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2 Artificial Intelligence (AI) Stocks to Buy Instead




Motley Fool

There’s no doubt about that Nvidia (NASDAQ: NVDA) has been the poster child for the artificial intelligence (AI) revolution so far.

Nvidias graphics processing units (GPUs) and Superchips are so sought after by cloud infrastructure companies and startups like OpenAI that there have been widespread shortages and a spike in prices for Nvidia components like the H100. Nvidia’s products form the backbone of the computing infrastructure that makes apps like ChatGPT work.

But Nvidia won’t have this space to itself forever. Competition comes from, among other things Advanced micro devices And Intelas well as the big tech companies that make up a significant portion of the customer base Apple, AlphabetAnd Metaplatformswho are working on their AI hardware to reduce their dependence on Nvidia.

Nvidia isn’t a bad buy right now, but there is some downside risk in the stock as it is up almost 500% since the start of 2023. That became clear when the stock fell 10% on April 19 on little more than fears of a bubble bursting in AI stocks.

For investors who want an AI stock that isn’t at risk of a bubble bursting, read on to see two that are well positioned for long-term growth.

The letters "AI" above a keyboardThe letters "AI" above a keyboard

Image source: Getty Images.


Microsoft (NASDAQ: MSFT) has been in the AI ​​spotlight since OpenAI launched ChatGPT. That makes sense. After all, Microsoft is a close partner of OpenAI and has invested an estimated $13 billion in the startup, and Microsoft’s AI strategy depends largely on OpenAI’s products and partnerships.

Unlike a hardware company like Nvidia, Microsoft has a wide range of ways to capitalize on the AI ​​boom. It has integrated generative AI technologies into products such as the Azure cloud infrastructure service, GitHub code repository tools, Microsoft Office suite, Bing search engine and others. The company has been rolling out Copilot, which it calls its AI-powered productivity tool, across a range of products, and CEO Satya Nadella said in the company’s recent earnings report: “Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation. better business results in every role and sector.”

Microsoft may not have experienced the explosive growth that Nvidia delivered, but it’s hard to doubt Microsoft’s AI bona fides given its close relationship with OpenAI, its dominance of enterprise software, and its diversification between businesses like Windows, gaming, and cloud computing .

Investors cheered the tech giant’s latest earnings report, sending the stock higher after hours Thursday after it easily beat expectations on the top and bottom lines.

Even if Nvidia’s growth suddenly slows, Microsoft should be an AI winner regardless of what happens in the chip sector.

2. ServiceNow

Service now (NYSE: NOW) does not receive much attention in the AI ​​sector. The company is best known for providing a comprehensive business software package for handling IT services and operations, as well as areas such as customer service and human resources. But it is one of the largest cloud software companies and it is increasingly carving out a position for itself in the artificial intelligence field.

ServiceNow uses more traditional AI technologies such as machine learning and predictive intelligence, but has also begun to integrate generative AI, using it for the Now Assist tool, which allows users to generate code to help create and update apps and a generative AI controller that can be used for things like content generation and sentiment analysis.

Generative AI is emerging as a key growth driver for the company, with CEO Bill McDermott saying: “Generic AI adoption remained at a low ebb in the first quarter.”

Like Microsoft, ServiceNow is also positioned to grow in a multitude of ways based on AI, and the company has historically been a model of consistency: Revenue has grown 20% or more every quarter since its IPO in 2012, while its profitability has steadily increased. improved.

With the exception of a few temporary pullbacks, ServiceNow has also been a steady winner in the stock market, and it appears poised to keep winning as its competitive advantages only grow stronger as it gains scale.

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in metaplatforms. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, Meta Platforms, Microsoft, Nvidia, and ServiceNow. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls to Intel, long January 2026 $395 calls to Microsoft, short January 2026 $405 calls to Microsoft, and short May 2024 $47 calls to Intel. The Motley Fool has one disclosure policy.

Forget Nvidia: 2 Artificial Intelligence (AI) Stocks to Buy Instead was originally published by The Motley Fool