We have recently put together a list of the 35 most significant AI stocks for 2025, according to JPMorgan. In this article, we will compare Intel Corporation (NASDAQ: INTC) with other companies in the AI sector.
Investors are growing more worried about rising capital expenditures in artificial intelligence, leading many to question whether current market expectations are realistic. JPMorgan’s latest report indicates that investors should target opportunities that will thrive across the entire AI value chain. Analysts at the bank suggest that investors compare potential future gains with those already embedded in stock prices. It appears that cheaper valuations and lower profit expectations outside of mega-cap tech stocks indicate that even optimists in AI should brace for further sector rotations by 2025.
The report from JPMorgan assesses the significant impacts of the "Magnificent Seven" tech stocks on the AI revolution. This group accounts for nearly 35% of the S&P 500’s market capitalization and has produced over 70% of the index’s returns since the start of 2023. While the wider S&P 500 trades at a 12-month price-to-earnings ratio of 19, the top 10 stocks in the index are currently at 29.
For more insights on this topic, you can explore the 10 best AI data center stocks and the 10 buzzing AI stocks according to Goldman Sachs.
Analysts, including Karen Ward, JPMorgan’s chief strategist for the EMEA market, argue that the noticeable valuation gap between tech stocks and the broader market is not sustainable. The report emphasizes that if the AI ecosystem generates enough revenue to justify lofty expectations for a select few companies, others in the market will eventually catch up. However, if the broader business landscape fails to see tangible benefits from these technologies and is unwilling to invest, a correction could occur. Nonetheless, the report suggests that catching up may be improbable when comparing the strong fundamentals of these mega-cap stocks to the tech bubble of the early 2000s.
JPMorgan outlines five critical areas within the AI revolution: AI equipment manufacturers, hyperscalers, AI developers, integrators, and essential AI elements. Equipment companies are defined as those designing and producing the semiconductors necessary for computational power. Hyperscalers provide the physical infrastructure for AI, including cloud services and data centers, while AI developers leverage hyperscaler technologies to offer end-user solutions.
Investors have mostly focused on AI equipment and hyperscalers, sectors heavily influenced by technological advancements. JPMorgan points out that high valuation disparities in these areas present ongoing opportunities for stock selection. However, any disappointing earnings in these sectors could lead to significant volatility, especially amid rising trade tensions between the U.S. and China. The bank also anticipates future investment opportunities in essential AI components and developers.
For this article, we highlighted AI stocks based on insights from a JPMorgan report and their popularity among hedge funds. Our research indicates that emulating the top hedge fund picks can lead to superior market performance. Our quarterly newsletter chooses 14 small and large-cap stocks and has achieved a 275% return since May 2014, outperforming its benchmark by 150 percentage points.
Intel Corporation (NASDAQ: INTC) is a key player in smart device technology. In September 2024, Intel launched its 5th generation Intel Xeon processors tailored for AI applications and the Intel Gaudi 3 AI accelerator designed for high-demand workloads. Nevertheless, Intel’s stock has struggled, dropping approximately 32% in the past six months due to worries about its competitive stance in the AI market, along with production issues and unmet sales targets. There are also rumors about the company divesting significant divisions to streamline operations.
Intel ranks 21st on our list of notable AI stocks for 2025, according to JPMorgan. While we see the potential in Intel, we believe there are other stocks with greater likelihoods of higher short-term returns. For more promising options, consider reading our report on the cheapest AI stock available.
To explore further, check out the 20 best AI stocks to buy now and a complete list of 59 AI companies with a market cap under $2 billion.
Disclosure: None. This article was originally published on Insider Monkey.