Episode 73 | Investing in AI: 2025’s Leading U.S. AI Stocks

In Episode 73 of “Market News with Rodney Lake,” Professor Lake, director of the GW Investment Institute, delivers a comprehensive overview of the nine leading U.S. AI stocks on the public market. He highlights Google’s strong 2025 performance, heavy AI investment, and strategic advantages from in-house chips and an integrated enterprise ecosystem. Lake also examines valuation and competitive dynamics across the AI landscape, including Nvidia’s GPU leadership, Apple’s longer-term AI positioning, and Tesla’s progress in autonomous driving, robotics, energy, and data centers in space. In all, Professor Lake emphasizes the transformative impact of AI and the importance of understanding these market leaders.

Chapters

• 0:00 Introduction
• 3:26 Alphabet & TPUs
• 11:35 Nvidia Low Valuation
• 14:15 Amazon & Trainium Chips
• 16:05 Microsoft
• 17:58 Apple & the Long Game
• 19:20 Tesla, FSD, & Energy Strategy
• 21:41 TSM
• 22:21 AI & Cybersecurity: Crowdstrike & Palo Alto Networks
• 22:59 Conclusion

Transcript

Thank you for joining Market News with Rodney Lake. This is a regular program for the GW Investment Institute where we talk about timely market topics. I'm Rodney Lake, the director of the GW Investment Institute. Let's get started.
Welcome back to Market News with Rodney Lake. I'm your host, Rodney Lake. Today's episode is going to be a little bit different. But before we get into it, remember this is a GW Investment Institute podcast for entertainment and educational purposes only. We are coming to you from the George Washington University School of Business. Duquès Hall. Duquès family studio right here in the heart of Foggy Bottom.
Super excited to be talking to you today. So today's episode, we have different versions of the episode. We're we're trying a new format today, and I think we'll keep it at least for a few times. I'd love to hear your feedback. So in today's episode, we're going to take a broad overview. It's going to be about stocks.
So it's not going to be that off base. Something different. But what we're going to talk about are AI stocks. So artificial intelligence stocks. Now we've talked about a bunch of these stocks on the episode already or on episodes in the past. But today we're going to have a broad cut. So we're going to talk about some of these companies, a little bit more than others.
But we're going to talk about a variety of companies that I think, so again, this is hot take not, you know, investment advice, educational entertainment purposes only. But this is my hot take on the companies that you should be paying attention to. With respect to AI. And there's plenty of people out there telling you what to pay attention to.
These are some of the companies that we either owned or have owned, in our portfolios, at the GW Investment Institute. And I think as an investor, business person, analyst, these are some of the companies that you should be paying close attention to in the AI game. The AI game is changing fast. And so I think it's pertinent that you stay up to date, that you check out what's happening.
And now as a segment, let's say as a as an episode, we're going to bring this to you and we can refine it. Love to hear your feedback. If you have, you know, put it in the comments. Let us know. What would you like to hear about these companies that maybe we're not saying? What questions do you have?
And we can get to answering those. All right. So what are we going to talk about. So so the companies that we're going to talk about. So I can maybe just give you the companies at the top of the episode here. And then we'll dive into each of them, a little bit. So we're definitely going to be talking about Alphabet, also known as Google.
We're going to be talking about Nvidia. Maybe seems obvious. Our largest holding at the Investment Institute, we're going to be talking about Amazon. We're going to be talking about Microsoft. We're going to be talking about Apple, Tesla, CrowdStrike, Palo Alto, those are the names, and TSM, Taiwan Semiconductor. And so those are the names that we're going to talk about in the episode.
And so we'll dive into each one of those a little bit here, so that we can talk about them. We're not talking about the Chinese names today. We'll get to those. But so these are the, the US AI companies. We'll talk about the Chinese AI companies as well. But on today's episode, it'll be, excuse me, the US AI companies that I think are worth paying attention to.
It's not an exhaustive set, but these are the ones for today's episode. So again, that is going to be Google, Nvidia, Amazon, Microsoft, CrowdStrike, Palo Alto, Apple, Tesla and Taiwan Semiconductor in no particular great order there except we're kicking off with Alphabet here. All right. Not in alphabetical order, for that otherwise. All right. So let's talk about it.
