Companies investing in artificial intelligence (AI) or playing a key role in the technology's development have seen their share prices soar in recent times. But this movement may just be getting started because AI is in its early days. The corporate world's interest in AI has been on the rise in recent years; still, only 16.6% of companies worldwide mentioned AI during their earnings calls last year, according to Goldman Sachs data.
This and the forecast for an AI market surpassing more than $1 trillion by 2030 mean growth is just in its early stages right now, and there may be plenty more ahead. That means right now is a great time to invest in AI players, even if in some cases their stock prices already have advanced on optimism about their AI programs. Here are my top AI stocks to buy right now because each of them could help you win in the AI revolution over the long term.
Image source: Getty Images.
1. Amazon
Amazon(NASDAQ: AMZN) is set to benefit from AI in two ways. The company uses AI across its e-commerce business to improve efficiency and therefore reduce costs over time. For example, AI helps Amazon determine the shortest delivery routes to bring a package from its fulfillment center to your door. This, along with other moves, like shifting to a regional from a national fulfillment model, are helping the company lower its cost to serve.
So, Amazon is a user of AI, but it also sells AI products and services to customers through its cloud computing unit, a business that generally has driven overall profit at the company. Amazon Web Services (AWS) is involved in AI on every level, from selling its own chips as well as ultra high-performance chips from leaders like Nvidia to offering customers a complete managed service that helps them tailor top large language models to their needs.
AWS is the world's leading cloud company, so it's well positioned to attract AI customers, since they may already be AWS customers for other cloud services.
Today, Amazon stock trades for 43 times forward earnings estimates, which is reasonable considering the company's solid track record of growth, leadership in the high-growth areas of e-commerce and cloud -- and this potential for dominance in AI too.
2. Medtronic
Medtronic (NYSE: MDT) isn't a name you immediately think of when someone mentions "AI stock." But this medical device company may be poised to benefit from AI because it's including the technology in its development of top products. Medronic isn't new to the area as it already has won regulatory clearance for five AI products, including an AI-enabled surgical system and its GI Genius intelligent endoscopy device.
The AI in healthcare market, expanding in the double digits, is set to surpass $430 billion by 2032, according to Polaris Research. And even one of the biggest figures in AI, Nvidia chief Jensen Huang expects healthcare to be one of the areas most transformed by AI. That's because the technology could result in better diagnostics, drugs, and patient outcomes.
Medtronic has established an AI center of excellence to help the company cost-effectively share resources across its businesses and further develop AI.
Medronic already is a global device leader, with a solid commercial infrastructure so it's well positioned to introduce its AI products into various markets -- and grow market share. Today, the stock is trading for about 15 times forward earnings estimates, a great entry point for this potential AI in healthcare winner.
3. Intel
Intel(NASDAQ: INTC) fell behind in the early days of the AI race, and that meant investors focused on growth turned their backs on the chipmaker. The company still is No. 1 in the central processing unit market but has lagged behind in the graphics processing unit (GPU) space. GPUs are the chips powering AI programs.
But Intel has made two decisions that should help the company turn things around. First, it put a new focus on AI, recently announcing an attractive portfolio of new products, including a processor family set to launch the era of the AI personal computer. If these products gain momentum, they could offer Intel's revenue a boost -- and prompt investors to see the company in a new light.
Second, Intel is opening up its manufacturing operations to others, with the goal of becoming the world's second biggest foundry by 2030. This is a huge bet, but it could be worth the effort and risk. If Intel reaches its goal, the move could be transformative for the company's earnings prospects over time.
Today, you can pick up shares of Intel for 27 times forward earnings estimates, and this looks well worth it for a company that could become an AI success story over the long term.
Should you invest $1,000 in Amazon right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends Intel and Medtronic and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
