These companies are winning now and should continue to win for the foreseeable future.
Don’t let NVIDIAIt’s easy to get distracted by the sudden popularity of and forget that there are many different artificial intelligence (AI) stocks to choose from. Companies across a variety of industries, from chips to software, are poised to benefit from AI growth in the coming years.
Investors can set themselves up for success by gravitating towards the real winners: the best talent who can stay on top as the AI industry grows and inevitably evolves. Amazon (AMZN -0.29%), Qualcomm (QCOM 1.29%)and Meta Platform (Meta -2.70%). These companies have the competitive advantages to continue winning over the long term, and their shares can be purchased for as little as $1,000.
1. Amazon: Low-key reviews are appealing
Jake Lerch (Amazon): My choice is AmazonIf I Make a Choice Today, when talking about AI stocks to hold forever, valuation must be taken into consideration. Simply put, AI stocks have been volatile, with some of them now reaching dangerously high valuation levels.
Please see the following graph.
NVDA PS Ratio Data by YCharts
The three biggest companies in the world — apple, MicrosoftPrice-to-sales multiples for companies like NVIDIA, NVIDIA. and others are at or near their highest levels in the past decade. These multiples are important because they capture market sentiment, which reflects investors’ expectations of future growth, rather than corporate earnings results, which tend to fluctuate from quarter to quarter.
The bottom line is that many AI stocks are poised to soar to new highs in the future. Expected growth, Not current sales. but, Among AI companies bucking this trend, or Even if only slightly, They are, size increase Not so big.
Below is the same chart, but with Amazon’s P/S ratio included.
NVDA PS Ratio Data by YCharts
At a current P/S ratio of 3.6x, Amazon is valued at a fraction of Nvidia’s (41.8x) and significantly lower than Microsoft (14.6x) and Apple (9.4x). Importantly, Amazon’s current P/S ratio is roughly equal to its 10-year average of 3.2x, indicating a stable valuation over time.
In other words, while shares of its major competitors are pulling ahead amid the AI boom, Amazon’s stock still looks very attractive.
Additionally, the company has a number of AI initiatives under its belt, from smart speakers to nearly a million humanoid robots. These initiatives, along with Amazon’s strong financial position, suggest that the company has the potential to capitalize on the AI revolution and achieve significant growth.
In summary, investors looking for an AI stock they can hold forever should seriously consider Amazon.
2. Qualcomm: Make a connection with this stock
Will Healy (Qualcomm): Investors have been paying close attention to AI chips over the past year, but just because Nvidia is leading the industry doesn’t mean it’s the only player. As attention to AI increases, investors may have more reason to view Qualcomm as a permanent holding.
Qualcomm has been a leader in smartphone chipsets for years, and maintaining that leadership in today’s market requires AI savvy. Luckily, the company is embracing on-device AI, which works in tandem with cloud AI and devices at the edge, so it can deliver AI capabilities faster and more efficiently.
Moreover, Qualcomm isn’t limiting these capabilities to smartphones: in recent years, the company has been working to provide technology for IoT devices, automotive platforms, and PC chips, building an AI-powered tech ecosystem.
Moreover, Qualcomm is finally starting to recover after a sluggish fiscal 2023 revenue, with revenue for the first half of fiscal 2024 (ending March 24) expected to be $19 billion, up 3% from the same period last year.
Total costs and expenses also fell 1%, leading to a net income of $5.1 billion for the first half of the fiscal year, up 29% from 2017. And Qualcomm is forecasting revenue of $9.2 billion as of the midpoint of its fiscal third quarter, meaning double-digit revenue growth is likely in the cards for the next quarter.
Semiconductor stocks have been gaining investor attention after rising about 80% over the past year, pushing their P/E ratio to about 28, the highest in more than three years.
Still, rising profits should mitigate the impact of the rising valuation if double-digit revenue growth materializes. Ultimately, Qualcomm’s improving financial position, combined with its growing importance in AI, should solidify the stock as a profitable long-term holding.
3. Metaplatforms: AI is complementary
Justin Pope (Meta Platform): While searching for the ultimate buy-and-hold AI stocks, Meta Platforms kept rising to the top of the list. Meta stock’s selling pitch is simple yet effective: the company is already a clear tech giant today. It makes money from digital advertising delivered to 3.24 billion daily active users on social media apps like Facebook, Instagram, WhatsApp, and Threads.
This is a profitable business. Meta takes 35% of the revenue. Free Cash Flow And it’s making a staggering 29% more. Return on capital It invests in the business.
Despite its $1.3 trillion market cap, Meta still has plenty of room to grow. Analysts believe the company will achieve average annual revenue growth of 18% over the long term. AI could play a big role in that. Meta has deployed AI to improve its advertising business. Increase profits.
In addition, the company They are making a large investment. in AI infrastructure. Billions of dollars are being spent on developing and running generative AI models.
The great thing about Meta is that AI will not drive the stock price. AI will likely unlock the growth Meta needs to continue to lead the market in the long term, but Meta was a great business even before AI. Mark Zuckerberg, CEO and co-founder of Meta, is still at the helm, even though he’s only 40 years old. You can buy and hold Meta with confidence that Meta will continue to be well-run for the foreseeable future.
Finally, the stock trades attractively at 26 times earnings. That’s a very reasonable price for a company with 18% annual revenue growth, and many other AI stocks are overpriced, so Meta could do much better if it realizes the potential of AI.
This ultimately makes it clear that Meta is an AI stock investors should buy and hold tight.
