The stocks included in the highly selective Dow Jones Industrial Average represent some of the most elite businesses in the world. These are companies that have a long history of delivering profitable growth and returns for shareholders.
But there are a few growth stocks among the prestigious group that stand out for their near-term upside potential. Here are two I would bet on to outperform the average Dow Jones stock in 2025.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free ?
1. Amazon
Amazon(NASDAQ: AMZN) delivered wealth-building returns to investors for many years thanks to its ability to win over millions of loyal shoppers to its online store. But one of the best reasons to consider buying the stock now is the opportunity for its cloud service business.
Amazon Web Services (AWS) is the largest enterprise cloud service provider. Revenue from this business makes up a small portion of Amazon's annual revenue, but it generates most of the company's operating profit. With AWS revenue growing 19% year over year in the third quarter, Amazon is entering the new year with lots of momentum.
The stock surged to new highs after the third-quarter earnings report, and it has great prospects to outperform other Dow Jones stocks in 2025. Thanks in part to accelerating growth from AWS, along with cost savings initiatives underway in Amazon's retail business, the company's trailing 12-month free cash flow more than doubled year over year to $47 billion.
AWS continues to roll out new AI tools for customers. It claims it has released more machine-learning and generative AI features than other cloud leaders, and the proof is in the pudding. Amazon says the revenue it is generating from AI is growing at triple-digit rates year over year.
Amazon's long-term earnings growth estimate, based on Wall Street estimates, currently ranks third among Dow Jones stocks. The consensus estimate has Amazon's earnings rising by 21% per year over the next several years, which means Amazon shares are positioned to outperform the Dow Jones in 2025 and beyond.
2. Nvidia
Nvidia(NASDAQ: NVDA) is the leading supplier of graphics processing units (GPUs). It was added to the Dow on Nov. 8, replacing Intel, which sends a big signal about its increasing importance to the economy as more companies adopt AI services.
You can't train AI models without GPUs. This is why demand for Nvidia's chips has outstripped supply over the last few years, which has been great for the company's profit margins and share price.
The chipmaker earned $53 billion in net income on $96 billion of trailing 12-month revenue through the fiscal second quarter. That is an extraordinary profit margin for a leading semiconductor business. With revenue growing at high rates, the company will be well positioned to deliver more profitable growth and returns to investors next year.
Its upcoming earnings report on Nov. 20 will reveal more about its momentum heading into 2025. On the previous earnings call, management noted that fiscal third-quarter revenue will be driven by existing chip products and early sampling of its new Blackwell chips that were designed to handle the most demanding AI workloads. These chips are expected to be a key driver of revenue growth next year.
Nvidia can maintain robust revenue growth in the near term due to the shortage of AI chips. Leading cloud service providers like Amazon are some of its biggest customers, and these companies are running out of GPU capacity. These cloud leaders are going to need more computing capacity to meet growing demand for their services, and this will continue to benefit Nvidia.
With another earnings report scheduled for Nov. 20, it's probably best to wait until after the fiscal third-quarter 2025 report to buy Nvidia shares, since earnings news can cause share price volatility. But over the long term, analysts expect the company to report annualized earnings growth of 35%, which ranks among the top of the Dow Jones. The stock is trading at a forward price-to-earnings ratio of 36 on next year's earnings estimate, which could support superior returns in the next calendar year.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $22,819!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,611!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $444,355!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.
