The Nasdaq Composite has been a goldmine for investors, powered by technology, artificial intelligence, and visionary companies that drive the future. In 2024, the index rose 33%, propelled by AI innovations, falling inflation, and rate reductions, after a 43% increase in 2023. History shows that after a year of growth of 30% or more, the Nasdaq rises by an average of 19%, with significant potential for 2025.
Following a 10% drop in early 2025 due to concerns about the recession and trade policy, the current downturn provides an opportunity to buy high-quality stocks at lower prices. May 2025 is an ideal time to buy Nasdaq stocks with strong fundamentals, particularly in AI, cloud computing, and healthcare.
Here are the five best Nasdaq stocks to consider for May 2025, based on their opportunities for growth, valuations, and market positions, using recent history and analysts' recommendations.
Nvidia remains the leader in AI hardware, holding sway over the graphics processing unit (GPU) market with a 95% lead in generative AI workloads. Revenue surged 114% to US$130.5 billion and operating income by 147% in fiscal year 2025, which closed January 31, 2025. Blackwell architecture, which was responsible for US$11 billion of Q4 revenue, is best at AI inference and reasoning, with 25 times greater token output at lower costs.
Even as 2025 saw a 10% correction, Nvidia is trading at 36.4 trailing earnings, below its five-year average of 71.6, and a PEG ratio of 0.25 signals undervaluation for its growth. The opportunity to buy this AI frontrunner arises in May 2025.
Alphabet, Google's parent, is a standout value and AI candidate. At 25 times forward earnings, it's one of the cheapest AI players. Google Cloud, a rapidly expanding business, gets a boost from AI-powered demand, delivering 160 foundation models through Vertex AI.
The new Gemini 2.0 model drives code-writing AI agents for coding, web work, and searching, putting Alphabet on a path for 2025 gains. Shares jumped 36% in 2024, but the stock is still a value compared to its rivals like Palantir, which is trading at 159 times forward earnings. Alphabet's entry into self-driving with Waymo provides long-term potential, making it a good May choice.
Taiwan Semiconductor Manufacturing Company or TSMC is the global leader in chip foundry, making semiconductors for AI champions such as Nvidia. AI chips drive TSMC's business, with semiconductor equipment spending in 2025 projected to reach US$121 billion from US$113 billion in 2024. Being responsible for the production of high-bandwidth memory (HBM) used in AI processors provides TSMC with stable revenue.
Even with a premium valuation, its diversified customer base, such as Apple and Broadcom, mitigates risk. Following a decline in early 2025, TSMC provides a solid entry point for investors looking at AI and tech expansion in May.
As tech dominates the Nasdaq, health stocks such as Gilead Sciences shine through in 2025. Unlike AI stocks, however, Gilead is showing oncology and HIV success, as revenue in Q4 2024 rose 6% to US$7.6 billion and 10% rising non-GAAP net income. Projected approvals in 2025 of twice-yearly injections of lenacapavir to prevent HIV and Trodelvy for breast cancer show growth.
Trading at a reasonable 15 times forward earnings, Gilead provides stability in the face of tech volatility. Its diversification and solid fundamentals make it an attractive ‘May buy’ for diversified portfolios.
SoundHound AI (SOUN): Next-Generation AI Software Leader
Voice recognition leader SoundHound AI anticipates 2025 revenues of US$155-US$175 million, almost doubling the levels of 2024. Its audio AI offerings, deployed in healthcare, travel, and insurance, take advantage of agentic AI trend, performing demanding tasks.
Even with a 300% increase in 2024, the valuation of the stock at 40 times sales may fall to 20 times by the end of 2025 if revenue triples as projected. High risk equals high reward, and SoundHound is a speculative but hopeful choice for May 2025 investors looking for AI software exposure.
The Nasdaq's future in 2025 hinges on AI adoption, economic stability, and clear policy. While recession worries linger, managed inflation and consumer spending could drive growth. Investors must focus on diversified choices like Alphabet and Gilead for stability, with high-growth players like Nvidia and SoundHound for possible upside.
TSMC bridges both worlds, exposing AI with vigor. May 2025's retreat presents a chance to buy before a potential rebound, but tread carefully in unpredictable markets.
The Nasdaq's potential for growth in May 2025 makes it a hot spot for investors. Nvidia, Alphabet, TSMC, Gilead, and SoundHound provide a combination of AI dominance, value, and diversification. Every stock capitalizes on a unique strength, from chip-making to healthcare technology, consistent with market directions.
As the Nasdaq navigates volatility, these picks stand out for fundamentals and growth prospects, ideal for building a good portfolio.