Investors thinking capital spending to build artificial intelligence (AI) infrastructure will continue to soar were thrown a curveball earlier this year. China's privately held DeepSeek announced its new R1 large language model (LLM) cost only $6 million to build, and big AI tech stocks plunged.
But it's unclear exactly what went into building DeepSeek's model, and large U.S.-based tech companies reiterated plans to continue to spend billions to grow data center and AI compute power in 2025. With those capital expenditure plans still on track, investors should look for the following two growing tech stocks to benefit.
From Russia with love (and cash)
Amsterdam-based Nebius Group(NASDAQ: NBIS) grew out of the restructuring of Russian search engine giant Yandex. The Nasdaq stock exchange halted trading in Yandex after Russia invaded Ukraine. After a Russian consortium purchased its Russian assets, the restructured company resumed trading on the exchange last October as Nebius Group.
The company is now made up of its core AI infrastructure business as well as three additional businesses. Those businesses include AI development data partner Toloka, educational technology business TripleTen, and autonomous driving and delivery robot maker Avride.
Nebius' first full year trading on the Nasdaq exchange is off to a great start with a 67% gain year to date.
That's because its business is growing quickly. Quarterly revenue has jumped from just $11.4 million in the first quarter to about $38 million in the just-reported fourth quarter. Full-year 2024 revenue reached $117.5 million, and management sees that continuing to accelerate. CEO Arkady Volozh called plans to achieve as much as a $1 billion annual revenue run rate by the end of 2025 "well within reach."
Also, the restructuring left its balance sheet in pristine shape. The company ended the fourth quarter with $2.45 billion in cash and negligible debt. That's more than a quarter of the company's total $9.3 billion market cap.
Investors aren't the only ones noticing. Leading AI chip and software company Nvidia(NASDAQ: NVDA) participated in a $700 million private funding round in December. Nvidia also owns more than 1 million shares of Nebius stock worth about $33 million. That investment was made in the fourth quarter, according to Nvidia's recently released Form 13F filing.
Nvidia flexes its AI muscle
Speaking of Nvidia, as large as it has become, the company still has great growth potential. Fears that capital spending on AI infrastructure would stall were premature. Several large growth tech companies have recently announced spending plans for 2025. Microsoft, Meta Platforms, Amazon, and Alphabet have confirmed plans to spend at least $300 billion combined in ongoing AI capital expenditures through this year.
That helps support analyst views that DeepSeek excluded costs when announcing that it created its R1 LLM for just $6 million. Costs related to research, trial architectures, data, and algorithm work may not have been included. After the DeepSeek release, the state-owned Bank of China even announced it would be spending about $137 billion over the next several years to support the AI supply chain.
While investments in Nvidia's AI hardware and software haven't stalled, the stock price has been range-bound over the past several months. That offers investors a chance to own shares before another surge in the company's business.
Two fast-growing AI plays
Nvidia will report fiscal fourth-quarter results on Feb. 26. That's when the company should provide updates on sales of its Blackwell architecture and potentially the timing for its next-generation Rubin AI platform.
While revenue growth rates might slow, any sign that sales can continue to increase over the next 12 months could be a catalyst for the stock. Nvidia also has other growing segments including gaming, automotive, and robotics. The latter helps explain its interest in owning shares of Nebius.
Nebius' Avride business focuses on autonomous driving technologies for self-driving cars and delivery robots. The investment case for Nebius relies on management's predicted revenue run rate through 2025 as well as the almost $2.5 billion in cash on its balance sheet. If it achieves the high end of its 2025 revenue target run rate, it's currently trading at a forward enterprise value-to-sales ratio of less than 7. That's very reasonable for a high-growth tech stock.
Both of these fast-growing AI companies should be considered for investments in the technology space in 2025.
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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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Howard Smith has positions in Alphabet, Amazon, Microsoft, Nebius Group, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nebius Group, and Nvidia. The Motley Fool 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.
