AI stocks sparked a frenzy after NVidia (NASDAQ:NVDA) delivered a blowout earnings report. This created a halo effect for any stock that even had a tangential relationship to AI, but investors have to be careful to focus on the best AI stocks to buy.
AI has a long runway, and these stocks will have advantage as the growth in AI stocks accelerates. In many cases, these companies give investors multiple ways to benefit from AI. And that makes them some of the best tech stocks to buy.
Much of the AI discussion has centered around the so called “FAANG” stocks, otherwise known as Facebook (now Meta), Apple, Amazon, Netflix and Google (now Alphabet). There is great earning potential with AI stocks, and each of these companies is exposed to AI in various ways, so which one is the right choice for individual investors?
Alphabet Inc. (NASDAQ:GOOGL)
No surprises here, search and cloud kingpin Alphabet is a FAANG company that seems the most AI-savvy of them all. Google’s generative AI Bard, which aims to duke it out with rival ChatGPT and Bing AI, may have had a slow and rocky beginning. However, if you’re a value investor, Alphabet may be the best option of the FAANG big players for your AI money. Compare Alphabet’s P/E ratio of 28 to Apple at 30x earnings and Amazon, off the charts at 289x earnings. Considering the tech focused nature of the entire company, this alone makes Alphabet a value relative to the other two players. Alphabet sports a Strong Buy, with 30 unanimous Buy ratings. The average GOOGL stock price target of $128.60 implies 23.3% upside potential.
Amazon (NASDAQ:AMZN)
Amazon is no longer just an e-commerce or cloud company anymore. Arguably, it’s one of the better ways to play autonomous robotics. With an impressive line-up of AI-powered warehouse workers and a foot in the waters of cashier-less stores, the firm has shown that it has not lost its disruptive innovation edge. AMZN stock may still be off 44% from its peak, but it’s well-equipped to keep its disruptive streak alive, thanks to AI. That makes me very bullish.
Recently, Amazon flexed its AI muscles to the crowd, announcing Amazon Bedrock, a service that puts the power of AI into the palm of its users’ hands. The platform allows users to create generative AI apps with its libraries. Indeed, Bedrock and services like it could render ChatGPT as just another language model of many. In a few years, GPT may not even be the go-to generative AI that mainstream users flock to.
Amazon has a Strong Buy, with 35 Buys and one Hold. The average AMZN stock price target of $135.79 entails a 28.3% gain from here.
Microsoft (NASDAQ: MSFT)
For decades, Microsoft was known primarily for its ubiquitous Windows software. Even though Windows remains the most dominant operating system in the world, Microsoft has since made a name for itself with its cloud computing and AI divisions as well. Microsoft’s AI platform, dubbed Azure, is the basis for countless applications designed for productivity and creativity.
According to the company itself, its AI platform allows companies to “achieve more at scale, more easily, with the proper enterprise level privacy, security and responsible AI protections that Azure offers.” The company plans to build Azure into a “supercomputer for the world,” on the back of the fastest GPUs in the world and its partnership with platforms like OpenAI.
All 3 of these companies work with C3.ai, an AI application development platform.
Best AI Stock
All of them are good buy i.e. Apple, Microsoft and Alphabet. Each of them are best long term AI stocks to invest in. In fact, to some degree, Apple, Microsoft and Alphabet are all working on similar advances in the field, and this competition will likely drive bigger and better things out of all of them.
As an investor, it’s important to remember that even leading AI companies like these 3 are immense businesses with a wide variety of products and services, not just AI. In that case, you should pick the one that you already favor based on valuation, growth rate, management and other traditional stock valuation methods.
