Technological innovations like electricity and the internet have brought tremendous economic development. At the same time, they have enriched investors who spotted these trends early. We are at a similar juncture with AI stocks to buy, which could compound for decades.
Undoubtedly, AI will be a transformative force that will reshape every aspect of our daily lives. AI will touch every aspect of our lives, from how we work to medicine, driving and entertainment. Today, enterprises are moving from experimentation to deploying AI in real-life use cases. Moreover, every company has to develop an AI strategy to remain competitive.
That said, AI is not a new phenomenon for these AI stocks to buy. These companies recognized the power of the technology early on and developed products integrating AI capabilities. Today, they are selling products leveraging AI capabilities to customers. However, their AI journey is only getting started and they are well-positioned to benefit from AI.
Tesla (TSLA)
What does a car company have to do with AI? Tesla (NASDAQ:TSLA) has been aggressively investing in AI for several years and will be one of the winners of the AI race. Under the leadership of visionary Elon Musk, this is one of the top AI stocks to buy with several catalysts.
First, the company has been developing its self-driving technology for several years. Today, the auto manufacturer offers full self-driving, a subscription service that supports autonomous self-driving in most instances. In April, it revealed that FSD drivers had surpassed a cumulative 1 billion miles.
Tesla is leveraging this massive data trove to train its models to achieve full self-driving without driver involvement. Once this is accomplished, Tesla can launch its robotaxi fleet. As a result, analysts estimate that a substantial portion of Tesla’s long-term value will accrue from this segment.
Besides robotaxis, Tesla is also developing an autonomous humanoid robot that could be used on factory floors. These robots can do repetitive and mundane tasks. Already, Business Insider has reported that Tesla has deployed two Optimus robots on its factory floor.
Bringing it together, Tesla could be closer to solving autonomous driving than any other company. Plus, its humanoid robot is another innovation that could make it a true AI leader.
Advanced Micro Devices (AMD)
In the AI chip race, Advanced Micro Devices (NASDAQ:AMD) has emerged as a credible alternative to Nvidia (NASDAQ:NVDA). Yet, the stock has lagged Nvidia’s performance by a significant margin. While Nvidia has tripled over the past year, Advanced Micro Devices is only up by 28%.
Although an underdog to Nvidia, Advanced Micro Devices will still profit from the gigantic data center market. After all, it’s producing competitive AI chips that support multi-cloud environments. That’s an advantage since cloud service providers want multiple alternatives to avoid vendor lock-in.
Indeed, its MI300X chips have had significant wins in the data center market. For instance, on May 16, Microsoft (NASDAQ:MSFT) announced it would offer clusters of MI300X AI chips through its Azure cloud computing service.
Going forward, Advanced Micro Devices has outlined a clear roadmap for more advanced AI chips. Later this year, it will launch the MI235X, followed by the CDNA4 generation MI350X in 2025. Also, due to the MI300 offering the lowest cost of ownership, the chip maker will gain more share in the inference market.
Lastly, AMD’s strength in the PC market makes it one of the AI stocks to buy. As AI gets integrated into computers, the AI PC upgrade cycle will boost Advanced Micro Devices revenues. Its AI chips for business laptops and desktops leave it well-positioned to dominate this market.
Alphabet (GOOG, GOOGL)
Google’s parent company, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), has recently been under increased scrutiny. Will AI startups like OpenAI and Perplexity erode its search moat? At this point, it appears that it’s ready to defend its turf since search growth accelerated in Q1 2024.
Google has been an AI pioneer and is rapidly introducing GenAI capabilities across its products. For instance, advertising uses AI in search generative experience, Performance Max and conversions. Even in AI hardware, Alphabet is a leader. It’s now on the fifth generation of its custom Tensor Processing Units (TPUs), which Gemini is trained on and served.
According to research by Evercore ISI, GenAI is increasing search volume on Google. They noted that the search giant is utilizing AI tools to enable effective searches and drive user satisfaction. Consequently, these improvements are driving better returns for advertisers, fueling more spending on search.
Lastly, its cloud service, Google Cloud, is becoming the provider of choice companies implementing generative AI use cases. In Q1, management noted that 60% of funded Gen AI startups were customers.
Altogether, AI will be a tailwind for Alphabet. At 24 times forward earnings, it’s one of the cheapest AI stocks to buy. Search, Google Cloud and YouTube will all have AI tailwinds.
On the date of publication, Charles Munyi 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.
