Artificial intelligence (AI) continues to be the biggest theme driving the market today, and for good reason. The technology has the potential to completely reshape the world we are living in, and it is still in the very early days of its development.
Let's look at three AI stocks to buy now.
Image source: Getty Images.
Nvidia
Nvidia (NVDA 2.22%) saw where AI was headed very early in the game, and its decision to give away CUDA for free to universities and research labs paid off big by giving it one of the widest moats in the industry. Developers have built their foundational AI code on Nvidia's software platform, which has effectively locked them into its ecosystem. Even if a rival comes out with a slightly better chip, ripping out years of code and retraining engineers is a nonstarter for most companies, especially when it comes to training large language models (LLMs). That is why Nvidia still controls more than 90% of the graphics processing unit (GPU) market for AI workloads.
The company has also gone far beyond just selling chips. Its proprietary NVLink interconnect allows its GPUs to work as one massive unit, which is a critical edge as AI models get larger and more complex. Now Nvidia has made another big strategic move by investing up to $100 billion in OpenAI. This will give Nvidia insight into where AI models are headed, and the two companies will work together to help shape the future of AI.
CEO Jensen Huang has predicted that data center spending on AI could reach as much as $4 trillion over the next several years, and Nvidia looks positioned better than anyone to capture that spending.
Alphabet
Alphabet (GOOGL -1.63%) (GOOG -1.78%) is positioning itself to become one of the biggest AI beneficiaries of the next decade. Its Gemini model has progressed rapidly to become one of the leading foundational models. It's helping power both its AI and search efforts, as well as its cloud computing unit.
The company developed a wide moat in search by becoming the default search engine on most devices on the planet. It did this by owning the popular Chrome browser and Android operating system, and then struck a search revenue-sharing deal with Apple. Now, as there is a shift toward AI, Alphabet has incorporated its Gemini model throughout its search platform with both AI Overviews and AI Mode, which lets people easily shift from AI-powered search to an AI chatbot with the click of a mouse. This is leading to more queries and helping the company generate more ad revenue.
Meanwhile, the company's cloud computing unit, Google Cloud, has been growing quickly, and it has an advantage as the only company with a fully integrated AI stack. In addition to its Gemini model, it has taken the lead with custom AI chips that give it cost and performance advantages, while also having leading data analytics and other services.
Meanwhile, longer-term bets like its Waymo robotaxi business and progress in quantum computing could turn into new growth drivers. Combined, all of this makes Alphabet a top AI stock to own.
Amazon
While most people think of Amazon (AMZN -1.35%) as an e-commerce company, behind the scenes, it is a leader in AI and robotics. The company created the cloud computing industry, which today is one of the industries benefiting the most from the AI boom.
Amazon Web Services (AWS) is both the company's largest segment by profitability and its fastest-growing. Last quarter, AWS revenue jumped 17.5% to nearly $31 billion, with operating income topping $10 billion. The growth is being fueled by customers looking to use its services and infrastructure to help build and run their AI workloads. On the service front, its Bedrock solution lets customers tap into the top foundation LLMs and customize them, while SageMaker gives them a platform to build and train their own. It has also recently introduced an open-source framework for building AI agents, called Strands, and Agentcore, a secure environment to deploy them at scale. On top of that, Amazon has built its own AI chips, Trainium and Inferentia, which lower costs for customers and give AWS an efficiency advantage.
Amazon is also embedding AI across its e-commerce business to squeeze out more profits. It already has more than 1 million robots working in its warehouses, which are coordinated by its DeepFleet AI model. Amazon is also using AI to predict where to store items for faster delivery, optimize driver routes, and improve its advertising platform. These changes add up to a better operating margin. Last quarter, North American operating income surged 47% on just an 11% increase in revenue.
Overall, Amazon remains well-positioned to benefit from the rise of AI over the next decade.
