expect the company to grow earnings by 140%, from a projected $1.41 diluted earnings per share in 2024 to $3.38 in 2025, according to Visible Alpha.
According to TipRanks, 31 analysts have issued reports on AMD in the past three months, and 23 of them have assigned the company a buy rating. The average price target implies more than 50% upside. If AMD surprises investors with positive earnings or guidance this year, the stock could potentially soar.
- As analysts look ahead to 2025, they expect a significant increase in earnings for Marvell Technology, projecting a 178% year-over-year growth.
- In the field of finance, Marvell's focus on semiconductor infrastructure, supporting data services like AI, has contributed to approximately 40% of its revenue in 2024.
- Despite the bullish projections, some investors may be wary of investing in Marvell due to its high forward earnings multiple, currently at 71 times.
- In contrast, Advanced Micro Devices, another major player in AI infrastructure development, is anticipated to experience an even more substantial earnings increase of 140% year-over-year in 2025, as per analysts.
