Artificial intelligence (AI) is rapidly transforming the world as we know it. While this paradigm-shifting technology may seem like science fiction to many, its impact has already profoundly reshaped global business, technological innovation, and human society.
With AI developing at an unprecedented pace, investors would be wise to position themselves in companies that are leading the way.
Which AI stocks should be at the top of your buy list now? Two names that stand out Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) And Microsoft (NASDAQ: MSFT). Here’s a closer look at why these tech giants are the best choice to gain exposure to the powerful AI theme.
Alphabet’s DeepMind: a source of AI breakthroughs
Alphabet, Google’s parent company, is an undisputed force in artificial intelligence. The company has leveraged its vast resources and computing power to drive breakthrough AI innovation through its pioneering subsidiary DeepMind.
Acquired by Alphabet in 2014, DeepMind is at the forefront of AI breakthroughs in machine learning, reinforcement learning and neural networks.
One of the most notable achievements is the development of AlphaGo, the first AI system to defeat a world champion in the age-old game of Go – a feat that was thought to be decades away.
More recently, DeepMind’s AlphaFold has revolutionized the field of protein structure prediction, unlocking new frontiers in biological research and drug discovery.
Alphabet’s extensive network of data centers and robust cloud infrastructure provide Alphabet with a significant competitive advantage.
With access to vast amounts of data and immense computing resources, Alphabet can train and deploy increasingly sophisticated AI models that push the boundaries of what is possible.
In addition to its groundbreaking AI research, Alphabet’s world-class architecture puts the company in a prime position to monetize its cutting-edge technology.
The company’s Google Cloud platform offers a range of AI-powered services and tools tailored for businesses and developers – a market that is expected to rise as AI adoption accelerates across industries.
With its proven track record of innovation, unparalleled data, computing resources, and an emerging AI-as-a-Service business, Alphabet stands out as an attractive option for investors seeking exposure to this powerful trend.
Best of all, the company’s shares trade at a reasonable 23 times forward earnings – one of the more attractive valuations in the ultra-fast-growing AI space.
Microsoft’s transformative AI bet is paying off
While Alphabet may be one of the early players in this field, Microsoft has firmly established itself as a force to be reckoned with in the AI space. The company’s strategic investments and partnerships in recent years have placed it at the forefront of real-world applications of AI.
Central to Microsoft’s AI strategy is its collaboration with OpenAI, the ambitious artificial intelligence research company behind groundbreaking language models such as GPT-3 and DALL-E 2.
In 2019, Microsoft announced a $1 billion investment in OpenAI, giving the tech giant exclusive access to OpenAI’s groundbreaking AI systems. The tech giant’s investment has since risen to more than $13 billion, underscoring its intention to be a leader in this emerging field.
The fruits of this partnership are already starting to become visible. Microsoft has since powered its Bing search engine with AI and integrated OpenAI’s technology into its Microsoft 365 suite through tools like Copilot, which uses AI to assist with writing, data analysis and other tasks.
With its strategic investments, innovative product integrations and bold vision for an AI-driven future, Microsoft is well positioned to capitalize on the transformative potential of artificial intelligence.
What’s the catch? Microsoft shares aren’t exactly cheap at 31.6 times forward earnings. However, Wall Street believes its AI initiative will deliver double-digit revenue and profit growth by 2025.
The high price tag therefore seems justified in the context of the company’s AI-powered growth prospects.
Should you invest €1,000 in Alphabet now?
Before you buy shares in Alphabet, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $740,690!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. George Budwell has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
2 Best Artificial Intelligence Stocks to Buy Now was originally published by The Motley Fool
