As the S&P 500 confirmed a bull market earlier this year, investors saw double-digit gains in the first half, especially in growth stocks within the technology sector. Companies focused on artificial intelligence (AI) emerged as top performers, showcasing the potential of this exciting field. While some may have missed out on these early gains, there are still solid investment opportunities to be found in the AI space that can boost portfolios in the near term and over the long term.
Two standout players in the market right now offer promising prospects for investors. These companies are actively involved in AI but are not solely dependent on it for their success. They have established themselves as leaders in their respective areas, possess strong competitive advantages, and have a track record of delivering solid results over time. These stocks are considered no-brainer buys at the moment, offering the potential for substantial returns over the years to come.
1. Amazon
Amazon, a giant in both e-commerce and cloud computing, stands out as a top player in the AI space. The company’s extensive infrastructure and fulfillment network, combined with its Prime membership program, give it a significant competitive advantage in the e-commerce industry. Customers rely on Amazon for a wide range of products and services, from groceries to entertainment, and the company’s continuous efforts to improve efficiency, lower prices, and expedite delivery times keep them coming back.
However, Amazon’s biggest profit driver is its cloud computing business, Amazon Web Services (AWS). As the world’s leading cloud services provider, AWS has achieved a $100 billion annual revenue run rate, largely due to its investments in AI. AWS offers a comprehensive suite of AI products and services, including customized language models, catering to the diverse needs of its customers.
Amazon has consistently delivered earnings growth over the years, even during challenging times such as rising inflation. The company’s recent cost restructuring efforts have positioned it for further growth in the future. Despite trading at 40x forward earnings estimates, Amazon’s leadership, strong competitive moat, and promising outlook make it a compelling investment opportunity for investors looking to capitalize on the next phase of its growth trajectory.
2. Apple
Apple, known for its iconic products like the iPhone and Mac, boasts a powerful brand that has established a loyal customer base over time. With an installed base of over 2.2 billion active devices, Apple generates revenue not only from device sales but also from its growing services segment. Services revenue, including offerings like cloud storage and digital content, has been a key driver of revenue growth for the company, reaching record highs in recent quarters.
Moreover, services revenue carries higher margins than hardware sales, allowing Apple to generate significant profits from this segment. The company’s recent announcement of AI features further solidifies its position in the AI space, offering a new avenue for growth in the future.
Trading at 33x forward earnings estimates, Apple presents a compelling investment opportunity for investors seeking exposure to a market leader with a proven track record of revenue growth. With its strong brand, loyal customer base, and expanding services segment, Apple is poised to deliver sustained gains over time, making it a must-have addition to any investment portfolio.
In conclusion, both Amazon and Apple stand out as top picks in the AI space, offering investors the potential for substantial returns in the long term. These market giants have demonstrated resilience and innovation in navigating challenging market conditions, making them solid investments for the future. By holding onto these stocks for the long term, investors can position themselves to benefit from the continued growth and success of these industry leaders.