So Alphabet. Everybody knows Google. And we've we've talked a lot about this. This is a portfolio holding. It's an important portfolio holding has been doing well. When you talk about okay, the year to date numbers, you know, it was out of favor, for a little while. And people thought, okay, well, charge me is really going to come for it.
Now, remember, OpenAI is not a public company. We're not going to talk about that today. We talk about publicly traded companies, the things that we can invest in on the public markets. You can invest in, excuse me if you have access to it in the private rounds to OpenAI, people are investing in that company.
Excuse me, I'm drinking out of the GW Business School mug here, you know, link up, buy it. You know, lots of people thought, okay, we have this legal overhang, Google Search is going to get killed by OpenAI's ChatGPT. And that's where it's all going. Well, that ended up not happening. The legal situation resolved itself much better than I think people expected.
And then you heard, Google off to the races here and we'll talk a little bit about that. So but let's look at the numbers for a quick second market cap as of December 4th here is $3.82 trillion. So very big company, one of the largest market cap companies in the world. And the year to date number now for 2025 again through December 4th, 2025 is 67%.
So it has run super hard. And we'll talk a little bit about the business, management, price valuation, and balance sheet, as we typically do when we talk about the companies. So when you talk about, the business here, let's go over some of some of the quick metrics here. Right. And some of the updates on the, on the AI.
So this business, excuse me, is still running at nearly 60% gross margins. From the latest quarter of 9/30/2025, 59.2 and net margins of 27%. And these are terrific margins. Now. Excuse me. Take another sip here. We've already talked about this before, but they're investing a lot. They're on track to invest 90 billion for the year for the full year 2025 calendar year.
That fiscal year, also the calendar year, excuse me, which is going to leave them free cash flow at 60 billion. That's still a lot of free cash flow. And now let's go back to this. Now focus on the AI piece on the business side, they have a Google cloud, which is that, you know, their cloud version of, you know, Microsoft Azure and AWS for Amazon, which we'll talk about a little bit as well.
And that business has been growing. And so in that cloud business, you know, they offer that to other clients obviously, and people can, you know, rent out for example, Nvidia chips and Blackwell as well, but they also have their own chips. And I think this is really important. And again, as a business person, analyst, investor, you should be paying attention to this if you have not already.
So what do they have that others don't have? Right. So you can everybody can buy the Nvidia chips and getting you know securing capacity there and enough supply is important. But back in 2015, they started building something called tensor processing units. So what are those? Those are what are called ASIC, which is application specific integrated circuit.
Circuit. And they're doing specific workloads. So the GPU, from Nvidia, I'm not an expert here, just trying to explain this as an investor. The GPUs are general purpose graphic processing units, and they can do a variety of different things. And you can use Cuda to help program the way that you want to do that is the software layer, that that helps make that, that even much more powerful moat for Nvidia that they have the software and the hardware there.
But how do you skip over all of that? Well, you really need to have some of your own chips. They've started building these chips back in 2015. So tip of the cap here to Google for doing that. And now they're on their seventh generation, which they just announced it launched called Ironwood. And again if you haven't been paying attention to this I encourage you to do that because Gemini three, which is their frontier model, large language model, frontier model, most advanced, that they have.
And depending on, you know, what system that you're using, I'll give my hot take on what I think, who's leading and that is right now again, Rodney Lake’s AI hot take on what models for investment research. I still think Grok leads then, so Grok 4.1, then Gemini 3. I think those are the top two. And I think they really are ahead now of ChatGPT 5.1.
And Claude Sonnet. So I think, and even Opus, I think are are behind. So I've been using them all. I think Gemini is a big upgrade from 2.5 though. So I do think, it is a is a big move. And I think it's important, to be paying attention to that. So again, these are their own chips.
I think it's really important to be paying attention to what's happening there. So start doing some of your own research if you haven't done already. Always do your own work. Always have. You know, you want to create your own edge. You want to have your own ideas. Not that you're not going to agree or disagree with people.
There'll be cases, obviously, for other people own Google. We own Google. It's not new in that sense, but you want to make sure that you have your own understanding. You want to build your own database of understanding for these things. And I do think these companies that have this advantage like Amazon here, or rather, we'll get to Amazon rather like Google here with its own TPU is important.
