Finance
2 Artificial Intelligence Stocks to Buy and Hold for the Next Ten Years
The adoption of artificial intelligence (AI) promises to add tremendous value to the economy by increasing worker productivity, accelerating product development, and providing a greater variety of services to consumers and businesses. It presents a lucrative opportunity for investors, as Statista predicts the AI market will quadruple to $826 billion by 2030.
Here are two profitable AI software companies that should be relatively safe over the next decade.
1. Palantir Technologies
Palantir Technologies (NYSE:PLTR) is a leading AI software builder used by major corporations and the US government. The latest financial results continue to point to a major opportunity that could deliver handsome returns for shareholders.
After experiencing a slowdown in growth last year due to macroeconomic headwinds, the company is once again starting to see an acceleration in sales. Revenue grew 27% year-on-year in the second quarter, driven by balanced growth in commercial and government deals.
Organizations are spending more and more money on it Palantir because it helps them improve operational efficiency and shorten time to market with new products, while keeping their data secure. Palantir differentiates itself from competitors by focusing on projects where it adds the most value, such as expensive and complex projects that other companies are unwilling to tackle.
Palantir builds deep relationships with customers, and this is most evident in its strong growth in government. In the second quarter, Palantir’s U.S. government business grew 8% from the previous quarter and 24% year over year.
Importantly, Palantir is becoming a highly profitable company, which also sets it apart. It has been adjusted free cash flow the margin versus turnover has increased from 15% in the fourth quarter of 2022 to 22% in the most recent quarter.
While there will be winners and losers in the AI market, Palantir’s growing revenues and free cash flow show that Palantir will be one of the winners.
2.Microsoft
Microsoft (NASDAQ: MSFT) is the 800-pound gorilla of software, with millions of users using Windows, Office and LinkedIn every day, in addition to its enterprise cloud services business. The large number of installed users will be valuable as the company looks to transform and capitalize on AI functions across the business.
Office 365 Commercial revenue grew 13% year over year in the fourth fiscal quarter ended in June, thanks in part to Copilot for Microsoft 365. The number of people using Copilot for work nearly doubled quarter over quarter.
But AI will also lead to new product categories that could benefit Microsoft’s consumer business in the long run. Microsoft recently unveiled new Copilot+ PCs, which bring several AI improvements to the user experience.
Wall Street is especially bullish on Microsoft because of its growth opportunities in the Azure cloud sector, the world’s second-largest cloud services provider. Revenue from Azure and other cloud services grew 29% year-over-year last quarter, with AI services contributing 8 percentage points to the growth. This contribution from AI is higher than in previous quarters, indicating that Microsoft is gaining momentum in the AI market.
Microsoft will be one of the safest AI stocks to hold for the long term. It is a financial powerhouse with free cash flow of $74 billion and revenue of $245 billion. It has the financial resources to invest in innovative new technologies while generating growing flows of free cash flow to enhance shareholder returns.
Should You Invest $1,000 in Palantir Technologies Now?
Consider the following before purchasing shares in Palantir Technologies:
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 Palantir Technologies wasn’t one of them. The ten stocks that made 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 $641,864!*
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 August 6, 2024
Johannes Ballard has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Microsoft and Palantir Technologies. The Motley Fool 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.
2 Artificial Intelligence Stocks to Buy and Hold for the Next Ten Years was originally published by The Motley Fool
