Artificial intelligence (AI) isn't just a trendy technology that fails to live up to the hype, like 3D printing is. AI has already been integrated into many products for years, but the mainstream public is just now catching on.
AI fundamentally shifts how we interact and work. As a result, investors need to be aware of many of the long-term winners in this space and position their portfolios accordingly.
So if you have $3,000 to invest (or any amount, for that matter), consider splitting it up among these stocks.
1. Meta Platforms
When looking for companies to buy and never sell, it's crucial to find businesses with a sticky product or service that can quickly pivot to stay at the top.
One such company is Meta Platforms (META 0.43%), the owner of social media platforms like Facebook, Instagram, Threads, WhatsApp, and Messenger. Meta is deploying AI in multiple ways, including how we communicate with those who don't speak the same language.
Social media products are also benefiting from AI on the business side, as it helps create ads catered to individuals. Over the long term, this will likely increase the cost per ad due to their efficiency, and Meta profits from this rise. For example, Nicola Mendelsohn, Meta's Head of Global Business Group, stated ads that utilized AI saw a return of spending increase of 32% from ad viewers. With Meta's ads becoming more effective, it's only a matter of time before costs start to rise
Lastly, its Reality Labs division is working on its Ego model and glasses, which could help bring technology like augmented reality, currently used for games or other leisure activities, to training aids, allowing users to learn a new skill.
Meta is at the forefront of AI, making it a fantastic stock to buy and stash away. With the stock trading for 25.5 times forward earnings and posting 25% revenue growth, it's operating at a high level and reasonably priced.
2. Adobe
Adobe (ADBE 0.87%) has digital design products that are the industry standard. But for Adobe to continue growing, it must adopt AI, and it already has.
Its Firefly tool gives users the power to create images using AI and can significantly reduce the cost and time needed to create media. For example, IBM used Firefly to generate 200 campaign assets with 1,000 variations in moments rather than the months it might have taken to do them individually. These generated images were also quite successful: The advertising campaign had 26 times higher engagement than its benchmark.
These kinds of success stories excite me as an investor, since they demonstrate Adobe's prowess in the digital media space.
Getting existing customers to add on offerings like Firefly is a key part of the Adobe investment thesis, as it already has a strong foothold in its target audience. Without new products, it would need to rely on hiking the subscription fees every year to drive growth. While Firefly is an important part of this expansion, other products and functionalities also played a role in Adobe growing its Q1 FY 2024 (ending March 1) revenue by 11%. Combined with the effects of stock buybacks, this would have allowed Adobe to grow its net income by 30% if it didn't have a $1 billion charge from an acquisition breakup fee.
With AI already affecting how media is created, it's crucial to invest in a company like Adobe, which is at the forefront of this shift.
3. Snowflake
Snowflake (SNOW 3.69%) is vital to the development of AI models because it requires a vast amount of information to make these models accurate, and collecting and storing that can be problematic without the right tools.
Snowflake allows businesses of all sizes to capture, store, and use data through its data cloud platform. And if a company has a dataset it wants to sell to another company that's creating an AI model, it can do so on the Snowflake Marketplace.
So Snowflake is a key company in this space, and regardless of how widely AI is adopted, the importance of having a way to collect and store data will never go away.
This makes Snowflake a great stock to buy and hold because it will continue to grow for years with the constant need to collect and process information to feed models.
Snowflake's recent results show how strong the company is, with its product revenue growing 33% to $738 million in Q4 FY 2024 (ending January 31). For FY 2025, it expects 22% growth which highlights a continued demand for its product. With the stock trading around its all-time low price-to-sales valuation, it makes for a smart buy.
Buying now and holding for at least five years is a wise decision for all three of these companies. They have high long-term prospects, making them excellent choices over the long term.
