Over the last year, an economic downturn highlighted the importance of dedicating a large portion of your portfolio to solid growth stocks. Companies active in high-growth markets can almost guarantee long-term gains and help safeguard your portfolio from temporary market declines.
In 2023, Wall Street has become particularly bullish about artificial intelligence (AI) and its potential to bolster countless markets. Excitement for the burgeoning sector is not unfounded, as the AI market is expected to expand at a compound annual growth rate of 37% through 2030.
While much of the hype this year focused on companies like Microsoft and Nvidia, businesses in the earlier stages of their AI journeys could offer more growth over the long term. Here are three stocks that could make the smartest investing moves you ever make.
1. Apple
Apple (AAPL -2.88%) has enjoyed a reputation as an excellent long-term investment, catching the eye of some of the world's most successful investors. Warren Buffett's holdings company, Berkshire Hathaway, has dedicated 46% of its $348 billion portfolio to the iPhone company. Apple consistently delivered throughout the years, with its stock up 560% since Berkshire Hathaway first invested in 2016.
The tech company, however, stumbled in 2023, with macroeconomic headwinds causing declines in its product sales. However, its long-term outlook remains strong. Apple has leading market shares in most of its product categories, including smartphones, tablets, smartwatches, and headphones. It has built almost unrivaled brand loyalty among consumers, which bodes well for its growing venture in AI.
Over the last year, Apple gradually added AI-enabled features to its products. Meanwhile, the company has reportedly built a custom framework for developing AI language models and created a chatbot similar to OpenAI's ChatGPT, which engineers call Apple GPT. Apple's dominance in tech could help it attract millions of consumers to its future AI services, allowing it to profit substantially from the sector's development.
Alongside a history of stock growth, Apple could be one of the smartest long-term investments.
2. Alphabet
Many investors have overlooked Alphabet's (GOOG -1.34%) (GOOGL -1.37%) potential in AI, favoring competitors like Microsoft and Amazon, which hold larger market shares in cloud computing. However, the lack of confidence only boosted the value of Alphabet's stock. The chart below shows how Alphabet has the lowest forward price-to-earnings ratio (P/E) among some of the biggest names in AI.
Data by YCharts. PE Ratio = price-to-earnings ratio.
Meanwhile, Alphabet is using AI to enhance several areas of its business, including Google Search and Cloud.
The company started the year by introducing the world to Bard, an AI chatbot meant to compete directly with ChatGPT. Then, in the second quarter of 2023, data from Nielsen revealed YouTube captured 8% of the total time consumers spent watching television. The platform uses AI to recommend videos to users, keeping them connected to the service longer.
Alongside AI, Alphabet enjoyed a solid recovery in its digital ad business. In Q2 2023, revenue rose 7% year over year, driven by strong ad revenue growth.
Alphabet is home to some of the world's most potent brands, including Google, YouTube, Android, Fitbit, and more. With a stock trading at a bargain compared to the competition, Alphabet could be one of the best investments to hold on to for the next five to 10 years and beyond.
3. Intel
Like Alphabet, Intel (INTC -2.34%) is a company significantly overlooked in AI and tech in general. As a result, its P/E sits at an attractive 16, indicating its stock is undervalued.
The company stumbled for several years after consistently losing central processing unit (CPU) market share to Advanced Micro Devices and then losing its position as the primary supplier of chips to Apple. However, Intel has used the last year to pivot its business toward generative AI, developing chips to go up against Nvidia.
Moreover, the PC market is beginning to stabilize after more than a year of sales declines. The improvement was evident in Intel's Q2 2023, with its $0.13 earnings per share beating analysts' expectations by $0.16. Meanwhile, revenue of $13 billion beat by $760 million. The company appears to be back on a growth path, making its stock a compelling investment right now.
With the power of AI and a recovering PC market, Intel stock could be one of the smartest investments you ever make.
