2 AI stocks to buy and hold for strong long-term potential

Companies are rapidly investing in artificial intelligence (AI) to improve productivity and create new applications for both consumer and enterprise use. This will be a huge growth opportunity over the next decade, so investors who identify companies best positioned to capitalize could reap big benefits.

Here are two companies working on artificial intelligence that could benefit your long-term investment.

1. Palantir Technologies

The company’s software is used by organizations ranging from the military to Fortune 500 companies Palantir Technologies(NYSE: PLTR) for data analytics based on artificial intelligence. The stock has been volatile over the past few years, but is up about 230% since its 2022 low.

As recent share gains suggest, Palantir’s business is delivering solid financial results. Its quarterly revenue of $634 million has tripled over the past five years. In the first quarter, the company reported revenue growth of 21% year-over-year, led by a 69% year-over-year increase in customer numbers. Faster customer growth demonstrates the opportunity to deliver greater growth as they expand their relationship with Palantir.

While the U.S. government company’s revenue grew just 12% year-over-year in the first quarter, its U.S. corporate business is booming. U.S. commercial revenues grew 40% year-over-year last quarter. In 2023, Dresner Advisory Services selected Palantir as a leading provider of artificial intelligence, data analytics and machine learning, which was well reflected in the company’s financial results.

One of her clients is a seller of home furnishings Lowe, which uses the Palantir software platform to improve customer service. Another notable client is Archer Aviation, which uses it for dynamic flight routing and predictive maintenance. These are just a few examples of how companies are using Palantir.

An important characteristic an investor should look for in any software company is whether it is effective in converting growing revenues into profits. Palantir ticks that box as management projects adjusted operating income this year to be between $868 million and $880 million on revenue of more than $2.6 billion. Profitable growth will deliver significant gains for investors, and Palantir clearly shows it can achieve this.

2.Tesla

It was a difficult year for the electric vehicle (EV) market, under sales pressure due to rising interest rates and competition among leading EV manufacturers. Tesla(NASDAQ: TSLA) observed a decline in revenues in the first quarter, which affected the company’s results so far this year. Although Tesla is known primarily as an electric vehicle brand and still has many advantages in this market, investments in artificial intelligence and software are what make the company stand out in the automotive industry.

CEO Elon Musk mentioned in a recent earnings call that Tesla was in talks with the major automaker about potentially licensing its full autonomous driving (FSD) software. Given that an estimated 29% to 54% of new vehicles by 2050 will be electric, according to the Energy Research Institute, Tesla may see significant opportunities in licensing its self-driving software.

Tesla is already one of the world’s most profitable automakers, generating net profits of $13 billion last year. One thing he can do with those profits is buy Nvidiaexpensive AI training chips. It is making significant progress in training its AI models. The latest video reviews show that Tesla’s latest version of FSD can handle common traffic and traffic challenges as well as a human.

Tesla’s FSD upgrade encourages the company’s long-awaited Cybercab unveiling in August. According to MarketsandMarkets, the robotxi market is expected to grow rapidly over the next decade, from $400 million in 2023 to over $45 billion in 2030, and Tesla could one day become a leading supplier.

In summary, Tesla’s investments in artificial intelligence, including its work on humanoid robots, could provide greater revenue opportunities over time that will not be reflected in stock valuations.

Is it worth investing $1,000 in Palantir Technologies now?

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John Ballard holds positions at Nvidia and Tesla. The Motley Fool covers and recommends Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Lowe’s. The Motley Fool has a disclosure policy.