The market for artificial intelligence (AI) is a generational investment opportunity. But you don’t have to seek out risky stocks to get great returns. Leading semiconductor and software companies benefit greatly from the growing adoption of AI and can help you achieve superior returns over the long term.

Here are two reasonably priced AI stocks that could reach new highs in 2025 and years to come.

1. Advanced micro-devices

Actions of Advanced microdevices (AMD 2.43%) its value has quadrupled over the past five years. The company is the second largest supplier of graphics processing units (GPUs)which are necessary for AI training in data centers. The company has gained significant market share compared to Intel in recent years, but AMD stock is down about 4% this year and underperforming S&P500That’s a 20% increase. However, its latest earnings report shows accelerating growth that could send the stock higher in 2025.

Revenue grew 18% year-over-year in the third quarter, but the most telling sign of this dynamic was the 17% increase in revenue from the previous quarter. The company data center revenue more than doubled year over year, driven by insatiable demand for AMD’s Instinct and Epyc GPUs central processing units (CPU) for servers.

AMD supplies chips for several markets, including video game consoles. Gaming revenue fell 69% from last year’s quarter, but momentum in data centers and their customer segment, including sales of Ryzen desktop processors, is enough to push the stock higher next year. Management sees substantial growth opportunities in these markets. It recently announced the acquisition of ZT Systems, which will expand its opportunities to meet the growing demand for AI infrastructure.

More importantly, strong demand for data center and server chips benefits AMD’s margins. Adjusted earnings per share grew 33% year over year last quarter, and analysts expect profits to rise 52% in 2025.

AMD Stock are not cheap at a forward price/earnings (P/E) ratio of 42 on 2024 earnings estimates, but that’s a reasonable valuation to pay for a fast-growing AI chip supplier.

2.Microsoft

Microsoft (MSFT 2.12%) is going to be the face of AI for millions of people. The software giant has rolled out AI features in its consumer and business offerings, including Copilot Assistant for Windows and Microsoft 365 apps. More people are using Microsoft 365 (e.g. Word and Excel) , and the Azure cloud business continues to experience strong growth, driven by increased demand for AI services. The stock’s 9% year-to-date return trails the S&P 500, but Microsoft’s momentum in cloud and AI should boost the stock price.

There is some uncertainty about the timing of Microsoft’s capital spending to support AI demand and how that spending will translate into long-term profits. But investors are giving Microsoft the benefit of the doubt. Revenue growth continues to look strong, with Microsoft Cloud revenue reaching $38.9 billion last quarter, up 22% year over year.

However, the spending needed to support demand for AI services is putting pressure on profits, which are up 10% year-over-year. That’s lower than the 16% increase in revenue, but Microsoft is growing its cloud and AI services, which will lead to better margins over time.

Microsoft is capitalizing very well on AI adoption. Company expects AI-driven revenue to surpass $10 billion in annual revenue in the next quarter, making it the fastest-growing business in history from Microsoft.

Investments in AI will continue to weigh on margins, but management is countering this trend by focusing on high-margin opportunities in its consumer products. Overall, analysts expect the company’s profits to rise 15% in the 2025 fiscal year ending in June. The stock is fairly valued at a forward P/E of 31, so investors should expect Microsoft Shares to keep pace with income.