Buying growth stocks into a potential selling stock market may seem counterintuitive. After all, who wants to load up on stocks only to see them fall? But long-term investing is not about timing the market. Rather, the goal is to identify companies that can grow earnings over time and reward patient shareholders.
Here's why Meta Platforms(NASDAQ: META), Advanced Micro Devices(NASDAQ: AMD)a Adobe(NASDAQ: ADBE) stand out as outstanding growth stocks to buy in 2025 even if there are wider sales.
Image source: Getty Images.
Nvidia is widely credited with being the face of the artificial intelligence (AI)-based rally in growth stocks. But with Meta Platforms hovering around $600 a share, it's time to give credit where credit is due.
In October 2022, Meta fell below $90 per share as investors criticized the company's spending on the metaverse and research and development projects through its Reality Labs segment. The threat of TikTok also weighed heavily on Meta, which had yet to perfect Instagram Reels. But in a relatively short time, Meta Leverage AI and make Instagram a highly effective platform for content consumption and for targeted advertising.
Meta has used AI to boost engagement and improve the reach of ad campaigns with sophisticated metrics tracking. So while it's up more than sixfold from that low in October, Meta is still very reasonably priced going into 2025, making it a compelling buy.
Meta has a simple but highly effective business model. Its Family of Apps – Facebook, Instagram, and WhatsApp – have become highly valuable digital real estate for advertisers. It's like the strategy Alphabet is used for Google and YouTube. Instead of funding capital-intensive content creation, Meta lets users create content and then profit from engagement.
Instagram's transition from gallery-style standalone images to scrolling short-form videos has been a game changer for Meta's cash flow and profits. As you can see in the following chart, Meta generates strong operating margins and converts about a third of revenue into free cash flow.
Meta has a forward price-to-earnings (P/E) ratio of 26.5, which isn't dirt cheap. But it's fairly reasonable compared to other tech-focused megacap companies. Consider that An apple, MicrosoftNvidia, Amazon, Tesla, Broadcoma Netflix each has a higher forward P/E than Meta.
Add it all up, and Meta stands out as a nice balance of growth and value for 2025. In fact, I expect the company to eventually become more valuable than Alphabet and Amazon.
AMD soared 128% in 2023 – making it one of the best performing stocks in the S&P 500 that year. AMD initially carried that momentum into 2024, hitting an all-time intraday high of $227.30 per share in March. But AMD gave up all those gains and then some and is down over 15% year-to-date at the time of writing, and is hovering around a 52-week low. The selloff looks especially bad given that the broader tech sector is up over 23% year to date, and chip stocks like Nvidia and Broadcom have posted monster gains in 2024.
The simplest reason why AMD is underperforming in the sector is that its AI investments have yet to pay off. The company's revenue has leveled off, yet it continues to spend a lot on research and development. For the trailing-12-month period, AMD earned $24.3 billion in revenue but spent over $0.25 per dollar of that revenue on research and development. The company is currently making very low profits, but again, this is mainly due to the timing of its product development.
AMD's roots are in the central processing unit (CPU) market, not in graphics processing units (GPUs), which are Nvidia's bread and butter for data centers. However, AMD has new lines of GPUs to be released in 2025 and 2026 that could offer more affordable GPU alternatives for big-time Nvidia customers like Microsoft and Meta.
AMD's rise in 2023 was built around hype and its potential to dent Nvidia's market share in the GPU market. AMD has spent a lot of money hoping that its more cost-effective GPUs can win the budgets of big AI spenders. However, AMD remains a highly speculative investment opportunity. His plans could be derailed by competition or bad timing in the business cycle. If there is a broader decline in AI capital investment, it could affect AMD's orders.
The stock may look cheap because it's down while so many chip stocks are up, but from an earnings perspective, it's actually still quite expensive. Still, there are reasons to believe AMD could grow to its valuation in time. Analyst consensus estimates call for $5.13 in 2025 earnings per share, which would give AMD a P/E ratio of just 24.4 based on the current price.
AMD is worth a closer look for investors who believe in continued capital investment in AI and are willing to put up with the possibility of more volatility with AMD's product launch timeline.
Like AMD, Adobe had a remarkable 2023, gaining over 77%. But it's been one of the worst-performing megacap tech stocks in 2024 — down over 25% year to date.
Adobe continues to deliver pretty decent sales and earnings growth while maintaining solid margins. Adobe maintains a rock-solid balance sheet and generates enough cash to buy back stock and accelerate EPS growth. The problem is not so much where Adobe is, but fears about where it could be headed.
The company doesn't have a defined way to monetize AI to the same extent as other enterprise software giants Salesforce — has a clear roadmap for leveraging and benefiting from AI. Adobe has developed a number of new AI-focused tools that enhance the legacy software offerings in its Creative Cloud suite, from Acrobat to productive AI through Adobe Firefly. But Adobe has not yet communicated how exactly it will fund these new tools.
Adobe pioneered the software-as-a-service business model. The idea is to bundle and improve software offerings over time to justify price increases. You'd think AI would be the golden ticket for Adobe to allow its customers to do even more with a subscription, but not if it means companies will license fewer subscriptions overall. In other words, efficiency improvements could disrupt the very fabric of Adobe's business model. There's also the threat of competing AI-powered graphic design tools disrupting Adobe's offering or undercutting its prices to the point where Adobe loses customers.
Adobe must find a way to be the clear leader in AI for graphic design. It is likely that the stock will be under pressure until it convinces the market that it can evolve with the times. The good news is that Adobe is cheap — with a forward P/E ratio of just 21.9. Adobe is a compelling deep value play in enterprise software, but only for people who are confident in the company's ability to develop and benefit from AI tools.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool's board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Foelber does not have a position in any of the stocks mentioned. The Motley Fool has positions and recommends Adobe, Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Netflix, Nvidia, Salesforce, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
