One way to tell that AI stocks have lost some of their attraction is the fact that Nvidia (NASDAQ:NVDA) has lost nearly 4% of its value over the past month. Over the same period, the Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) has gained nearly 3%. 

That’s less than the 3.3% gain for the S&P 500. However, given NVDA and AIQ’s performance over the past five years, investors clearly have become more cautious. 

“I don’t think anyone would tell you that AI is not a generational investment theme,” CNBC reported comments from UBS senior vice president Christopher R. Jackson’s comments. “I think the concern, especially over the near term, is how quickly things have gone.”

Valuations have become stretched. That doesn’t mean you shouldn’t be considering AI stocks to buy in June. One area to focus on could be the companies with the “picks and shovels,” a reference to the equipment that made the gold rush of the 1800s possible.

Here are my three ideas for July when it comes to AI stocks to buy.  

Microsoft (MSFT)

Microsoft (NASDAQ:MSFT) is my first of three AI stocks to buy in July.

The New York Times published an article on July 14 about CEO Satya Nadella. I think most would agree that his leadership is a big reason for the company’s transformation over the past decade. 

“Risky bets on A.I. have become a habit for Mr. Nadella. Over the past five years, he has committed to investing $13 billion in another aggressive young company called OpenAI, even though it hadn’t yet made much money,” NYT’s Karen Weise and Cade Metz wrote about Nadella.

“And he told all of his lieutenants to find ways to build A.I. into Microsoft’s many, many products, even though the technology didn’t always work correctly.”

One of the things that Nadella did as CEO was to build its Azure cloud-computing business into a leader in the industry. With AI taking the world by storm, cloud computing will be a vital component, leading to considerable growth over the next decade. 

As the Times points out, Microsoft under Nadella embraced cloud computing. By 2018, it was the second-largest company behind Amazon (NASDAQ:AMZN). Investments in companies like OpenAI will help keep it there.

Apple (AAPL)

Apple (NASDAQ:AAPL) CEO Tim Cook is a slightly older version of Nadella. While not an engineer like the Microsoft CEO, he wasn’t afraid of shaking things up at the House That Steve Jobs built. 

When Cook was appointed CEO in August 2011, it didn’t really separate its Services business from the various products sold by the company. Its Software, Service and Other Sales in fiscal 2011 (September year-end) were $2.95 billion. In fiscal 2023, Services accounted for $85.20 billion in revenue or about 22% of its total. 

That’s a big jump. To continue, Cook and the company are launching Apple Intelligence, integrating it into its newest iPhones. Most analysts believe this will lead to a major iPhone upgrade cycle, boosting revenues considerably. 

“Analyst Erik Woodring boosted his price target on the tech giant’s shares to $273, the third-highest among analysts tracked by Bloomberg, saying Apple Intelligence has potential to drive a record number of device upgrades. The feature is a ‘clear catalyst’ for a multi-year upgrade cycle, he wrote in a note Monday,” Bloomberg wrote on July 15.  

Since announcing Apple Intelligence in June, its shares have outperformed the Nasdaq 100. Thanks to Apple Intelligence, I’d be shocked if AAPL stock didn’t outperform the index well into the future.    

Nvidia (NVDA)

I’ve been bullish on Nvidia long before AI became a license to print money for the California chip maker. Back in May 2017, I was singing its praises. At the time, its share price was just $3.55 after accounting for a 4-for-1 split in July 2021 and a 10-for-1 in June 2024.  

“[O]ver the past five years, Nvidia has made $4.6 billion in operating profits. By comparison, AMD has lost $2 billion. Under no circumstances should investors confuse the quality of each company’s financial statements,” I wrote in 2017. 

In the past five years, while AMD has made money, it hasn’t been nearly as profitable as Nvidia. That’s not a knock against AMD. Rather, it’s an admission just how unique Nvidia is. 

Barron’s reported on July 15 that the move by investors away from large-cap tech stocks could be overdone, especially as it relates to Nvidia. 

“‘We expect upside to results and guidance will be driven by continued robust demand for generative AI,’ wrote KeyBanc analyst John Vinh in a research note on Monday,” Barron’s reported the analyst’s comments.  

It’s hard not to like NVDA stock for the long haul. 

On the date of publication, Will Ashworth did not have (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.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.