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Alphabet CEO Sundar Pichai believes that “AI will be the biggest technological shift we see in our lifetimes.”
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If his prediction comes true, three AI stocks are especially poised for tremendous gains.
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There’s also one other potential AI winner that comes with an asterisk.
The internet has been a massive success. Could AI make an even greater long-term impact?
Google, which has been a subsidiary of parent company Alphabet (GOOG -0.28%) (GOOGL -0.22%) since 2015, will celebrate its 25th birthday in September. Sundar Pichai, CEO of Google and Alphabet, recently reflected on the last quarter-century of success. He also looked forward to what’s on the horizon.
Pichai wrote in a blog post on the Google website, “AI [artificial intelligence] will be the biggest technological shift we see in our lifetimes.” He added, “It’s bigger than the shift from desktop computing to mobile, and it may be bigger than the internet itself.”
Could AI really be bigger than the internet? Maybe so. And I think there are three stocks, in particular, to buy and hold if Pichai is right. There’s also another I recommend with caution.
1. Alphabet
Yes, I rank Alphabet itself at the top of the list. This could be a controversial pick since some believe that AI presents a potential existential threat to the company. Obviously, I disagree.
NASDAQ: GOOGL
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First, let’s address that concern. There’s a premise that AI will make search engines unnecessary. Since Google Search generates most of Alphabet’s revenue, the company could be rendered obsolete. I predict a different future where AI enhances search and Google successfully monetizes both search and its non-search AI initiatives.
In his blog post, Pichai stated that AI will enable Google to address issues such as providing personal tutors to every student on any topic, helping develop new forms of clean energy, assisting entrepreneurs in growing new businesses, and forecasting natural disasters. Those are just a few opportunities that could open up lucrative new markets for Google and other Alphabet units.
Alphabet certainly has three key prerequisites to winning in AI: a lot of money to invest in research and development, significant existing expertise, and access to a jaw-dropping amount of data. Pichai maintained in his post that Google’s “search for answers will drive extraordinary technology progress over the next 25 years.” I suspect he’ll be proven right.
2. Microsoft
There have been multiple beneficiaries from 2023’s AI boom. I look for that trend to continue. And my bet is on Microsoft (MSFT 0.56%) to remain one of those long-term winners.
NASDAQ: MSFT
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You have to give a lot of credit to Microsoft CEO Satya Nadella for recognizing the potential of OpenAI’s ChatGPT. Nadella didn’t just invest billions of dollars into OpenAI; he spearheaded the integration of GPT-4 throughout Microsoft’s product lineup.
Like Google’s Pichai, Nadella has a vision for what AI could do for his company in the future. He recently told Wired columnist Steven Levy, “My dream is that every one of Earth’s 8 billion people can have an AI tutor, an AI doctor, a programmer, maybe a consultant!”
At its core, Microsoft is a productivity company. Its software helps people in a wide range of professions, including programming, sales, and marketing, perform their jobs more efficiently. AI is a perfect fit for what Microsoft does. I’d be shocked if the stock hasn’t soared to much greater heights 10 years from now as a result of the company’s AI efforts.
3. Amazon
There were some who thought Amazon (AMZN 2.11%) had been left in the dust after ChatGPT’s launch. The e-commerce and cloud services giant’s Alexa AI assistant almost seemed antiquated. But Amazon’s stock performance this year underscores just how wrong those views were.
NASDAQ: AMZN
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Amazon quickly launched several AI products of its own in early 2023. Arguably the most important of the group was Amazon Bedrock, a service that helps companies quickly build generative AI apps with foundational models.
AI has been important to Amazon’s e-commerce business for years, helping improve recommendations and more. However, I think the biggest AI growth opportunity for the company is with its Amazon Web Services (AWS) cloud platform.
As Amazon CEO Andy Jassy said in the latest quarterly update: “Remember, the core of AI is data. People want to bring generative AI models to the data, not the other way around.” Jassy then correctly noted that AWS has more customers and data than any rival. That’s a key advantage that I expect will pay off for a long time to come.
One other pick with an asterisk
There’s one other AI stock that I like, but it comes with an asterisk. Nvidia (NVDA -2.10%) emerged as one of the biggest winners of all this year, with AI fueling tremendous demand for its chips.
I believe that Nvidia will continue to rank among the most important players in the AI arena. My main reservation about its stock, though, is valuation. All signs, in my view, point to Nvidia being priced for perfection. However, we don’t live in a perfect world. I think it’s a matter of when, not if, Nvidia’s bubble will burst.
That said, a pullback could present a great opportunity to buy shares of Nvidia. I predict that Nvidia — like Alphabet, Microsoft, and Amazon — could grow much larger over the long run. These companies could do so even if AI doesn’t turn out to be bigger than the internet.
Should you invest $1,000 in Nvidia right now?
Before you consider Nvidia, you’ll want to hear this.
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https://www.fool.com/investing/2023/09/09/google-ceo-sundar-pichai-ai-internet-stocks/
