Please ensure Javascript is enabled for purposes of website accessibility

3 Top Artificial Intelligence Stocks to Buy in May

By Chris Neiger - May 5, 2021 at 7:54AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These tech companies are already benefiting from AI's growth.

Artificial intelligence (AI) is in everything from voice-enabled smart speakers to smartwatches to computers, and even our cars. But while AI has gone mainstream, not all artificial intelligence companies are benefiting equally.

Investors looking for the top AI stocks to buy right now should consider NVIDIA (NVDA -6.30%), Amazon (AMZN -0.99%), and Microsoft (MSFT -0.92%). Here's why.

A microchip with the letters "AI" on it.

Image source: Getty Images.


You might know NVIDIA as a leading graphics processing unit (GPU) company that has benefited immensely from the gaming market. 

The company is indeed a gaming GPU powerhouse, with revenue from its gaming GPU segment spiking 67% in the most recent quarter, accounting for 50% of the company's top line in the quarter. 

But NVIDIA is a leading artificial intelligence player as well. The company uses its GPUs to help power data centers, which are increasingly focused on artificial intelligence. The company's GPUs allow data centers to process information like voice and image recognition, allowing for more effective cloud-based AI services.

NVIDIA's data center sales skyrocketed 97% in the fourth quarter, and now account for 38% of the company's total revenue. That's impressive, especially considering that just two years ago data center sales made up less than 30% of NVIDIA's revenue. 

And then there's NVIDIA's pending purchase of Arm Holdings. The company says it will use its existing AI platform and combine it with Arm's CPU designs, which NVIDIA CEO Jensen Huang says "will create a company fabulously positioned for the age of AI." The deal hasn't closed yet, and it still faces a few hurdles, but even if it fell through NVIDIA's data center AI opportunity is more than enough to keep the company growing.

Investors looking for an AI stock that's already benefiting from this growing market and is in the perfect position to continue doing so for many more years would be wise to take a closer look at NVIDIA. 

A woman holding computer server wires.

Image source: Getty Images.

2. Amazon 

Amazon may not be the first company you think of when you're compiling a list of artificial intelligence stocks, but the company is doing far more in this space than you might realize. 

For starters, Amazon has experimented with state-of-the-art AI in its Amazon Go and Amazon Fresh grocery stores, which use image recognition to keep track of what users are picking up -- and what they walk out of the store with -- and then automatically charge them for it. 

And then there are the company's popular Echo smart speakers, which use Amazon's voice-recognition assistant, Alexa. The virtual assistant has become so popular that it's now embedded in third-party devices and is one of the leading smart home virtual assistants. 

But what really makes Amazon an artificial intelligence stock is the company's leading position in the cloud computing market. Amazon Web Services (AWS) helps companies set up chatbots, use image and video analysis, set up text-to-speech features, forecast product demand, and much more.

AWS holds 32% of the cloud computing infrastructure market, and it's one of Amazon's most lucrative businesses. The company earned $4.2 billion in operating income from AWS in the first quarter, more than the $3.5 billion in operating income from its North American e-commerce business.

For an AI play that's also dominating the cloud computing market, there's likely no better bet than Amazon. 

A man using a computer.

Image source: Getty Images.

3. Microsoft 

Last but certainly not least is Microsoft. Sure, smaller, faster-growing tech companies are betting on AI, but don't underestimate Microsoft's growing position in the space.

Microsoft's Azure is the second-largest cloud computing service behind AWS, and is benefiting from the increased demand for cloud-based AI services just like Amazon is. Azure's growth over the past few years has helped make Microsoft a major AI player -- and so will the company's latest purchase. 

Just last month Microsoft announced that it was purchasing Nuance Communications for $20 billion. The company focuses on voice recognition and AI healthcare technologies, including voice transcription and patient engagement. Microsoft says the purchase will fit nicely into its company's Intelligent Cloud business. Nuance's AI services -- like its popular Dragon speech software -- are used by companies around the world, and its AI-based healthcare tech is used by 77% of U.S. hospitals. 

The purchase of Nuance will nearly double Microsoft's total addressable market in healthcare to $500 billion, and give the company even more artificial intelligence tools.

For investors looking for an established technology company that's making all the right moves when it comes to cloud-based AI, Microsoft won't disappoint. 

Play the long game with AI

Buying these tech stocks doesn't guarantee immediate success in the market, of course. Artificial intelligence is already gaining traction in a lot of technologies, but investors need to remember to play the long game with these stocks -- especially as, according to IDC estimates, the current $327 billion global artificial intelligence market could grow into a $554 billion business over the next few years.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. John Mackey, CEO of Whole Foods Market, an Amazon 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 Amazon, Microsoft, and NVIDIA. The Motley Fool recommends the following options: long January 2022 $1920.0 calls on Amazon and short January 2022 $1940.0 calls on Amazon. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
$177.93 (-6.30%) $-11.96
Microsoft Corporation Stock Quote
Microsoft Corporation
$280.32 (-0.92%) $-2.59, Inc. Stock Quote, Inc.
$139.41 (-0.99%) $-1.39

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.