And they built Gemini 3.0 with their own chips. Right. And so not having access to Nvidia chips is not going to be an issue for them to keep pushing their models forward. And on the enterprise side, I think it's really important to note that, excuse me, if you have Google. Right. If you have the office, suites, the suite of products that are in the office, like Google Docs and Google Sheets, and Gmail and it's all integrated, that's going to work better for you as a customer to use Gemini.
Right. The security piece is going to be a little bit easier to manage, for you as an enterprise and even as an individual, if you have an individual Google account and you're paying for the Pro subscription, and you get access to all of these things, that's just going to be easier for you to manage. Also, for your own security, you're not copying pasting things in and out, into a different, large language model.
So I think there's some big advantages here for Google on the enterprise side especially. But but even including on the individual side, where again, they have their own email, they have their own docs. They have, you know, they have their own photos built in. So a lot of this, that's integrated, I think, gives Alphabet Google a huge advantage over OpenAI.
And I would frankly be a little bit concerned. Apparently there was some code red issued by saying Altman, the CEO of OpenAI. I don't know if that's true. It's hearsay right now, but if they have an issue, they should, because that's my hot take. I think, they're well behind now. And they do not have all of the, this enterprise, sort of know-how and clients and set up, and they're losing money, not making money.
And Google's making quite a lot of money, even after investing a lot of money. So I think the competition, has stepped up now and I think, who would I put as the frontrunners here? I would put Google out in front at the moment, given their balance sheet, their business, their management. And I really think that if you had to say, like, well, who's going to who's going to dominate, who's going who can be one of the dominating forces in AI?
I think Google is going to absolutely be one of those. And there's one right now. And I think they're going to have a tough time. Others, unseating them. All right. Well, let's move on, to some other names, maybe come back to Google. But Sundar Pichai, I think, is doing a fantastic job on the management. And then let's visit maybe the valuation here.
The balance sheet is excellent. Before we before we head to another company. Excuse me. All right. So the valuation even after this huge run, 67% the year to date, 80%, year over year, but you're still looking at a forward of 28 times. And so this is not a super expensive company, by any means. And you wouldn't say that.
I, you know, I think it's at least fairly price it it may even be, you know, undervalued at the moment given the position they have in the AI world. All right. Again, not investment advice. So let's move on to Nvidia. So Nvidia has been, you know, hit a little bit here lately. And so the year to date numbers only 36%.
Right. And but they've come off and certainly if you look at, you know, where they've been, people are concerned, that, you know, Google, right, has their own TPUs. And there's this overcapacity, these deals where their vendor financing these lazy Susan deals, OpenAI, you know, issuing this code red. I think it's a concern, you know, for the spend and all the money that that has been pledged 1.4 trillion, for example, and OpenAI, a huge chunk of that is going to obviously be for Nvidia chips.
How's that all going to play out? Where are they going to get that money? You know, that obviously has an impact for Nvidia. In the short and medium terms, but longer term, and medium to long term. And VR is still in the driver's seat. Right? They're still producing some of the best chips, if not the best chips.
And I think they're the best chips, on the GPU side. And they're not slowing down. They're not sitting still. Jensen Huang is super, focused. He was in Washington yesterday. He is, you know, plenty wealthy. He doesn't need to work anymore, obviously. Or maybe it's not obvious, but if you're not paying close attention, he he likely doesn't need to work anymore for money.
He's trying to move this company to the next level. So, their valuation is not quite as good. 38 times is the forward. And on the business side, the metrics still seem very good. But I think that's where some of the sell off has come that the metrics for this company are so good that people are worried that they, you know, okay, they're going to have to take a hit to this, especially because, you know, as competitors come in like the TPUs and maybe the spend, has been overstated on some of these, you know, people like OpenAI, they're going to get hit.
So if you look at the gross margin, 70% on the gross margin side and 52% on the net margin side, people are concerned about that. They're going to come in. But, you know, they're continuing to, to invest. They're not investing as heavily as these other companies. But they're, you know, 5.7 billion for the year, and they're going to have 97 billion in free cash flow, and so nearly 100 billion of free cash flow for the full year.
