You don’t have to take big risks to benefit from the $184 billion artificial intelligence (AI) market. AI is driving massive improvements in business productivity and more personalized services for consumers. Leading technology companies you already know are among those best positioned to capitalize on these trends. Here are two such stocks you can buy today.
1. Amazon
Amazon (NASDAQ: AMZN) The stock has more than doubled in the past five years and is currently up about 23% through 2024. And the e-commerce leader still offers excellent return prospects over the next decade, especially given its investments in AI.
Most consumers will first know Amazon as a retail company, but it is also the No. 1 enterprise cloud service provider, where Amazon Web Services (AWS) today commands more than 30% of a $297 billion market, according to Synergy Research. AWS revenue is accelerating – up 19% year over year in the second quarter – as more enterprises adopt AI services.
For example, Ferrari uses Generative AI from AWS to design cars faster and deliver personalized experiences to customers. Many other leading companies have chosen AWS for AI, mainly to take advantage of Amazon Bedrock, which allows them to build custom AI applications.
Amazon has been using AI in its e-commerce business for years to give customers personalized recommendations based on their interests. It also uses AI to provide content recommendations to Amazon Prime Video viewers. However, Amazon is still in the early stages of implementing generative AI into the shopping experience. It recently launched Rufus, a conversational shopping assistant that can answer questions about products. In the long term, this has the potential to significantly reduce shopping time and generate more sales.
Given the attractive growth opportunities for the tech titan, analysts expect Amazon’s profits to grow 22% annually in the coming years. Assuming the stock is still trading at the same price-to-earnings ratio in ten years, that would be enough growth for the stock to reach $1,350 by 2034. At the very least, Amazon investors can expect the stock to outperform its average return. the stock market indices.
2. Alphabet
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is one of the most AI-focused companies in the world. It powers everything important to the company’s growth, including its digital advertising business, search, content recommendations on YouTube and Google Cloud. The shares have nearly tripled in the past five years and are up about 17% so far this year.
Alphabet has been investing heavily in AI since 2015, when it launched TensorFlow, an open source machine learning system that made AI research more accessible to other organizations. But the company made a big splash with the launch of Gemini in December. More than 1.5 million developers use Gemini, making it one of the most widely used AI models and 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 the rollout of its AI Summaries, a new feature that helps people get information about complex topics and generates higher search frequency.
Alphabet also sees growing demand for AI services in Google Cloud, where Gemini helps developers build applications faster. Google Cloud offers a large selection of open-source AI models and third-party AI models. Growing demand is driving Google Cloud’s profitability, as 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. Shares are trading 15% below their recent high after the company lost an antitrust case in early August over anti-competitive behavior in the search market. It’s uncertain what the impact of the lawsuits will be, but analysts still expect the company to grow its profits at an annualized rate of 16% in the coming years. Assuming the stock continues to trade at the same price-to-earnings ratio as it is now, growing at that rate, shareholders could potentially double their investments by 2030.
Should You Invest $1,000 in Amazon Now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director 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 holds positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.
2 Artificial Intelligence Stocks to Buy and Hold for the Next Decade was originally published by The Motley Fool