The artificial intelligence (AI) market is expanding rapidly and is projected to develop at a compound annual growth rate (CAGR) of 37% through 2030. So, it's no surprise that numerous tech companies have joined the industry in an effort to take a slice of a $200 billion pie.
One of the most attractive features of AI is its versatility. The generative technology has the potential to boost countless markets, from consumer products to cloud computing, the automotive industry, video games, productivity software, and more. The sector is only just getting started, with now an excellent time to consider dedicating a portion of your holdings to AI and profit from the market's long-term development.
So, here are two artificial intelligence stocks you can buy and hold for the next decade.
1. Intel
Intel (INTC 3.94%) has faced repeated hits to its business in recent years that have seen its share price tumble 43% since 2021. As a result, patience will be essential with the company's stock, but recent developments suggest it could deliver major gains over the long term.
Intel was once the biggest name in the chip market, responsible for more than 80% of the central processing unit (CPU) market and the exclusive chip supplier to Apple's (AAPL 1.19%) Mac lineup. Increased competition has brought its CPU share down to 64%, while Apple has transitioned to using in-house designed processors.
Recent headwinds have forced Intel to rethink its model, restructuring its business to prioritize manufacturing and AI. The company has adopted a foundry model, which will see it open manufacturing plants throughout the U.S. as it attempts to steal market share from Taiwan Semiconductor Manufacturing Company.
NASDAQ: INTC
Key Data Points
Intel CEO Pat Gelsinger spoke on May 16 about the factory the company is building outside of Columbus, Ohio, saying, "I want our Columbus site here, Ohio One, to be the AI systems fab for the nation." Gelsinger's comments about the site come only a month after Intel unveiled its Gaudi 3 accelerator, a chip designed to compete directly with Nvidia's AI graphics processing units (GPUs).
Intel still has a mountain to climb before it begins seeing significant returns on its investment in AI, but recent earnings indicate it's moving in a promising direction. From the fourth quarter of 2023 to Q1 2024, Intel's free cash flow increased by $2 billion, from a negative $14 billion to a negative $12 billion.
Meanwhile, Q1 2024 saw Intel's AI and data-center segment report operating income of $184 million, significantly improving on the negative $69 million it posted in the year-ago quarter.
Intel is no doubt a long-term hold, but with a forward price-to-earnings (P/E) ratio of 29 compared to Nvidia's 37 and AMD's 47, it's also one of the best-valued AI chip stocks.
2. Apple
Apple is slightly late to the AI party, with competitors like Microsoft and Amazon making more headway in the industry. However, recent developments suggest Apple has a bright future in the market.
The iPhone maker made Wall Street bullish earlier this month when it debuted its newest iPad Pro. The tablet is the first device to utilize Apple's M4 chip, its most powerful chip to date. The new processor expands the company's AI capabilities, with many experts believing this is just the start of Apple's venture into the lucrative industry. The company will host its Worldwide Developer Conference in June, where it's expected to introduce a range of new AI tools.
Additionally, the iPad debut comes just weeks after a Bloomberg report revealed Apple will completely revamp its Mac lineup to prioritize AI-enabled features.
NASDAQ: AAPL
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Apple's expansion into AI may be moving slower than some of its peers, but that isn't necessarily bad. The company isn't known for always being the first to new technology but instead has a reputation for taking existing technology, perfecting it with its own design language, and quickly rising to dominance in the market by utilizing its immense brand loyalty.
The tech giant has employed this strategy in tablets, headphones, smartphones, and smartwatches. Different companies led each of these markets before Apple landed on the scene and stole the whole show. As a result, I wouldn't bet against Apple going far in AI over the long term.
Data by YCharts
Like Intel, Apple's stock potentially offers more value than its competitors. The company's forward P/E is significantly lower than that of Microsoft and Amazon, making Apple's shares a far better value. And with that, Apple's stock is a screaming buy and one you can hold for the next decade.