26 there's is, sorry, not calendar year, but there is January 31st. And so 5.7 billion. Not an inconsequential number, but certainly not the nearly 100 billion that some of these other companies like Google, Alphabet are doing. But 100 billion nearly and free cash flow. And so I think they're still super consequential. I think they're still at the, at the top of the league table here and pure play open, or pure play AI.
Not OpenAI. I think it's an issue with OpenAI with them. All right. So let's move on. To Amazon. We're just going to try again, touch a bunch of different companies here that I think are relevant in the AI space. All right. Another sip of water from my trusty mug here.
All right. So Amazon. Amazon I also think is in a unique position because they're building some of their own chips, the Trainium chips. The year date number they have not been up a lot, 3.9%. And if you look at their valuation 26 times, excuse me, is the forward PE. So, you know, it looks like, you know, people have not been appreciating them.
And certainly, you know, AWS is the is one of the big players in cloud. You know, so the OG in that world, still is a third of the market, you know, and now has been rolling out, if you watch their conference, they're rolling out new options for their, for their clients, to have dedicated LLM models for themselves.
And so why is that important? Excuse me? Because, you know, if a client is using a general LLM to create some type of advantage, well, it's that's going to be commoditized and lots of other people are going to have that. So they're working on helping clients create customized LMS for them to do whatever tasks that they want to do to help them be distinguished and unique.
So we'll have to see how that all turns out. I think it's worth paying attention to that piece. From the AWS standpoint, they have their own Trainium chips, and they just launched their whole data center, out in Indiana that's all Trainium chips for Anthropic, which they have an investment in. And they there's a tie between, Microsoft, Anthropic, and Amazon, on that front.
So I think it's, it's worth paying attention to Amazon. It's worth paying attention to the Trainium chips. And it's worth paying attention to these new offerings for these bespoke LLM models that they're building for clients, apparently $100,000 a year for access to that. So I think those things that combination of things is worth, paying attention to Microsoft.
We're going to move a little bit more quickly now, trying to keep this to 20 minutes. Microsoft. You know, if you look at the numbers here. So the year to date, returns 13% not fantastic. You know they they've had some pullback here as well. People concerned about you get some reports about spend on AI for them.
And there are multiple if you look at, you know, 29 times forward, it's certainly not cheap by, by any measure. But Microsoft continues to be, you know, a huge behemoth, along with AWS and Google in the cloud space. And so I think it's really important to continue to pay attention to what's happening in that space. And then, you know, there are huge enterprise business.
And they have these relationships. And so, excuse me, getting things done at the enterprise level is going to be much easier for them than OpenAI. They have a stake in OpenAI. I do think this is worth paying attention to. It looks like this stake is strained. Again, I mentioned that they had a tie up with Anthropic, Amazon.
And so I think it's it's interesting to watch and see how okay, they're pivoting away, I think from OpenAI, and to having more options for their clients. And I think that tie up between Anthropic, Amazon, and Microsoft is interesting, to talk about that. So, you know, pay attention to to what's happening. Sorry, I was not between Amazon, I mean, Nvidia, excuse me, it's not a tie between the three are Nvidia anthropic, and Microsoft.
All right. So I think they're still in the game. I think they're worth paying attention to. I think they have taken a little bit of a hit. You know, they bet early they look like the leader with OpenAI. But I think it's worth, you know, making sure you're paying attention to what's happening at Microsoft. They're certainly trying to reposition themselves.
They're still a dominant force. Microsoft Azure are still one of the biggest cloud offerings. So I would continue to pay close attention to them. Apple, we're going to move quickly here. And to the next couple of mentions here. Apple has sort of lost its way. You know, the person is stepping down, from their AI, they're getting a new person who's coming in.
I think that's, you know, worth paying attention to here. They said they're going to start, you know, fixing some of the stuff for Siri, making it smarter. Please do that. I have Apple, lots of other people do too. But Apple is not out of the game. I think they're very still, much in the game. It's one of our largest holdings.
I don't lack any confidence in Apple right now. I do think they're behind. But I do think that, you know, they have the wherewithal. I, you know, Tim Cook is a fantastic manager, has been a fantastic CEO. I was a little bit concerned, when we talked about Apple, one of our episodes of very concerned about their AI game.
