Finance
3 Artificial Intelligence Stocks to Buy and Hold for the Next Ten Years
Investing in artificial intelligence (AI) seems to have become more challenging in recent months. Over a year later generative AI created excitement among technology investors, specific stocks such as Nvidia, Super microAnd CrowdStrike seem to have attracted the most interest and risen to nose-bleed valuations.
Fortunately for investors who feel like they’ve missed out on these stocks, AI will likely be more than a flash in the pan. So one can buy and hold specific AI stocks for the next decade with a reasonable expectation of significant returns. These three stocks should deliver returns for investors.
1. Palantir Technologies
At first glance, investors might assume they missed something Palantir Technologies (NYSE:PLTR). The stock has quadrupled since bottoming in late 2022. Moreover, the recent revenue growth is unlikely to impress growth investors.
Nevertheless, investors may yet be fully aware of the game-changing potential of the generative AI product: the Artificial Intelligence Platform (AIP). AIP builds on the analytics capabilities of its legacy Gotham and Foundry platforms. While these platforms also relied on AI, the productivity gains reported by AIP users have yielded eye-popping results.
After attending AIP bootcamps, companies seem to find multiple use cases. One potential customer has achieved more in a day through AIP than a hyperscaler (such as Amazon Web Services) could have achieved this in four months, while another claimed to build ten times faster with three times fewer resources. Such results appear to quickly lead to new seven-figure deals for Palantir.
As mentioned, results may take some time. In the first quarter of 2024, revenues of $634 million increased 21%, which seems modest when you compare the growth to the price-to-sales ratio (P/S). of 24.
Still, net income of $106 million is more than six times higher than a year ago’s level. If revenue growth begins to reflect the productivity gains and increased deal volumes resulting from AIP, share price growth should accelerate significantly in the coming years.
2. Alphabet
In addition to emerging AI companies, investors may also want to look at one of the pioneers in this field: Google parent company Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). Alphabet began using the technology in 2001 and became an AI-first company in 2016, using the technology in all subsequent product releases.
However, the rise of ChatGPT gave investors the impression that Alphabet had fallen behind its competitors. For the first time in decades, Google’s dominant search engine faced a credible competitive threat.
Nevertheless, before writing off Alphabet, investors should remember that it has released its own generative AI tool in the form of Google Gemini. Furthermore, Google Cloud, the third largest cloud company, ensures that it will play a crucial role in deploying this technology for customers.
Moreover, in April 2023, Alphabet combined its research teams to form Google DeepMind. With $108 billion in liquidity to support its efforts, Alphabet is unlikely to lag behind in this area.
Finally, with a price-to-earnings ratio of 28, it is cheaper than its megatech competitors. Thanks to its broad experience in AI and vast resources, Google’s parent company is likely to remain a force in the AI industry for a long time to come.
3. VanEck Semiconductor ETF
Investors who prefer not to risk precious capital on a particular company’s fortunes may simply want to invest in most of the top chip stocks through the VanEck Semiconductor ETF (NASDAQ: SMH). Most exchange-traded fund (ETF) companies design or produce AI-ready chips. Without this technology, AI would not have been possible.
This ETF invests approximately 20% of its assets in Nvidia, with another 13% in the leading chip manufacturer Taiwanese semiconductor manufacturing. However, the rest of the investments each represent less than 10% of the fund Broadcom, Advanced micro devicesAnd Micron are among the 26 shares held.
Moreover, it reported a return of 28% per year over the past ten years. For comparison: the benchmark SPDR S&P500 reported an average annual return of 13% over the same period – less than half the return of the VanEck ETF.
Additionally, VanEck’s ETF expense ratio is 0.35%, slightly lower than the average expense ratio, which is 0.37%, according to Morning star. So the fund has achieved these outsized returns at an affordable price.
Indeed, the fund does not guarantee that it can match the average annual return of 28% over the past ten years. However, if one wants outsized returns with lower risk and without the work involved in finding such stocks, they will likely find both in the VanEck Semiconductor ETF.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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. Will Healy has positions in Advanced Micro Devices, CrowdStrike and Palantir Technologies. The Motley Fool holds and recommends Advanced Micro Devices, Alphabet, Amazon, CrowdStrike, Microsoft, Nvidia, Oracle, Palantir Technologies, Salesforce, Taiwan Semiconductor Manufacturing, and Tencent. The Motley Fool recommends Alibaba Group, Broadcom and International Business Machines and recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has one disclosure policy.
3 Artificial Intelligence Stocks to Buy and Hold for the Next Ten Years was originally published by The Motley Fool
