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3 Top Artificial Intelligence Stocks to Buy Right Now

By Chris Neiger – Updated Aug 6, 2020 at 8:35AM

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These tech giants are already benefiting from the rise of AI.

Artificial intelligence (AI) is a broad tech category that can encompass everything from semi-autonomous vehicle systems to artificially intelligent virtual assistants like Alexa. Investors who are looking for AI stocks have a wide variety to choose from these days, because many technology companies are using AI to enhance their software and services. 

But there is only a handful of AI investments that have the potential to add long-term value to your portfolio, including Amazon (AMZN 2.14%), Microsoft (MSFT 1.24%), and NVIDIA (NVDA 6.51%). These companies are not only titans of the tech industry, but their AI pursuits are putting them ahead of the competition as well.

A computer chip with the letters "AI" on it.

Image source: Getty Images.

Amazon's AI angle

Why is the e-commerce giant in a list of the top AI stocks to buy now? Two reasons: First, the company's Amazon Web Services (AWS) is the top cloud-computing infrastructure company with 33% of the market. AWS has a long, and growing, list of AI services that it offers, including text-to-speech, image identification, demand forecasting, and more. 

As a leader in the cloud-computing market, AWS is not only helping to expand AI, but it's reaping a lot of rewards as well. AWS revenue increased 29% in the most recent quarter to $10.8 billion. More importantly, AWS's operating profit was $3.4 billion, which outpaced Amazon's North American e-commerce operating profit of $2.1 billion.

The second reason Amazon makes it on this list is that the company has integrated AI into its own services to improve its business. The company uses AI to offer up the best recommendations to customers on its e-commerce platform, to power the Alexa voice assistant in its Echo speakers, and to allow customers to automatically be charged for what they put in their cart as they walk out of Amazon Go grocery stores.

By using AI to both enhance its own products and services and selling AI services to customers through AWS, Amazon has made itself into a unique AI play. 

A hallway with data center computers on either side.

Image source: Getty Images.

Microsoft's intelligent cloud play

Microsoft is a leading cloud-computing company through its Azure cloud services and is second only to Amazon in this market. Microsoft's Azure offers an array of AI services to its Azure customers, including machine learning, document and image search, and voice services. 

Azure holds about 18% of the cloud-computing market right now,  and revenue from this business increased 50% in the fiscal fourth quarter. Some investors have been concerned that Azure's revenue in the quarter didn't grow as fast as in previous quarters. But it's worth pointing out that even with a slight slowdown, 50% sales growth indicates that Azure is still expanding quickly. Additionally, Azure still holds the No. 2 cloud-commuting spot. Google is far behind it with just 8% of the market.

Like Amazon, Microsoft has also integrated AI into its services, including Microsoft 365, to make them better for its customers. And with the company already a dominant player in the cloud-computing market, Microsoft's AI integrations should help the company continue to be a key player in this space. 

A blue computer motherboard.

Image source: Getty Images.

NVIDIA is playing for keeps with its AI chips

Most people know NVIDIA as the company that makes graphics processors (GPUs) for gaming and computers, but NVIDIA's chips are far too powerful to be contained in just those markets. The company's GPUs are also a go-to chip for Amazon, Google, and Microsoft AI data centers. 

NVIDIA continues to release new artificial intelligence hardware, including its recent A100 Tensor Core GPUs, which allow data centers to accelerate both AI training and inference. This means that these chips not only help computers learn through neural networks but also help them make decisions based on what they've just learned. NVIDIA believes that bringing AI training and inference into one-line chips will make AI data centers faster than ever before.

In the most recent quarter, NVIDIA's data-center revenue spiked 80% to $1.1 billion. That impressive growth could continue as the new A100 chip continues to find its way to customers. NVIDIA said on the first-quarter earnings call that the GPU added "meaningful" contribution to the company's revenue in the quarter and will be used in the top cloud-computing services from Amazon, Alibaba, Dell, Google, and Microsoft. 

If you're looking for an easy way to tap into the AI chip market, which will grow from $10.1 billion in 2020 to an estimated $80.2 billion in 2027, there's likely no better bet than NVIDIA.

John Mackey, 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. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Alphabet (A shares), Alphabet (C shares), Amazon, Microsoft, and NVIDIA and recommends the following options: long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, long January 2021 $85 calls on Microsoft, and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

Stocks Mentioned

Microsoft Stock Quote
$247.40 (1.24%) $3.03 Stock Quote
$90.35 (2.14%) $1.89
Nvidia Stock Quote
$171.69 (6.51%) $10.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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