Artificial intelligence (AI) stocks took a beating this summer. VanEck Semiconductor ETFwhich is packed with semiconductor stocks tied to the AI sector, fell as much as 25% from its highest level reached in July.
Still, I remain optimistic about AI. Investors have only seen the beginning of how this technology will change the world, and it will be years and even decades before more innovations emerge.
That’s a strong argument for owning AI stocks for the long term. Here are two that I find particularly compelling.
The leading leader in data analytics
At the top of my list is Palantir Technologies (NYSE: PLTR).
The company, which provides AI-powered big data solutions, is successful. Earlier this month, it was announced that Palantir had joined the S&P 500 index. The news sparked a rally in the stock, which has already risen 113% this year.
Behind that stellar performance is the company’s strong foundation. Palantir is still a young company and is focused on growing its customer base and revenue. As of the second quarter, quarterly revenue rose to $678 million, up 27% from a year earlier.
Likewise, Palantir’s U.S. customer base is growing rapidly. The company reported 295 U.S. enterprise customers in the quarter, an 83% increase year-over-year. Additionally, Palantir is attracting larger customers, as it closed 27 deals worth more than $10 million each during the period.
It goes without saying that Palantir is riding the wave of AI momentum. As CEO Alex Karp noted in his most recent shareholder letter, “Our growth in the commercial and government markets has been driven by relentless customer demand for artificial intelligence systems that go beyond the performative and academic.”
In short, the company has caught the wave and is riding it well. Investors looking for an AI stock to buy and hold for the long term should strongly consider Palantir.
The foundation of AI innovation
Next on my list of AI stocks is Nvidia (NASDAQ: NVDA).
That being said, Nvidia is a stock that I want to buy And delay for the next decade or longer. That’s important, because I’ve made no secret of the fact that I believe the stock has become very expensive..
However, I still see it as a strong buy because AI is a long-term trend that will continue for many years to come. In the same way the internet continues to evolve, AI has a long road ahead of us of it.
This is especially good news for Nvidia, as their product is the solution par excellence when it comes to building the “brains” of various AI models. It makes the graphics processing units (GPUs) the most popular among AI developers
The high demand for AI-enabled GPUs means Nvidia can charge top dollar for its products, including the H100 and the upcoming Blackwell chip.
It’s important to remember why Nvidia stock has risen more than 600% over the past two years: the company’s revenue and profits are exploding.
In the most recent quarter (ended July 28), revenue was $30.0 billion, up 122% from a year earlier. Over the past 12 months, the company generated $96.3 billion in sales, up from $25.7 billion less than two years ago. Profits have also increased.
The company’s dominance in AI has driven its stock price to new heights, but even after the incredible gains of the past two years, Nvidia is still an AI stock I want to own for the next decade or more.
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Jake Lerch has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.
2 Artificial Intelligence (AI) Stocks to Buy and Hold for the Next Decade was originally published by The Motley Fool