Grand View Research predicts that the artificial intelligence (AI) market will grow at an average annual rate of 37% through 2030. If this trajectory continues, the sector will reach nearly $2 trillion in annual market value by the end of 2020. With such growth on the horizon, it would be wise to dedicate a portion of your portfolio to companies that can take advantage of this up-and-coming industry.
The announcement of OpenAI’s ChatGPT in November 2022 reinvigorated interest in AI and highlighted how far this technology has come. AI can power countless industries, including healthcare, consumer technology, productivity software, cloud computing, self-driving cars, and more.
However, it will take time for AI to expand its reach and for businesses to realize its full potential. As that process continues, here are two exciting AI stocks to buy and hold for the next 10 years.
1. Nvidia
Last year’s AI boom put a bright spotlight on it. Nvidia‘s (NVDA 3.58%) It has had a huge impact on business as its cutting-edge chips have become the hardware of choice for AI developers and cloud infrastructure providers around the world.
The company, which has long dominated graphics processing units (GPUs), the chips needed to train AI models, is now supplying hardware to countless AI-driven companies as the market explodes. I was in a position to do it. Nvidia has a head start against rivals such as AMD and intel Gained an estimated 80%-95% market share in AI GPUs.
Data by YCharts.
Thanks to soaring chip sales, Nvidia’s revenue, operating profit and free cash flow have soared since last year, and its stock price has risen more than 215%. The company’s free cash flow amounted to more than $17 billion, significantly higher than AMD’s more than $1 billion and Intel’s minus $14 billion.
Therefore, despite the release of new GPUs from both of these rival chipmakers, Nvidia’s early advantage in AI has led it to continue to invest in the technology and do more to maintain market dominance. With cash reserves, there is potential for further progress.
Data by YCharts.
Nvidia’s price-to-free cash flow ratio and price-to-earnings ratio have declined by double-digit percentages over the past six months. When it comes to these metrics, the lower the number, the more valuable it is.
As a result, now is a great time to make a long-term investment in Nvidia and benefit from the consistently increasing demand for AI GPUs.
2.Amazon
shares of Amazon (AMZN 2.71%) It’s up 65% since February last year, driven in part by the company’s strong financial growth and promising prospects in the AI space.
The company announced its fourth quarter results last week. Revenue rose 14% from a year earlier to $170 billion, beating Wall Street expectations by nearly $4 billion. Meanwhile, earnings per share came to $1.00, compared to expectations of $0.80.
Over the past 12 months, Amazon’s free cash flow increased 904% to $32 billion due to impressive growth.
The tech giant’s e-commerce business also returned to strong growth. But the biggest reason to invest in the company’s stock is its profitable cloud platform, Amazon Web Services (AWS). As the world’s leading cloud infrastructure provider, the company leverages its massive data centers and has the potential to take advantage of the generative AI market.
Over the past year, AWS has responded to the growing demand for AI services by expanding its services. For example, in September, the company debuted Bedrock, a tool that provides a variety of models that customers can use to build generative AI applications. AWS also introduced CodeWhisperer, a code generation platform for developers, and HealthScribe, a tool that can transcribe conversations between patients and doctors.
In fiscal year 2023, AWS accounted for 67% of Amazon’s operating income, despite having the lowest revenue of Amazon’s three segments. Amazon’s continued expansion of AI services could lead to consistent revenue growth into the future.
Data by YCharts.
Based on current estimates, Amazon’s earnings could reach just under $7 a share in two fiscal years. Multiplying this number by the forward P/E ratio of 41 yields a stock price of $279. Therefore, if the forecast is correct and the forward ratio remains unchanged, Amazon’s stock price will rise 65% by 2026.
All of this makes Amazon one of the best AI stocks to buy now and hold for the next 10 years and beyond.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Dani Cook has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, and Nvidia. The Motley Fool recommends Intel and recommends the following options: Long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
