Investors will look back on 2023 as the year when artificial intelligence (AI) went mainstream. But as the calendar gets ready to turn to 2024, the question is how investors should approach the future of AI, particularly as that future relates to AI stocks.
For context, you can look back to the dawn of the internet. There’s no question that AI is here to stay. Why would there be such a rush to regulate it otherwise? But the question that some are asking is what comes next for AI, and how can companies monetize whatever that something is? Many companies failed to do that in the dot-com boom. There’s a possibility that many companies will not live up to the hype of AI.
But the focus of this article is on companies likely to survive and thrive as AI continues to evolve. There are many to consider, but here are three AI stocks you can confidently buy today and hold onto for years to come.
If you’re not a sports fan, forgive the reference I’m about to make. Nvidia (NASDAQ:NVDA) appears to be the Alabama Crimson Tide of AI stocks. Ten years ago, the National Collegiate Athletic Association began to look for the “best four” teams to compete in the college football playoff. The recent voting makes it 8 out of 10 years that Alabama has made that playoff. There have been critics, but nobody can ignore the program’s standard of excellence.
Nvidia is setting the standard of excellence in the AI sector. I expect that to continue for years to come. It’s true that companies like Microsoft (NASDAQ:MSFT) will start to chip away at Nvidia’s sizable lead (Alabama has “only” won the championship three times), but this is a company with a sizable lead on the competition.
But as AI extends its reach into other sectors in the next few years, Nvidia is the company best positioned to take market share in the short term. To be the best, you have to beat the best. And once companies choose Nvidia, it will be difficult to make a change. Ten years from now, I like Nvidia’s chances of still justifying its premium share price.
There’s been a lot of focus on Meta Platforms (NASDAQ:META) in the AI space in 2023, and with good reason. META stock is up more than 160% in 2023. With that in mind, Pinterest (NYSE:PINS) may be off your radar. Here’s why you may want to take notice.
The Pinterest platform is based on machine learning and AI. That is useful for showing users curated recommendations based on search patterns. It’s also attractive to advertisers. That’s because Pinterest users are showing less annoyance at receiving ads related to items they are already searching for.
And PINS stock has been a fine performer in its own right. The stock is up 52% in 2023. The company is projected to grow earnings by 127% in the next 12 months. However, even after a double beat in October, analysts are raising their price targets while showing the stock may be priced for perfection near its 52-week high.
But if Pinterest shows its strategy is taking root in the next few quarters, analysts will begin to price the stock more in line with projected earnings growth. You’ll want to be on board when they do.
Cisco Systems (CSCO)
Among potential AI stocks, Cisco Systems (NASDAQ:CSCO) is a laggard. CSCO stock is up just 1% this year and is down 8.5% in the last month as the broader market takes off.
Cisco supplies products critical to the AI infrastructure. The reason for the stock’s slide comes down to muted guidance from the company in its recent earnings report. The company is citing a temporary backlog as customers look to integrate their previously purchased products.
But the stock price may not accurately reflect the company’s planned $28 billion acquisition of Splunk (NASDAQ:SPLK). That will make Cisco a significant player in the cybersecurity space. And the company also forecasted more than $1 billion in AI-related orders from major cloud providers in fiscal 2025.
However, unlike the other two AI stocks on this list, Cisco carries a healthy 13x forward price-to-earnings (P/E) ratio. Cisco The company offers an attractive dividend that has been increasing for the last 12 years and a dividend yield of 3.22%.
On the date of publication, Chris Markoch did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.