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The artificial intelligence megatrend is here to stay, and companies continue to invest heavily in the disruptive technology to gain a first-mover advantage. A report from Statista predicts that the total addressable market for AI will expand from $136 billion in 2023 to $826 billion in 2030, providing enough room for several companies to gain traction over the upcoming decade.
After two consecutive years of 20%-plus gains, Goldman Sachs expects the S&P 500 Index ($SPX) to rise by “just” 7% from current levels in 2025. Investors looking to generate outsized gains should consider holding individual stocks that are part of growth markets such as AI.
Goldman Sachs believes these two AI stocks could 4x the S&P 500 in 2025. Let’s see why.
Stock #1: Synopsys
Valued at $80 billion by market capitalization, Synopsys (SNPS) develops essential software tools and technologies for designing and testing computer chips. These platforms enable semiconductor companies and electronics manufacturers to create, verify, and optimize integrated circuits and electronic systems while ensuring security and performance.
Synopsys has increased its sales from $2.24 billion in fiscal 2015 to $6.12 billion in 2024. The company’s growth story is far from over, given consensus estimates calling for revenue of $6.8 billion in 2025 and $7.7 billion in 2026.
Wall Street expects Synopsys to expand adjusted earnings from $13.20 per share in 2024 to $17.14 per share in 2026. The tech stock trades at a premium at 38x forward FCF and 35x forward earnings.
Out of the 17 analysts covering SNPS stock 14 recommend “Strong Buy,” one recommends “Moderate Buy,” and two recommend “Hold.” The average target price for SNPS stock is $647.88, indicating upside potential of over 26% from current levels.
Stock #2: Advanced Micro Devices
Another AI stock is Advanced Micro Devices (AMD), valued at a market capitalization of $206 billion. AMD designs and produces computer processors and graphics chips used in PCs, data centers, and gaming consoles. It produces high-performance CPUs under the Ryzen and EPYC brands, graphics cards under Radeon, and custom chips for gaming systems, competing directly with Intel (INTC) and Nvidia (NVDA) in consumer and enterprise markets.
Currently, Nvidia commands a 90% market share in the AI chip segment, which has led to AMD’s underperformance over the past two years. While Nvidia has enjoyed triple-digit revenue growth since the end of 2022, AMD increased sales by less than 10% year over year in the last 12 months.
However, its revenue growth accelerated 18% year-over-year in the third quarter, with sales of $6.8 billion. Moreover, its gross margins expanded by 2.5 percentage points while earnings expanded by 31% year-over-year.
AMD’s data center revenue more than doubled to $3.5 billion and now accounts for 50% of total sales. It gained server CPU share on the back of enterprise wins as cloud providers expanded the use of these products across their infrastructure.
Analysts expect revenue to almost double from $22.6 billion in 2023 to $40 billion in 2026. Comparatively, adjusted earnings per share are forecast to grow from $2.65 per share to $7 per share.
Out of the 38 analysts covering AMD stock, 30 recommend “Strong Buy,” one recommends “Moderate Buy,” and seven recommend “Hold.” The average target price for AMD stock is $188.69, indicating upside potential of 50% from current levels.
