2025 Is the Year of BATMMAAN. Artificial Intelligence (AI) Leader Nvidia Is the $1 Trillion Stock to Buy.

The Motley Fool · 01/07 10:45

Large tech stocks have been dominating the markets in recent years. From acronyms like FANG, then FAANG, to the "Magnificent Seven," investors created ways to group the biggest and fastest growth technology names.

After another astounding year in 2024 where the tech-heavy Nasdaq Composite index surged by 28%, the outlook for 2025 looks a bit more uncertain. While many tech companies should continue to show strong growth in revenue and earnings, the stock valuations reflect that in many cases.

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But all eyes will still be on what can now be called the BATMMAAN stocks in 2025 as growth could very well still outpace expectations. This group of BATMMAAN stocks all have over $1 trillion market caps. They are Broadcom (NASDAQ: AVGO), Apple (NASDAQ: AAPL), Tesla (NASDAQ: TSLA), Microsoft (NASDAQ: MSFT), Meta Platforms (NASDAQ: META), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), and Nvidia (NASDAQ: NVDA).

But there's only one that currently looks undervalued. Even after it has tripled in price over the last year, Nvidia is the only BATMMAAN stock that still looks undervalued by one important metric.

The best way to value growth stocks

Valuing tech stocks can be tricky. Investors inevitably bid shares higher based on potential future growth, but before revenue and earnings have yet materialized. BATMMAAN stocks have bright outlooks regarding growth in 2025. Trends in technology including artificial intelligence (AI), robotics, computing power, and autonomous vehicles will drive increasing sales and earnings.

But the stocks reflect that already. The most complete way to quantify which is the best value is to compare estimated earnings growth to the stock's forward price-to-earnings (P/E) ratio. If that P/E-to-growth (PEG) ratio is below 1, it means the earnings growth rate is expected to outpace the valuation investors looking ahead have already assigned to the stock. It's one way to suggest a growth stock is undervalued. The table below shows that Nvidia is the only trillion-dollar stock that still has a PEG ratio below 1.

Company	Market Cap* ($in trillions)	2025 Earnings Growth**	2025 PEG Ratio**
Apple	$3.68	19%	1.8
Nvidia	$3.54	52%	0.6
Microsoft	$3.15	13%	2.3
Alphabet	$2.36	12%	1.8
Amazon	$2.36	25%	1.4
Meta Platforms	$1.53	12%	1.9
Tesla	$1.32	37%	3.2
Broadcom	$1.09	28%	1.3

Data source: FactSet Research reported by Barron's. *Market Cap as of 1/3/25; **Ratios and growth based on calendar year estimates.

A diverse group of tech businesses

Each of these companies has a unique avenue for growth. Apple relies on iPhone sales to keep adding users to an ecosystem that integrates with its other consumer products and services. Amazon's consumer e-commerce business remains a major contributor to its revenue, but Amazon Web Services' cloud computing services are increasingly important. Its growth has helped Amazon shares rise by 55% over the last year. Analysts expect earnings to rise by another 25% in 2025.

Microsoft also has a quickly growing cloud storage segment with Azure. And like Apple, it integrates retail computer offerings with related services. Meta Platforms relies on recurring subscription and advertising revenue from its social media platforms. But Meta is also driving growth in augmented-reality (AR) and virtual-reality (VR) products and applications. Meta shares have jumped nearly 75% in the past 12 months.

Tesla is perhaps the most diverse company in the trillion-dollar club. Its valuation goes well beyond its position as the leading global electric vehicle (EV) company. Tesla is collecting data from those EVs to improve self-driving software, hoping to launch a fleet of autonomous robotaxis. It also has a growing energy storage segment and an increasingly discussed robotics division with Optimus humanoid robots.

While these are all different paths, all of these companies are investing heavily in the future. That spending is one important area of common ground. It is also why Nvidia is projected to grow its earnings much faster than the others in the BATMMAAN group.

AI ties it all together

These companies are spending heavily to increase compute power. Data centers used for cloud storage aren't enough. Now big tech companies need data centers dedicated to developing large language models and the other functions AI models perform. Nvidia is the leading source of advanced semiconductor chips for this purpose. It just launched the powerful Blackwell graphics processing units (GPUs) architecture and plans for the next-generation system, Rubin, to be available next year.

Broadcom provides networking and software solutions for these data centers. Its shares jumped by more than 120% last year largely because investors increasingly see what it brings to the growing AI ecosystem.

But much of the spending is being directed to Nvidia. Microsoft President Brad Smith recently said his company expects to invest $80 billion in its fiscal 2025 for AI-enabled data centers used to train models. Nvidia shares as some of that spending turned into revenue and earnings. Though the stock rose, the company's growth looks to continue in 2025, and it still looks like a good buy.

PEG is one good way to find undervalued growth stocks. Of course, the forward estimates need to be realized, or the stock will be punished. That's the risk investors have to manage. But Nvidia looks like a good bet heading into the new year.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Howard Smith has positions in Alphabet, Amazon, Apple, Broadcom, Microsoft, Nvidia, and Tesla and has the following options: short January 2025 $255 calls on Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, 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.