If you're looking to invest a large amount of money, like $10,000, in a couple of artificial intelligence (AI) stocks that you can hold for decades, you're going to want to buy market leaders with wide moats. Let's look at two stocks that fit this bill.
1. Alphabet
NASDAQ: GOOGL
Key Data Points
One of the best-positioned AI names over the next decade is Alphabet (GOOGL +3.12%) (GOOG +3.10%), hands down. The company is involved in nearly every aspect of AI, from large language models (LLMs), AI chips, AI-powered chatbots, and cloud computing, and its pending acquisition of Wiz will add AI cloud security to that list. It's also a leader in other emerging fields, including quantum computing, and robotaxis with its Waymo unit.
Alphabet's fastest-growing business right now is Google Cloud, which last quarter saw its revenue jump 34% and its segment operating income surge 89%. The company's biggest advantage is that it controls the whole tech stack, highlighted by its own leading LLM in Gemini and its own custom AI accelerators with its tensor processing units (TPUs). This helps give the company both a performance and cost edge. While demand for AI services is lifting all cloud computing boats currently, when supply starts to catch up with demand in the coming decade, Alphabet will likely be the best-positioned cloud computing company because of this.
At the same time, the company's Gemini model is helping transform its search business into more of a discovery platform. New features such as AI Overviews, Lens, and Circle to Search are helping drive more queries, while its new AI Mode allows users to easily toggle between traditional search and an AI chatbot. And while there is competition from AI chatbots, Alphabet has a few big advantages.
The first is distribution, as with its Chrome browser, Android smartphone operating system, and a search revenue-sharing agreement with Apple, Google is the default gateway to the internet for a large percentage of the world. At the same time, the company has a treasure trove of data that is just unmatched. And lastly, the company has spent decades building one of the most wide-spanning ad networks on the planet, which can just as easily run a global campaign as it can a local one.
Taken altogether, Alphabet is an AI leader with a wide moat that you want to own for the long haul.
Image source: Getty Images.
2. ASML
NASDAQ: ASML
Key Data Points
There is no bigger moat than being a monopoly, and that is exactly what ASML (ASML +1.29%) is. Without its technology, there would be no AI boom. In fact, we wouldn't even have smartphones.
ASML makes extreme ultraviolet lithography, or EUV, machines, which are used to make advanced chips. No other company has this technology, and most rivals gave up long ago trying to replicate it. As such, ASML doesn't even really have a distant second competitor when it comes to EUV technology.
ASML is also the leader in DUV (deep ultraviolet) machines, which are used to manufacture less complex chips. It does have some competition in this area from companies like Canon and Nikon.
ASML is in a very strong position moving forward. As demand for AI chips increases, more and more of its EUV machines will be needed to help make them. Meanwhile, other emerging fields such as robotics, robotaxis, and quantum computing will also need advanced chips. The company has also developed its next generation of EUV technology called High-NA EUV (high numerical aperture extreme ultraviolet lithography), which will be able to shrink chip node sizes (how many transistors can be fit onto a chip) even further.
Its new High-NA EUV machines are expensive, costing nearly $400 million versus the $220 million its EUV machines cost, but eventually foundries like Taiwan Semiconductor Manufacturing and Samsung will need to adopt the technology in the future if they want to remain on the cutting edge of chip technology. While its current EUV machines should be its main growth driver over the next few years, its High-NA EUV machines should lead to strong growth in outer years. That makes ASML a stock to own for the long term.
