The artificial intelligence (AI) market is growing rapidly and is expected to grow at a compound annual growth rate (CAGR) of 37% until 2030. So it’s no surprise that many tech companies have joined the industry to take a share of it. $200 billion pie.
One of the most attractive features of artificial intelligence is its versatility. Generative technology has the potential to power countless markets, from consumer products to cloud computing, automotive, video games, productivity software and more. The sector is still in its infancy, now is the perfect time to consider dedicating part of your holdings to artificial intelligence and take advantage of the long-term development of the market.
Here are two AI stocks to buy and hold over the next decade.
1. Intel
Intel (NASDAQ:INTC) has faced repeated difficulties over the past few years, which has seen its share price fall 43% since 2021. As a result, patience will be key in the company’s actions, but recent developments suggest it could generate significant gains in the long term.
Intel was once the biggest name in the chip market, responsible for more than 80% of the central processing unit (CPU) market and the exclusive supplier of chips for AppleIt is (NASDAQ:AAPL) Mac range. Increased competition reduced the CPU share to 64%, while Apple switched to using its own processors.
Recent headwinds have forced Intel to rethink its model, restructuring its business to prioritize manufacturing and artificial intelligence. The company has adopted a foundry model, which will allow it to open manufacturing facilities across the United States in an attempt to steal market share from A Taiwanese semiconductor company.
Intel CEO Pat Gelsinger spoke on May 16 about the factory the company is building outside of Columbus, Ohio, saying, “I want our Columbus location here, Ohio One, the nation’s AI systems factory.” Gelsinger’s comments on the site come just a month after the Intel unveiled its Gaudi 3 accelerator, a chip designed to compete directly with NvidiaAI graphics processing units (GPU).
Intel still has a hill to climb before it starts seeing significant returns on its AI investment, but recent results show it’s moving in a promising direction. From Q4 2023 to Q1 2024, Intel’s free cash flow increased by $2 billion, from negative $14 billion to negative $12 billion.
Meanwhile, in the first quarter of 2024, Intel’s AI and data center segment reported an operating profit of $184 million, a significant improvement from the negative $69 million recorded in the 2024 quarter ‘last year.
Intel is clearly a long-term company, but with a forward price-to-earnings (P/E) ratio of 29 compared to 37 for Nvidia and AMDAt 47, it’s also one of the most valuable AI chip stocks.
2. An apple
Apple is a little late to the AI party, with competition like Microsoft AND Amazon make further progress in the industry. However, recent developments suggest that Apple has a bright future in the market.
The iPhone maker got Wall Street upbeat earlier this month with the launch of its latest iPad Pro. The tablet is the first device to use Apple’s M4 chip, its most powerful chip to date. The new processor expands the company’s AI capabilities, and many experts believe it’s just the beginning of Apple’s journey into this lucrative sector. The company will host its Global Developers Conference in June, where it is expected to showcase a number of new AI tools.
Additionally, the debut of the iPad comes just weeks after a Bloomberg report revealed that Apple will completely revamp its Mac lineup to prioritize AI-enabled features.
Apple’s AI expansion may be slower than some of its peers, but that’s not necessarily a bad thing. The company is not known for always being the first to adopt new technologies, but has a reputation for taking existing technology, perfecting it with its own design language, and quickly becoming dominant in the market using its immense brand loyalty.
The tech giant uses this strategy in tablets, headphones, smartphones and smartwatches. Different companies led each of these markets before Apple came on the scene and stole all the limelight. As a result, I wouldn’t bet on Apple going far in AI in the long term.
Like Intel, Apple stock potentially offers more value than its competitors. The company’s forward P/E is significantly lower than that of Microsoft and Amazon, which makes Apple’s stock much better valued. And with that, Apple stock is a screaming buy and one to hold onto for the next decade.
Should you invest $1,000 in Intel 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. Dani Cook has no position in any of the mentioned stocks. The Motley Fool holds positions in and recommends Advanced Micro Devices, Amazon, Apple, Microsoft, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long $45 January 2025 calls on Intel, long $395 January 2026 calls on Microsoft, short $405 January 2026 calls on Microsoft and short $47 calls in May 2024 for Intel. The Motley Fool has a disclosure policy.
2 Artificial Intelligence (AI) Stocks You Can Buy and Hold in the Next Decade was originally published by The Motley Fool