In 2023, artificial intelligence (AI) has emerged as a transformative business force, offering unique investment prospects for those looking for high-growth investments. Indeed, the potential of AI to mimic human intelligence, learn from data and drive innovation spans various sectors, promising growth and wealth for patient investors.
Due to their complexity, many AI investments are typically avoided in favor of more straightforward options. Conversational AI, used in customer service and marketing, presents cost-saving advantages for businesses.
That said, it’s my view these AI stocks offer the best mix of AI growth catalysts, alongside rock-solid core business models. Here’s why I think investors looking at the AI trend ought to consider these three mega-cap names first.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) delivered a robust Q3 earnings report, with revenue surging 11% year-over-year, reaching nearly $77 billion. The highlight was a 9% rise in ad revenue, a positive sign for the segment that accounts for 77% of parent company Google’s income.
Google Cloud revenue grew by 22%, though slower than last year’s 38%. Despite concerns, Q3 2023 net income increased by 42% year-over-year to almost $20 billion. Alphabet’s stock has climbed over 40% this year, and its price-earnings ratio of 24 times is in line with historical averages, making it a compelling buy.
Intense emotions have benefited potential Alphabet stock buyers. While Google Cloud’s growth slowed a bit, the recovery in ad spending is essential. Strong profits and a discounted stock price make it a buying opportunity, not a fear-driven sell-off. Over the long term, Alphabet should be able to capitalize on its core AI investments made under its “other bets” category, providing yet another cash flow driver for this tech giant.
Amazon (AMZN)
The holiday season is almost here, and Amazon (NASDAQ:AMZN) is gearing up for a surge in global orders. The convenience of fast delivery, easy returns and a vast selection of items make online holiday shopping a dominant trend — with Amazon playing a significant role. Although retail is no longer Amazon’s primary focus, its cloud computing sector is leading the way.
Amazon, valued at $1.4 trillion, has expanded from e-commerce to lead in cloud computing, advertising and streaming. The company’s Q3 2023 results also highlighted the strength of the company’s core AI-driven e-commerce business model. In fact, AMZN stock surged nearly 7% on the results, as investors piled into this mega-cap growth stock.
Amazon has continued to invest strategically into its fulfillment and e-commerce technologies, among which AI has played a leading role. That move makes Amazon one of the most efficient delivery companies out there. Until that changes, this is a stock to buy.
Meta Platforms (META)
Despite increased expenses totaling $25 billion, effective management and operational efficiency allowed Meta Platforms (NASDAQ:META) to remain highly profitable. That means the company is growing and delivering value to shareholders. Among the key drivers of this strong growth is Meta’s continued investments into its AI tech, with these investments funded by its cash cow — the company’s core social media base.
In the most recent quarter, Meta outperformed revenue expectations with a 23% surge to $34.15 billion and earnings per share at $4.39. The tech giant also doubled its operating margin to 40%, an impressive achievement. However, fears of economic volatility triggered an 8% stock drop last week. It’s now priced at $310. This quarter marked the company’s peak profitability, with a projected growth trend through 2024.
Meta Platforms aimed to enhance its social sites like Facebook and Instagram with AI chatbots. These virtual assistants would offer users helpful support and companionship. The innovation hints at Meta’s future potential in the AI landscape, exciting passionate investors.
On the date of publication, Chris MacDonald has a long position in AMZN, META. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