Now, by the way, it looks potentially like we mentioned this. Maybe not spending all that money ends up being one of the best ideas, and then they can figure out how they're going to place themselves in this business. A lots of people know Apple, the year to date number 12%, the forward PE 33 times. I think that's where there's concern that they're still even without having some really specific I play here that they could be potentially overvalued.
But the iPhone 17 has been super well received, and they're likely going to have a super big year with that. I think they're very much in the AI endgame. Continue to pay attention to them. Tesla here moving on. Quickly. You know, robotics and real world AI that's autonomous driving robotics and the energy piece. And also what we talked about.
And more and more people are talking about this, which is data centers in space. Tesla said they're gonna get involved with that. They're going to have their own fab for chips. I think it's very much worth paying attention. Obviously, Elon Musk is a polarizing figure. Sometimes, the year to date number up 11%. Obviously, the valuation is, is, much different than all the other companies that we've talked about 274 times is the forward.
So there's a lot of good news priced into this, you know, again, not investment advice, but if you look at who's leading autonomous driving 14.2 right now out very good, works. They got robotaxis in in Austin and in the Bay Area in California, San Francisco works super well. I think they're going to they have it nailed
Basically. They're going to get it. It's going to get even better. If if it's not basically done now with 14.2, it's very close. That's the software number for the Full Self-Driving, supervised Full Self-Driving at the moment. So I think they're the leader there. And then the Optimus, I think that's a that is a big deal. And they're making lots of progress there.
That's going to be huge total addressable market. TAM. Everybody's going to want one of those, to do the dishes, clean the house, you know, do whatever, you need done, get work done. Super important, I think, to be part of that market. And then the other pieces, their investments in the energy business, you know, they're building grid scale batteries.
And I think that's going to continue to be super important there. Autobidder software, you know, check that out if you haven't seen it. And then Musk, talking about which also Alphabet talked about it and Amazon has talked about two data centers in space. I think that is a real thing that is going to happen. I think Musk will be the first one to get that done, because he controls right now.
And if you looked at if you seen the numbers, kilograms to orbit as a percent of total kilograms to orbit and SpaceX is like 85 plus percent of the total market volume. The other piece is China. And so I think you have to really think about what's happening there. It sounds a little bit like science fiction at the moment, but I think that is going to be a reality that solves the the energy piece.
They still have to work on the cooling side. And if you talk about the low latency with the LEO satellites, low Earth orbit, I think that's super important to mention. All right, last up here, TSM, they built all these chips, for these companies. And so they built chips for Nvidia, Alphabet, Microsoft. Maybe they have custom chips too, Amazon.
So I think it's, it's important to pay close attention to what's happened at TSMC. The year to date number, they're up 48%. So a lot of people realize that and certainly the PE 28 times not cheap. But they're that infrastructure play. The concern is that all of that in Taiwan, all the the high end three nanometer, for example, in Taiwan, but that's coming to the US, Texas, Arizona.
And I will mention two other names here, which we'll go over just very quickly. And that is CrowdStrike and Palo Alto, I just mentioned both together. I think on the cybersecurity side, it's important to pay attention to them. We won't do a deep dive. Or not even we didn't deep dive into anybody. We won't go heavily into them.
But year to date CrowdStrike up 50%. The valuation is high, though, 138 times, Palo Alto up, 7%, a little bit different. And they're highly valued as well, 50 times as the forward there. But both of those I think are in the pull position, for AI and cybersecurity here. So I think it's important to pay attention to those names.
All right. So, again, we went over Alphabet, Nvidia, Microsoft, Amazon, CrowdStrike, Palo Alto, Apple, Tesla and Taiwan Semiconductor today. We’ll feature this AI episode. Going forward. So we'll continue to talk about the names that that I think are relevant on the AI front. We'll talk about the Chinese names, as well in a forthcoming episode.
But I think as an analyst, investor, business person, you should be paying attention to what's happened on the AI front. And we're talking about publicly traded companies. So we didn't obviously didn't spend time on OpenAI or Anthropic. They're private companies. But obviously they're very important, important frontier models. So pay attention to what's happening here. AI is obviously, I think, a transformative feature of what's going to be happening in society and in the markets as well.
And so pay attention. But until the next episode, thank you for watching, and we'll see you back on the next episode of Market News with Rodney Lake. Thank you.