Nvidia is undoubtedly the name many investors think about these days when they think of artificial intelligence (AI). And that's not wrong, as the chipmaker has been playing a big role in helping companies develop AI models and improve their overall capabilities. But there are some strong AI stocks to buy besides Nvidia that investors should consider as well.
Palantir Technologies (PLTR 1.38%), Amazon (AMZN 0.75%), and Alphabet (GOOG -3.33%) (GOOGL -3.37%) are three stocks that all look unstoppable right now and can be excellent long-term options for AI investors. Let's find out a bit more about these three buy-and-hold AI stocks.
1. Palantir Technologies
Palantir is a name that has been growing in popularity with both government organizations and private businesses. The company's focus on data analytics and delivering actionable insights has always had AI connections. But more recently, Palantir made the connection more clear when it launched its Artificial Intelligence Platform, or AIP. Based on customers' reactions, it's clear they are eager to put it to use.
In 2023, the company reported revenue totaling $2.2 billion, which grew 17% year over year. For the current year, Palantir anticipates its top line will total around $2.6 billion to $2.7 billion, rising at a slightly higher rate of around 20%. It also expects to remain in the black, as it has in recent quarters, as a lack of profitability is no longer a big risk with the tech stock.
Palantir expects its growth rate to ramp up, however, thanks in large part to the more than 500 "boot camps" it has held with customers to help them identify possible opportunities for AI to help their businesses. Securing those types of contracts can take time, but with a few large wins, the company's revenue potentially could come in much higher in the long run.
Investors expect more growth from the business thanks to AI, but Palantir is getting more positive attention because it is not only improving its growth rate but is profitable while doing so. All in all, this can be one of the best AI stocks to own as Palantir's mix of government and commercial revenue gives it some excellent long-term stability.
2. Amazon
Amazon was a top AI stock to own even before AI was a big buzzword in stocks. The company has long used AI to optimize its e-commerce operations and shorten its delivery times. While it's a big name in e-commerce, its other business segments are getting a boost from increased interest in generative AI. Amazon has invested $4 billion in AI startup Anthropic, which last month rolled out Claude 3, an AI chatbot that could rival OpenAI's ChatGPT.
Whether or not Claude 3 becomes the best chatbot isn't what matters in the end. Instead, it's Amazon's constant pursuit of investing in AI and next-generation technologies that makes it a great option for long-term investors. Chatbots are just one of several AI-related growth opportunities for Amazon, especially with its strong cloud business Amazon Web Services.
The company's deep pockets also put it in excellent shape to continue growing and investing in AI. Last year, Amazon generated free cash flow totaling $32.2 billion as it focused on efficiency and cutting down on costs.
3. Alphabet
Another stock poised for growth because of AI is Alphabet, the parent company of Google and YouTube. It, too, has entered the chatbot wars with the launch of Bard (recently upgraded and renamed Gemini). Google's rollout, however, hasn't been without its challenges as its chatbots have faced problems with delivering correct and accurate results. But that shouldn't deter investors; just because the launch doesn't go well doesn't mean the long-term outlook is in trouble.
Alphabet has a wealth of data at its disposal through search queries on YouTube and Google, which give it a big advantage in developing a chatbot that may end up being more intuitive and predictive in knowing what people may search for and ask questions about.
The company's financials are also arguably the best of all three stocks here as Alphabet generates strong margins; last year its free cash flow came in at just under $70 billion. With a wealth of data and cash, Alphabet is a great AI stock to buy and hold for the long haul.
