Artificial intelligence (AI) is probably the most talked-about investment area right now — and for good reason. The AI market is expected to expand at a double-digit compound annual growth rate over the next few years to reach more than $1 trillion by 2030. That means many companies — and those who invest in them — may benefit.
On top of this, AI is generating excitement because it offers concrete examples of how it could save companies time and money. For example, it can streamline processes or help a pharmaceutical company develop drugs more quickly. So, it’s easy to understand the importance of this technology. And that means you may want to start investing in AI players in 2024, in the early days of this high-growth story.
Nvidia, the world’s leading AI chipmaker, might seem like the obvious choice — but this high-flying stock isn’t the only game in town. In fact, two other AI players make fantastic stocks to buy and hold for decades thanks to their investments in AI — and the potential for this technology to boost their earnings over time. Let’s check them out.
Alphabet
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), as the parent of Google, already is the global Internet search leader, holding more than 85% share. And the company’s investment in AI is likely to keep this going. Alphabet is applying AI to search to broaden its capabilities and improve search in general.
The company has been testing AI throughout search, serving billions of queries so far. The tests have shown increased search usage among people using the AI features and higher user satisfaction regarding search results. Here’s why this is so important: Alphabet generates most of its revenue from advertisements on Google Search pages, and the more people use search, the more advertisers will keep coming back.
It’s also important to remember that Alphabet offers six products that boast more than 2 billion monthly users, and these represent opportunities to integrate AI and grow revenue. Finally, Alphabet’s Google Cloud business continues to increase revenue in the double-digits, and this could continue thanks to its selection of AI products and services. More than 60% of funded generative AI start-ups are already customers of Google Cloud, Alphabet said in its recent earnings call.
And Alphabet also emphasized that it has “clear paths” to monetizing its investment in AI through ads, cloud, and subscriptions. All of this means AI could have a significant positive impact on Alphabet’s business over time, making now a great moment to get in on this top tech stock.
Amazon
Amazon (NASDAQ: AMZN) benefits from AI in two ways. First, its investments in the technology are helping it cut costs and please partners in its e-commerce business. And second, AI is boosting Amazon Web Services’ (AWS) revenue as the business sells AI products and services.
As a global leader in e-commerce, Amazon strives to increase efficiency, and AI supports that by helping determine the fastest package delivery routes, for example. And a newly released tool allows Amazon to create a detailed product page for an item with just a link to the seller’s website. Amazon says more than 100,000 sellers have used at least one of its generative AI tools.
But the biggest impact of all may be in the earnings potential of AWS, which is already the company’s main profit driver. AWS, the world’s leading cloud provider, sells a wide variety of AI products and services — from top-performing Nvidia chips and platforms to AWS’ own chips for the cost-conscious customer.
All this has helped AWS already generate a multibillion-dollar annualized revenue run rate. And it’s important to remember we’re still in the early days of AI adoption, so AWS’ AI long-term growth prospects look particularly bright. The opportunity ahead is “very large,” CEO Andy Jassy said during the company’s earnings call this week.
So, Amazon’s already seeing significant revenue gains thanks to its AI investment, and this momentum may just be getting started — and that makes it a top AI stock to buy and hold for the long haul.
Should you invest $1,000 in Alphabet right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy.
Ready to Invest in Artificial Intelligence in 2024? 2 Stocks to Buy and Hold for Decades (Hint: They’re Not Nvidia) was originally published by The Motley Fool