HomeBusiness3 Artificial Intelligence (AI) Stocks to Buy with $1,000 and Hold Forever

3 Artificial Intelligence (AI) Stocks to Buy with $1,000 and Hold Forever

The artificial intelligence (AI) revolution will certainly produce some very big winners, but it also has the potential to disrupt major incumbents. How can you be sure you are investing in one of the AI ​​beneficiaries, and not the disrupted one?

The question is not simple. But an assessment of a company’s competitive advantages and the history of defending those competitive advantages can provide clues.

Looking through the current technology landscape, these three companies seem like excellent additions to your AI-focused portfolio.

Table of Contents

Microsoft

Shall Microsoft (NASDAQ: MSFT) be helped or hurt by AI? It certainly seems to be the former, as the company has extremely wide moats in its empire and many ways to win against AI.

Of course, Microsoft has an exclusivity agreement with OpenAI, the parent company behind ChatGPT. Microsoft parlayed that smart partnership into a leading position in the AI ​​cloud computing races, delivering best-in-class growth for its Azure cloud platform compared to its rivals. As one of only three major players in cloud infrastructure, where most AI processing is likely to occur, Microsoft appears poised to benefit from AI’s increased computing intensity in the coming years.

But Microsoft’s AI advantage goes beyond OpenAI. As a longstanding leader in enterprise software, Microsoft has close relationships with the world’s largest companies dating back decades. With a highly regarded brand and the capital strength to invest in the latest innovation, it’s a pretty safe bet that Microsoft can use AI to both increase revenues and reduce costs in the long run.

For example, Microsoft just rolled out AI CoPilot for Microsoft 365 for $30 per person per month. That’s a big price increase, made possible by the wide moat the Microsoft 365 Office software suite enjoys among businesses.

But even beyond Azure and Office, Microsoft’s other business segments, each with their own franchises and network effects, will all benefit from AI. Social media platform LinkedIn will benefit from advanced AI targeting, and Github users should also benefit from natural language AI prompts for writing code.

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And let’s not underestimate the effect AI can have on Microsoft’s consumer business. Microsoft owns the Xbox gaming platform, along with a host of gaming studios such as the recently acquired Activision-Blizzard, where AI may be able to help create and manage content. Additionally, AI PCs could allow Microsoft to increase the prices of its Surface laptops as AI moves further to the edge.

With several competitively advantaged products and services and leading AI capabilities, Microsoft should be a big AI winner.

ASML Holdings

What is a good sleep-at-night share? A company with a monopoly. And that’s exactly what ASML Holdings (NASDAQ: ASML) has, especially in the technology needed to produce the world’s most advanced chips: extreme ultraviolet lithography (EUV).

Any AI chips worth their salt require EUV lithography to pack an incredible number of tiny transistors onto a die. Soon, the AI ​​wars will require ASML’s “high-NA” EUV technology, ASML’s latest incarnation of EUV, to compete.

The new high NA system will reduce the critical size of a chip, or the smallest feature that can be printed on a wafer, to 8nm, compared to the 13nm possible by regular EUV systems. That’s an improvement of 1.7 times, meaning new 2nm chips will be on the market in 2025.

That’s why the new high-NA systems cost about $380 million each, more than double the cost of the standard EUV systems ASML has sold to date.

Letters A and I on a cartoon microchip.

Image source: Getty Images.

That paves the way for rapid sales growth that will start soon and should continue throughout this decade. Note that the first company to purchase a high NA system was not Taiwanese semiconductor manufacturingtoday the largest manufacturing company in the world, but earlier Intel. That’s because Intel is trying to overtake TSMC and become one of the largest foundries in the world. Samsung will also likely follow suit, as will memory chip makers, all of which will use high NA this decade to produce the DRAM memory chips that are also crucial to AI systems.

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Competition between TSMC, Intel and Samsung, as well as governments around the world investing in leading domestically produced chips, will drive robust demand for ASML’s machines this decade.

Metaplatforms

Artificial intelligence is likely to amplify the advantages of companies with vast numbers of users and amounts of proprietary data. Not only Metaplatforms (NASDAQ: META) has that in abundance with its core platforms Facebook and Instagram, but Meta is also becoming a major player in building AI models itself.

At its core, AI can help show Reels what users are likely to be interested in. And for monetization, AI helps create and optimize ads, increasing the return on ad spend for advertisers and therefore increasing the price Meta can charge per ad.

Meta itself also builds AI models in major languages ​​under the brand name Llama. Interestingly enough, Meta has decided to make Llama open-source, essentially giving the code away to developers. That is a strange strategy and distinctive from the competition, but it can be effective. The third-party contributions could potentially improve Llama compared to what Meta could do on its own, and the open nature of the model could attract top talent.

Just as Facebook initially didn’t make any revenue when it scaled, Llama doesn’t make much money now, although other cloud platforms do pay Meta a fee to host the Llama model in their clouds. However, if Llama is used as a base model for many future applications, there is more potential for monetization.

Meanwhile, Meta, like all other major tech companies, has just introduced its own AI chips called Artemis. Meta claims that running workloads on Artemis with its own optimized software will help reduce costs and save energy, although it will still buy a lot Nvidia potato chips. at.

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Meta has also overcome many challenges in the past. These include the transition to mobile, the threat of Snap, then the even bigger challenge of Bytedance’s TikTok. But Meta has managed to use its established position and technological flexibility to fend off these technological challengers and thrive.

Combined with a brand new dividend, Meta is another stock that investors can confidently buy and hold for the long term.

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Billy Duberstein has positions in ASML, Meta Platforms, Microsoft and Taiwan Semiconductor Manufacturing. His clients may own shares of the companies mentioned. The Motley Fool holds positions in and recommends ASML, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. 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, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft , and briefly May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

3 Artificial Intelligence (AI) Stocks to Buy with $1,000 and Hold Forever was originally published by The Motley Fool

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