Artificial intelligence (AI) stocks have soared over the past couple of years as investors bet on what could be the next technology revolution. The idea is that AI will change the way businesses operate by reducing costs and driving innovation -- and the technology aims to make daily life easier too, as AI helps us with a wide range of tasks from making an appointment to planning a trip.
Though AI stocks have climbed, the good news is it isn't too late to get in on this investing theme -- and this is because we may be in the early days of the complete AI story. Even certain companies that have generated significant growth from AI still offer the potential of more growth over time.
With this in mind, what are the top three AI stocks to buy right now? Let's find out.
1. Nvidia
Nvidia (NVDA 0.04%) already has scored many AI wins thanks to its dominance in the AI chip market. As the potential of AI became apparent several years ago, Nvidia tailored its graphics processing units (GPUs) for this technology, and the bet turned out to be a brilliant one. In recent quarters, Nvidia's GPUs have led the company to double- and triple-digit revenue growth and strong profitability on sales.
NASDAQ: NVDA
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This has translated into a stock price increase of 1,300% over the past three years. But the good news is earnings and stock performance gains may be far from over. For a few reasons. Companies are investing in data center ramp-up now and in the coming years, and Nvidia's GPUs are a core part of every high-performance data center. The company's GPUs also are needed well beyond the phase of training AI models -- they play a key role in AI inferencing, too, or the actual solving of complex problems. Finally, Nvidia's GPUs may extend their dominance into areas such as robotics and cellular technology.
All of this means that Nvidia shares may have plenty of room to run over the coming years -- and that makes now a great time to get in on them.
2. Oracle
Oracle (ORCL +2.23%) is a leading database software company, and in recent quarters, it's also emerged as a potential AI winner. This is thanks to the company's cloud business, which offers customers something in great need right now: capacity for AI workloads.
Over the past several quarters, Oracle has seen this business gather momentum, and the latest period is a perfect example of this trend. In the three months, Oracle's infrastructure revenue jumped 55% to $3.3 billion, and importantly, the company predicts this will continue. It forecasts cloud infrastructure revenue to reach $18 billion for the current fiscal year, then advance to $144 billion in four years.
Though Oracle sees increased capital spending to support the needs of its AI customers -- with $35 billion projected for this fiscal year -- most of this is for data center equipment. By investing in equipment rather than buildings or land, Oracle can focus on developing the technology that leads to revenue growth while limiting its costs.
NYSE: ORCL
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Oracle stock soared after the company's latest earnings report, then slipped to bring its valuation to 37x forward earnings estimates -- and this offers you a great entry point.
3. Alphabet
You may know Alphabet (GOOG +0.00%) (GOOGL 0.10%) best for a platform used worldwide on a daily basis: Google Search. It holds about 90% share in the search market, and thanks to Alphabet's focus on generating the best search results possible, that's unlikely to change. This is important because advertising across Google drives revenue at the company.
How does AI fit in? In a big way. Alphabet has developed its own large language model, Gemini, that it uses for a variety of key tasks -- from improving search and the advertising experience to serving the company's Google Cloud customers. This focus on AI has helped supercharge earnings in recent quarters, and in the latest period, Alphabet beat analysts' estimates for revenue and profit.
NASDAQ: GOOGL
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As companies flock to cloud providers for their AI tasks, recent trends suggest that Alphabet should be one of the winners. The company said in the latest quarter that AI demand drove growth in the cloud business, and cloud backlog reached $155 billion.
Alphabet is among the cheapest of the Magnificent Seven tech stocks, trading at 27x forward earnings estimates, and this along with the points I mention above make it one of the best AI buys to get in on right now.
