3 artificial intelligence (AI) stocks to buy now and hold for decades

Artificial intelligence (AI) is a transformative technology, and many companies are rushing to capture a piece of this rapidly growing market. The Statista research team forecasts that the AI ​​industry will grow from $136 billion in 2023 to $827 billion by 2030.

At this early stage of the AI ​​revolution, determining which companies will be able to successfully leverage emerging opportunities over the long term can be a challenge. However, among the multitude of companies vying for supremacy in this space, three stand out as attractive AI stocks worth buying and holding for years as the market grows: Amazon(NASDAQ: AMZN), Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG)AND Palantir Technologies(NYSE: PLTR).

1. Amazon

Amazon may be best known for its e-commerce business, but the key to its ongoing success is its use of artificial intelligence. For example, the e-commerce giant created an AI tool to make it easier for third-party sellers to list their products on Amazon. They simply enter the URL of the relevant page on their site into the tool, and the AI ​​automatically extracts the products to republish on Amazon.

Helping third-party sellers is important because Amazon generates a significant portion of its revenue from them. In the first quarter, the various fees Amazon collected from these sellers amounted to $34.6 billion of its $143.3 billion in revenue.

The company also relies on artificial intelligence, developing new technologies. For example, Amazon has used artificial intelligence to develop a system that can accurately identify people based on the vein structures in their hands, so customers can now scan their palms and then use their hands to pay when shopping at Amazon Fresh and Whole Foods stores. Another example is the virtual assistant Alexa, which relies on artificial intelligence to understand human speech and perform tasks.

The company’s cloud computing division, Amazon Web Services (AWS), provides technology for other companies to build and run AI models. Customers are increasingly embracing AI capabilities, which helped AWS achieve 17% year-over-year sales growth in the first quarter, to $25 billion.

Amazon’s success with AI has already seen it achieve multi-billion-dollar AI revenues, suggesting these technologies could power the company’s business in the coming years.

2. Alphabet

Alphabet has been working aggressively on AI for years. Indeed, as CEO Sundar Pichai has said, “We’ve refocused the company around AI.”

AI is part of the company’s strategy to fend off competition and maintain a dominant position in areas such as digital advertising, where it has about 40% of the market, compared with Amazon’s 7%.

Like Amazon, Alphabet uses AI to improve its products and help other companies create AI models. For example, AI has been injected into Google Search, Google Docs, and Google Cloud to improve these products and provide new capabilities, such as helping people write emails.

But what really makes Alphabet an attractive AI investment is the company’s efforts to create incredible new technologies that solve society’s biggest challenges. One example is its use of AI in its efforts to build the technology needed to harness nuclear fusion, a problem that would provide humanity with a nearly limitless source of clean energy.

Alphabet is able to fund this type of research because it generates huge amounts of revenue and free cash flow. In Q1, its sales increased 15% year-over-year to $80.5 billion, and free cash flow amounted to $16.8 billion.

With its massive free cash flow, Alphabet can easily afford a dividend and finally rewarded investors with its first-ever dividend in the first quarter – a $0.20 per share payment. Dividends boost investment returns and can also provide passive income streams.

3. Palantir Technologies

As a data analytics company, Palantir is in a strong position to fully leverage AI. That’s because AI requires a lot of data to make effective decisions.

However, using AI is not just about having a huge amount of data. AI requires that the data be organized and accurate. How can an organization do this?

Palantir’s solution is the Foundry Ontology system, which organizes and structures customer data by mapping properties and relationships between data.

As CEO Alex Karp explained Palantir’s approach and competitive advantage: “We are differentiated because for AI to actually work, you need an ontology.”

Palantir’s early efforts focused on helping the U.S. government with counterterrorism investigations. It has since expanded into commercial markets, launching the Palantir Artificial Intelligence Platform (AIP) last year.

AIP has proven to be a success, as evidenced by the U.S. Army’s selection of Palantir to help build the first AI-powered military vehicle.

AIP helped grow the company’s revenue by 17% in 2023 to $2.2 billion. And in the first quarter of 2024, sales increased 21% year over year to $634.3 million.

Palantir’s first-quarter results suggest that its revenue growth rate is accelerating. As a result, management raised its full-year guidance and projected second-quarter revenues to reach at least $649 million, up from $533 million in the prior year.

With cutting-edge technology and a track record of success, Palantir, Amazon, and Alphabet look like good stocks to buy and hold for investors looking to capitalize on the coming years of AI industry growth.

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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Robert Izquierdo holds positions at Alphabet, Amazon and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Amazon, and Palantir Technologies. The Motley Fool has a disclosure policy.