My Top 5 AI Stocks to Buy Amid the Market Pullback

The S&P 500 marched higher in the bull market over the past three years, but in recent times, the index has encountered turbulence. Many concerns have weighed on investors' minds, from worries about high levels of spending on artificial intelligence (AI) to concerns about the war in Iran.

These headwinds have pushed many quality stocks lower. Though it may seem intimidating to buy amid market volatility, tough times actually offer the long-term investor opportunity to get in on stocks for reasonable or bargain prices. And here's the best news of all: History shows us that the major indexes and solid stocks always have gone on to recover and advance over the long run.

With this in mind, here are my top five AI stocks to buy amid this market pullback.

Image source: Getty Images.

1. Palantir Technologies

Palantir Technologies (NASDAQ: PLTR) has been around for more than two decades, but the software company truly saw earnings climb over the past few years. The company is benefiting from AI demand thanks to the launch of its Artificial Intelligence Platform (AIP), AI-driven software that helps customers aggregate and analyze their data -- then put it to work.

The results can be game-changing, and companies have realized this, driving strength in Palantir's commercial business. This is big because it represents a new growth driver for Palantir, which in the past relied on government contracts.

Palantir should continue to benefit as companies and organizations aim to apply AI to their problems -- and with AIP, they can do so easily. Palantir stock isn't cheap, but its valuation has dropped significantly, making it a reasonable buy today.

PLTR PE Ratio (Forward) data by YCharts

2. Amazon

Amazon (NASDAQ: AMZN) is winning in AI because it is both a user and a seller of AI products and services. The company applies AI to its e-commerce business, gaining efficiency across its fulfillment network and delivery systems. And Amazon Web Services (AWS), the cloud computing unit, offers its customers a wide range of AI tools and platforms.

All of this is boosting growth, and we should see this continue as the AI story unfolds. Meanwhile, Amazon's e-commerce business and non-AI cloud offerings also are generating growth -- and importantly, have proven their strength over the long run.

Today, Amazon stock trades for 27x forward earnings estimates, down from more than 35x just a few months ago, making it a smart buy on the dip.

3. Microsoft

Microsoft (NASDAQ: MSFT) has established itself as a leader in AI through its investment in AI lab OpenAI and through its cloud computing business. Like Amazon, the tech giant offers its customers access to a broad range of AI products and services -- and this is delivering significant growth.

In the latest quarter, Microsoft said that cloud services revenue soared 39% and that demand continues to surpass supply. And at this early stage of the AI story, Microsoft has built out a significant presence, positioning itself to benefit as the next chapters unfold.

Microsoft also generates growth through its software business, gaming, and more, and has demonstrated its strength over time. Today, the stock is on sale, trading for only 24x forward earnings estimates.

4. Apple

Apple (NASDAQ: AAPL) hasn't been a leader in AI, as it took its time to add AI features to its products. But the smartphone leader may now start to benefit from Apple Intelligence, as this AI platform creates yet another reason for Apple fans to spend more time on their iPhones.

The company also is heading into a new era of growth powered by its services revenue. Now that Apple has a massive installed base of active devices, they represent the door to recurring revenue. This is as users sign up for a variety of services, from storage to digital entertainment. In fact, services revenue has reached records quarter after quarter.

Apple stock trades at 30x forward earnings estimates right now, a reasonable level for a company with a long track record of earnings growth and the potential for further growth ahead.

5. SoundHound AI

SoundHound AI (NASDAQ: SOUN) is an expert at voice AI. The company's patent-protected platform translates speech directly to meaning -- no need to translate it into text first. Customers across industries clearly appreciate the quality of this system as they've rushed to sign contracts with the company.

SoundHound's revenue soared almost 100% last year, driven by contracts with customers across automotive, restaurant, retail, financial, and other industries. And in the latest quarter, the company closed a record number of deals.

The voice specialist isn't yet profitable, so if you're a cautious investor, you may prefer to keep it on your watch list, but if you're an aggressive investor, now, on the dip, is a great time to get in on this AI winner.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, Palantir Technologies, and SoundHound AI and is short shares of Apple. The Motley Fool has a disclosure policy.