The artificial intelligence (AI) sector continues to be a compelling area for investment in 2025, as enterprises and cloud-service providers intensify their investments in data center infrastructure to meet the growing demand for AI applications. Oppenheimer analyst Rick Schafer notes that AI-related semiconductor stocks have been at the forefront of the PHLX Semiconductor Sector’s (^SOX) performance in the last two years, a trend expected to persist as capital spending on chip scale packages increases and companies seek to capitalize on their AI strategies.
Nvidia (NVDA) remains the dominant player in this space, particularly known for its AI accelerators. The company’s full-stack approach, encompassing both hardware like GPUs and networking components, and software like the CUDA platform, gives it a significant edge. The upcoming Blackwell architecture is anticipated to further fuel its growth, with Oppenheimer forecasting Nvidia’s data center AI sales to hit $172 billion in 2025. Despite Nvidia’s stock soaring by over 170% in 2024, Schafer suggests the stock is still trading at a valuation below historical multiples, indicating potential for further appreciation. Nvidia’s performance stands in stark contrast to competitors like Advanced Micro Devices (AMD), whose AI sales are expected to fall short of market expectations. AMD’s projected AI revenue of $7.5 billion for the year is significantly below buy-side estimates, which ranged from $9 billion to $10 billion.
Oppenheimer has assigned an ‘Outperform’ rating to Nvidia with a price target of $175. The stock is currently up $5.89 (+4.19%) at $146.73, indicating potential upside of approximately 19.3% from its current price.
Beyond Nvidia, Schafer’s top picks for 2025 include Monolithic Power Systems (MPWR), Broadcom (AVGO), and Marvell (MRVL). Monolithic Power Systems, despite facing short-term challenges from Nvidia’s reduced orders, is poised for long-term growth in the higher-power module market. Its shares, although down more than 21% in the last three months, are still considered undervalued with an ‘Outperform’ rating and a $900 price target, indicating significant upside from the current price of $693.43.
Deutsche Bank (DB) also views MPWR as a “top pick” and sees the recent dip as a buying opportunity. They maintain a “buy” rating and a $900 price target, driven by expectations of revenue growth and margin improvements over the next two years.
Broadcom and Marvell continue to exhibit strong growth, particularly in their roles within AI and data center markets. Broadcom‘s custom chip designs for major tech firms have contributed to a tripling of its AI revenue, while Marvell, as a key ASIC provider, has seen its data center sales nearly double. Both companies are seen as beneficiaries of the scaling up of AI clusters by cloud service providers, with Broadcom leveraging high profitability margins and Marvell anticipating substantial revenue growth from custom ASICs.
Oppenheimer has given both Marvell and Broadcom an ‘Outperform’ rating, with target prices set at $125 and $225, respectively. As of the latest trading, MRVL was up $2.05 (+1.66%) at $125.95, while AVGO gained $5.98 (+2.49%), reaching $246.29.
Oppenheimer’s continued endorsement of these four stocks for 2025 reflects confidence in their ability to navigate the evolving landscape of AI technology, where demand for specialized hardware and infrastructure continues to outstrip supply. This optimism is underpinned by strategic business models, technological leadership, and the broader market’s shift towards more sophisticated, AI-driven applications. However, investors are reminded of the inherent volatility in tech stocks, where short-term fluctuations can contrast with long-term growth trajectories.
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