Best AI Stocks for 2025 with hidden gems that could outperform big tech giants
Best AI stocks for 2025 - 7 undervalued infrastructure picks that could beat big tech. Fund manager reveals hidden gems with 2x returns
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Jul 01 2025
While investors continue to chase the "Magnificent Seven" tech giants, seasoned fund manager John Barr is looking elsewhere for AI investment opportunities in 2025. These undervalued AI stocks represent the best AI investment strategy for investors seeking alternatives to big tech. The manager of Needham Aggressive Growth Fund, whose portfolio has delivered double the returns of competing funds over the past five years according to Morningstar Direct, believes the real AI infrastructure plays are found in lesser-known companies that supply critical services to the industry.
While investors continue to chase the "Magnificent Seven" tech giants, seasoned fund manager John Barr is looking elsewhere for AI investment opportunities in 2025. These undervalued AI stocks represent the best AI investment strategy for investors seeking alternatives to big tech. The manager of Needham Aggressive Growth Fund, whose portfolio has delivered double the returns of competing funds over the past five years according to Morningstar Direct, believes the real AI infrastructure plays are found in lesser-known companies that supply critical services to the industry.
Why AI Infrastructure Matter More Than Big Tech in 2025
In a recent interview with MarketWatch, Barr explained his "picks and shovels" investment strategy for AI stocks. Rather than betting on the obvious winners like Microsoft, Meta, and NVIDIA, he focuses on companies that provide essential tools and services that enable AI development and deployment.
"When companies aren't in the spotlight, it increases the likelihood that they may offer significant value that's not yet reflected in their stock prices," Barr explained. This contrarian AI investment approach has proven successful, particularly as AI infrastructure demands continue to surge across industries. For 2025, these AI stock picks represent superior growth potential compared to overvalued big tech giants.
7 Best AI Stocks for 2025
Vertiv Holdings - Data Center Cooling Solutions
$VRT Vertiv Holdings stands out as a pioneer in data center infrastructure, having sold the first computer room air conditioning system in 1946. The company develops and sells cooling components and systems that enable data centers to function properly – a critical need as AI workloads generate unprecedented heat.
Barr notes that while VRT stock has already increased tenfold, he expects continued momentum from AI-driven growth. The stock remains one of the fund's top ten holdings in Q1 2025, positioning for further gains as data center expansion accelerates.
KLA Corporation - Semiconductor Testing Equipment
$KLAC KLA Corporation sells advanced testing and measurement equipment used in semiconductor manufacturing. This AI infrastructure stock is particularly well-positioned as chip complexity increases.
Barr highlights that KLA is expected to see sustained revenue growth driven by two new testing products: Eagle G5 and Hawk. These systems are essential for manufacturing high-performance computing (HPC) chips that power AI applications, making KLAC a critical AI infrastructure play.
FormFactor - Semiconductor Probe Cards
$FORM FormFactor provides testing and measurement technologies used in chip manufacturing processes. The company's growth trajectory centers on "probe cards" – essential tools for testing chip quality during manufacturing.
These probe cards are particularly crucial for producing high-bandwidth memory required for AI applications. As AI chip complexity increases, FormFactor's testing solutions become increasingly valuable, positioning FORM as a key AI infrastructure stock.
Artris - Chip Communication Technology
$AIP Artris specializes in technologies that help subsystems within semiconductor components communicate with each other. As chips become more complex and require greater computational power, Artris stands to benefit significantly.
Barr notes that the company has launched several new products over the past 18 months that should drive more growth than the market currently prices in. This makes AIP an undervalued AI infrastructure opportunity.
PDF Solutions - Semiconductor Analytics
$PDFS PDF Solutions offers products that help chip manufacturers collect and analyze data to improve product quantity and quality. According to Barr, the company's products "catch errors, helping manufacturers save money."
The founder-led management structure provides an additional advantage, as leadership remains deeply invested in long-term success. This AI infrastructure stock benefits from the increasing complexity of semiconductor manufacturing.
Vishay Intertechnology - Automation Components
$VSH Vishay Intertechnology sells computer chips and electronic components used in automated equipment found in manufacturing facilities. With President Trump's "America First" policy driving domestic semiconductor manufacturing, VSH is positioned for significant growth.
The company supports "next-generation automation across diverse sectors, including factories, automotive electrification, 5G network technology, artificial intelligence, and the growing expansion of cross-sector connectivity," making it a comprehensive AI infrastructure play.
Cognex - Machine Vision Systems
$CGNX Cognex provides computer vision products that ensure manufacturing processes in advanced facilities run smoothly. The company's solutions are valuable for "applications where human vision is insufficient, or where significant cost savings can be achieved by reducing labor or improving product quality."
As domestic manufacturing expands under current trade policies, Cognex's automation solutions become increasingly essential, positioning CGNX as a key AI infrastructure beneficiary.
AI Infrastructure vs. Magnificent Seven
While the Magnificent Seven show mixed results in 2025, with some posting double-digit gains and others declining significantly, these AI infrastructure stocks offer a different risk-reward profile. The specialized nature of their products and services creates higher barriers to entry and more predictable demand patterns.
Barr recommends following long-term trends including artificial intelligence, data centers, and semiconductors. His approach focuses on companies that may not be in the spotlight but provide essential services that enable AI development and deployment.
The fund manager's track record speaks for itself – consistently outperforming competitors by focusing on these "picks and shovels" plays rather than chasing the most obvious AI stocks.
Ready to diversify your AI portfolio beyond the obvious plays? These infrastructure stocks could be your next big opportunity.
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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.
