Finance
3 Artificial Intelligence Stocks to Buy and Hold for the Next Ten Years
Artificial Intelligence (AI) has the chance to become one of the biggest and most impactful technological innovations of our time. The applications of the technology are still in their early stages, as is the development of the infrastructure needed for testing large language models (LLMs) and perform AI inference.
Let’s take a look at three stocks that will be AI winners and that you can buy and hold for the next decade.
1. Nvidia
Nvidia (NASDAQ: NVDA) has been one of the biggest AI winners to date, but that doesn’t mean it won’t remain a long-term winner. The company’s graphics processing units (GPUs) have become the backbone of building out the infrastructure to support AI applications. As companies rush to create their own AI applications, demand for Nvidia chips has skyrocketed.
To maintain its lead in this area, Nvidia has accelerated its innovation cycle and wants to accelerate the introduction of new chip architecture. At the same time, the company’s Compute Unified Device Architecture (CUDA) software platform is a differentiator for the company and has helped create a wide moat. The software platform is generally the platform that developers learn to program GPUs, making Nvidia’s chips and software platform the industry standard.
Despite the stock’s strong performance, Nvidia still trades at an attractive valuation, with a price-to-earnings (P/E) ratio of less than 30, based on analyst estimates for 2025. Given its growth potential, that’s a bargain.
2. Alphabet
Don’t let it slide in Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) stocks are fooling you after second quarter results. The company posted strong results that show it is on its way to becoming an AI winner.
The company’s cloud computing segment, Google Cloud, is making great progress, seeing second-quarter revenue growth of 29% to $10.4 billion as the segment benefits from developers’ AI infrastructure and generative AI solutions to use. Importantly, however, this is a very fixed cost business where the company has just acquired the necessary scale. As such, profitability is starting to rise, with operating income rising to $1.2 billion in the second quarter from $395 million a year ago.
Meanwhile, fears that AI could negatively impact Google Search have so far proven unfounded, with the company seeing a 14% increase in search revenue last quarter. Alphabet is just beginning to leverage the power of AI with its search operations and is developing AI overlays to answer certain questions. After some initial hiccups, users are starting to engage with the new feature, and the company is in the early days of monetizing (profiting from) these AI views. The company plans to introduce new search and shopping ads with this format soon.
The stock trades at a forward price-to-earnings ratio of less than 20, based on analyst estimates for 2025. It’s one of the cheapest mega-cap tech stocks out there and a great stock to buy and hold for the long term .
3.Adobe
While chip stocks related to building out AI infrastructure have been the big early AI winners, software companies have the potential to be strong AI winners as well. This is one of those companies that embraces AI and leads the way Abbe (NASDAQ: ADBE), which occupies a dominant position in the field of creative software with programs such as Photoshop and InDesign. It is also the leading PDF solutions company through its Acrobat programs.
The company has implemented the use of AI in its products, with AI features such as generative fill, text to image, generative shape fill and generative deletion, using the Firefly AI models it has developed. Adobe is still in the early days of AI monetization, as users can currently try its AI capabilities for free before having to purchase generative credits. The company should find a better way to capitalize on its AI capabilities in the future, but for now it’s contributing solid growth.
Meanwhile, the company’s AI-powered Adobe Express app, which helps create images and videos for social media, looks like it could be a long-term AI winner. Social media is clearly a big business, and such a tool has a lot of potential. Adobe launched a brand new version of the Express app early last quarter and saw the number of monthly active users double quarter-over-quarter as a result.
Adobe’s Document Cloud segment, home to Acrobat, meanwhile, delivered some of the best growth last quarter, with revenue for the segment rising 19% to $782 million in the second quarter. The results were made possible by the introduction of the Acrobat AI Assistant add-on subscription.
Adobe is trading at a reasonable price-to-earnings ratio of less than 26, based on fiscal 2025 estimates, and the stock looks poised to be a longer-term winner that investors can buy and hold.
Should You Invest $1,000 in Nvidia Now?
Consider the following before buying shares in Nvidia:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $692,784!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns July 22, 2024
Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool holds positions in and recommends Adobe, Alphabet, and Nvidia. 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
