Artificial intelligence (AI) stocks have been soaring for most of the past few years amid optimism about the technology's game-changing potential. AI has already demonstrated some of its strengths, making companies more efficient, for example. In the future, it may continue to do this and more, reshaping the way the world operates. Importantly, this could lower companies' costs and boost innovation.
As a result, earnings and stock performance may take off -- and early investors in AI companies might score a significant win. But, with all of the AI stocks out there today, which ones should an investor choose? Here are the top 3 to buy right now.
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1. Nvidia
Nvidia (NVDA 1.53%) may be the world's most well-known AI company. That's because it's built an AI empire, selling everything -- from chips to networking tools -- a customer may need along the AI path. Its expertise in designing AI chips, or graphics processing units (GPUs), got the ball rolling and paved the way for Nvidia to construct this complete portfolio of products.
All of this has helped the chip leader to generate explosive revenue growth -- in the double and triple digits -- and at a high level of profitability on sales. In the latest quarter, revenue soared 62% to $57 billion, and gross margin topped 70%.
Nvidia's commitment to innovation should keep this leadership going, and with an AI market forecast to reach into the trillions by 2030, this company could have plenty of bright days ahead. That's why right now, with Nvidia trading at its lowest valuation in nearly a year, it's a great time to get in on this AI powerhouse.
NVDA PE Ratio (Forward) data by YCharts
2. Amazon
Amazon (AMZN 1.52%) is a fantastic AI buy because it offers you exposure to a company well-positioned to benefit from AI -- and it already is doing so -- and a tech leader that doesn't rely entirely on this new technology. After all, it's important to remember that Amazon's e-commerce and cloud computing businesses built a track record of earnings growth well before the AI boom gathered momentum.
Meanwhile, Amazon has been growing its presence in AI as a user and a provider of the technology. For example, Amazon uses AI to choose the best delivery routes for packages, saving money and time. And Amazon Web Services (AWS), the company's cloud business, offers customers a wide range of AI products and services, from chips to a fully managed system called Amazon Bedrock.
NASDAQ: AMZN
Key Data Points
All of this makes Amazon a great selection for investors looking for both safety and AI growth. Today, Amazon trades for 27x forward earnings estimates, down from more than 35x just a few months ago -- a very reasonable price for this top tech player.
3. Meta Platforms
Meta Platforms (META 2.52%) chief Mark Zuckerberg hasn't been shy about expressing his AI ambitions. He put a focus on AI a few years ago, launching the construction of Meta's own large language models, and has built on this effort. Today, Meta has its own superintelligence lab, continues to invest heavily in AI, and aims to become one of the industry's leaders.
How can Meta benefit from this technology? Meta relies on advertising for its billion-dollar revenue, and the company's AI strengths may prompt advertisers to spend more and more of their ad budgets on Meta. This is because AI features may keep us, advertisers' target audience, on Meta's social media apps longer. And Meta is working on AI to improve and automate the advertising process to make it more efficient and more effective.
NASDAQ: META
Key Data Points
On top of this, Meta's interest in AI could result in other products and services down the road.
Importantly, Meta has the financial resources to follow its ambitions and, at the same time, pay shareholders a dividend. All of this makes the stock look cheap at 21x forward earnings estimates.
