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2 Artificial Intelligence Stocks You Can Buy and Hold for the Next Decade

Source The Motley Fool

You don't have to take high risks to profit from the $184 billion artificial intelligence (AI) market. AI is bringing massive improvements to business productivity and more personalized services for consumers. Leading tech companies that you already know are among the ones that are best capitalizing on these trends. Here are two such stocks to buy today.

1. Amazon

Amazon (NASDAQ: AMZN) stock has more than doubled over the last five years and is currently up about 23% year to date in 2024. And the e-commerce leader still offers excellent return prospects over the next decade, particularly given its investments in AI.

Most consumers will know Amazon first as a retail operation, but it's also the No. 1 enterprise cloud service provider, where Amazon Web Services (AWS) today controls more than 30% of a $297 billion market, according to Synergy Research. Revenue from AWS is accelerating -- it rose 19% year-over-year in Q2 -- as more enterprises are using AI services.

For example, Ferrari is using generative AI from AWS to help design cars faster and deliver personalized experiences to customers. Many other leading companies have chosen AWS for AI, especially to take advantage of Amazon Bedrock, which helps them build custom AI applications.

Amazon has been using AI in its e-commerce business for years to deliver personalized recommendations to customers based on their interests. It's also using AI to drive content recommendations to viewers of Amazon Prime Video. However, Amazon is still in the early stages of implementing generative AI in the shopping experience. It recently launched Rufus, a conversational shopping assistant that can answer questions about products. Over the long term, it has the potential to significantly reduce shopping time and convert more sales.

Considering the attractive growth opportunities ahead for the tech titan, analysts expect Amazon's earnings to grow at a 22% annualized rate over the next several years. Assuming the stock is still trading at the same price-to-earnings multiple a decade from now, that would be enough growth for the stock to reach $1,350 by 2034. At a minimum, Amazon investors should expect the stock to outpace the average return of the stock market indexes.

2. Alphabet

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is one of the most AI-focused companies in the world. It drives everything that is important to the company's growth, including its digital advertising business, search, content recommendations on YouTube, and Google Cloud. Its shares have nearly tripled over the last five years and are up about 17% so far this year.

Alphabet has been heavily investing in AI since 2015, when it launched TensorFlow, an open-source machine learning system that made AI research more accessible for other organizations. But the company made a big splash with the launch of Gemini in December. More than 1.5 million developers are using Gemini, making it one of the most widely used AI models, and it's also powering Google's products.

Advertising generates about half of Alphabet's total revenue, and one of the biggest opportunities the company has with AI is to use the technology to drive more ad sales. Google is already seeing positive results from its rollout of its AI Overviews, a new feature that helps people get information about complex topics and is driving higher search frequency.

Alphabet is also seeing growing demand for AI services in Google Cloud, where Gemini is helping developers build applications faster. Google Cloud offers a large selection of open-source and third-party AI models. Growing demand is boosting Google Cloud's profitability -- the segment's operating profit improved from $395 million in Q2 2023 to more than $1.1 billion in Q2 2024.

Alphabet stock offers great value to investors right now. The shares are trading 15% off their recent high after the company in early August lost an antitrust case over anticompetitive behavior in the search market. It's uncertain what the consequences of litigation will be, but analysts still expect the company to grow its earnings at an annualized rate of 16% over the next several years. Assuming the stock keeps trading at the same price-to-earnings ratio it is now, with growth at that rate, shareholders could potentially double their investments by 2030.

Should you invest $1,000 in Amazon right now?

Before you buy stock in Amazon, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $752,838!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 30, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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