Artificial Intelligence (AI) is going to infiltrate every aspect of our lives, so its no wonder investors are in search of AI stocks to buy. From the games we play to figuring out what’s wrong with us at the doctor’s office, the uses for AI are far and wide. The applications are seemingly limitless, but our technology does have some boundaries right now. That’s because AI is only in its infancy, with plenty of room to run stretching far into the future. Investors see this as an opportunity, and rightly so. But how can you find AI stocks that can claim a top spot in the race toward the future?
For long-term investors that want to buy and hold a stock for years to come, the larger, more diversified tech giants are worth considering. Their strong balance sheets and trove of customer relationships make them good long-term AI investment opportunities.
Nvidia (NVDA)
One of the first places investors look when it comes to AI stocks to buy is chipmakers. Semiconductor manufacturers like Nvidia (NASDAQ:NVDA) have been on somewhat of a roller coaster, but with AI fueling fresh optimism it seems growth is back on track.
Nvidia’s latest guidance was for sales growth of almost 70% thanks to AI-related demand. The world’s most famous AI language model, ChatGPT runs on Nvidia chips. That gives the group a strong foothold in the industry as it continues to grow. Nvidia chips are higher margin than some of its peers thanks to their advanced capabilities. The group’s also building out a small software arm that offers chips that have already been “pretrained.”
Notably, this kind of growth story comes at a price. Nvidia shares aren’t exactly cheap, reflecting investors’ optimism. However with so much potential ahead the sky-high valuation is justified, and worth stomaching if you’re able to ride out some near-term volatility.
Microsoft (MSFT)
ChatGPT has become somewhat synonymous with AI, making its largest partner Microsoft (NASDAQ:MSFT) one of the sought after AI stocks to buy. Notably, AI is just a drop in the bucket at Microsoft right now but it fits nicely with the tech behemoth’s suite of services and is quickly making inroads into just about everything the company does.
For now, Microsoft is leading in the race to monetize AI thanks to its strategic purchase of a major stake in OpenAI. Artificial intelligence will add significantly to the group’s existing portfolio of services, from its software to cloud-based security. That should drive higher margins down the road as long as the group can navigate the ups and downs that come alongside such a new technology.
There’s no reason to believe Microsoft can’t roll with the punches. The company has been a staple in the tech industry for decades, and has reinvented itself from a tired hardware maker to a cant-live-without software as a service provider. Plus Microsoft has a rock-solid balance sheet with plenty of cash to play with. That means investing in future growth within its AI arm, or potentially making more strategic acquisitions.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is probably not a name you’d expect to see on a list of AI stocks to buy, but you’d be remiss to count out the cloud-computing giant. Amazon’s proven incredibly nimble given its size. Every time you turn around Amazon is leader in something, e-commerce, streaming, cloud computing. As the largest cloud computing player, Amazon is in a strong position to leverage AI in the years ahead.
While Microsoft’s gotten most of the press for its ChatGPT large language model, Amazon’s not resting on its laurels. The company has its own large language models thanks to some smaller startups. The group’s also developed its own in-house machine learning models, and given the enviable trove of customer data the group’s sitting on, we’re likely to see some big things in the years ahead.
AI will have a profound effect on every business, but perhaps an amplified one when it comes to Amazon. From using machine learning to coordinate logistics more efficiently to better understanding and predicting customer buying patterns, the opportunities are massive.
On the date of publication, Marie Brodbeck held Microsoft. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.