2 Artificial Intelligence (AI) Stocks to Buy and Hold for Great Long-Term Potential

2 Artificial Intelligence (AI) Stocks to Buy and Hold for Great Long-Term Potential

All eyes have been on the artificial intelligence (AI) market over the past year. The launch of OpenAI’s ChatGPT in late 2022 has reignited interest in the technology and forced many to rethink what they currently thought was possible with AI. Advances in generative software could boost countless industries, from self-driving cars to e-commerce to consumer products to cloud computing and more.

The rise of AI has been a crucial growth driver across the world. Nasdaq-100 Technology SectorThat’s an increase of 33% over the last 12 months. Dozens of AI-based technology companies have made solid gains using AI. However, the market appears far from reaching its ceiling, suggesting that it is not too late to invest long-term in the industry.

Chip stocks like Nvidia (NASDAQ:NVDA) And Intel (NASDAQ:INTC) are attractive options, with both companies developing the hardware that makes AI possible. These tech giants could have a lot to offer investors in the coming years as demand for chips increases and the AI ​​market grows.

Here are two AI stocks to buy and hold for great long-term potential.

1.Nvidia

Nvidia shares have soared more than 210% since last June. The company has rallied investors by securing a leading market share in AI Graphics Processing Units (GPUs)the chips used to run and train AI models.

As a result, Nvidia shares are trading at a premium, with a forward price/earnings (P/E) ratio of approximately 44. However, this number does not necessarily tell the whole story.

First, Nvidia’s forward P/E is lower by the same measure for its biggest rival, Advanced microsystemswhich has a forward P/E of 48. The difference indicates that Nvidia’s stock is trading at a better value despite significantly greater stock growth than AMD over the last year.

2 Artificial Intelligence (AI) Stocks to Buy and Hold for Great Long-Term Potential

NVDA PE Ratio Chart (Forward)

Additionally, even with Nvidia’s meteoric rise, the company’s stock value has actually increased since 2021. This chart shows that Nvidia’s forward P/E and price-to-earnings-to-growth (PEG) ratio have plunged , indicating that the company’s shares could be trading at one of their best values ​​in years. Now may be the best time to invest in Nvidia.

However, it will be crucial to approach this stock from a long-term perspective. Nvidia has delivered several quarters of record profits, posting revenue growth of 262% in the first quarter of fiscal 2025 (ending April 2024). Still, Nvidia’s high forward P/E suggests that some of its projected financial growth may already be priced into its stock to some degree. But maintaining it for many years will likely alleviate this phenomenon.

Nvidia has around 70-95% market share in AI chips. The company has become the go-to chip supplier for AI developers around the world, illustrating a dominance that will likely prove difficult for competitors like AMD to overcome.

As a result, Nvidia could have a lot more to offer in the long term, and it remains an AI stock worth investing in now.

2.Intel

Intel’s inclusion on this list may make you wonder why you should consider having two chipmakers in your portfolio. However, recent restructuring means Intel operates in a very different part of the chip market than Nvidia and could have growth potential equal to, if not greater than, its AI peers.

While Nvidia focuses on chip design, Intel is shifting its business toward a foundry model. The company plans to build chip manufacturing plants across the United States. So as demand for chips increases, Intel could become the country’s go-to chipmaker, taking advantage of the growth of the entire AI market.

In May, CEO Pat Gelsinger said he expected Intel’s next plant in Ohio to become “the nation’s AI systems factory.” Gelsinger later reiterated this sentiment at a conference in Taipei on June 4, saying: “We want to build everyone’s chips, everyone’s AI chips. We want them to be built by pulling left American factories.”

Intel is going all-in on the manufacturing business, which could prove very profitable in the long run. However, a foundry model is not cheap and requires a large initial investment, which is why most technology companies prefer to outsource their manufacturing. As a result, it will take time for Intel to see a return on investment.

However, with a forward P/E of 28, Intel is potentially one of the most valuable stocks in the AI ​​space. The company’s forward P/E is considerably lower than that of fellow chipmakers AMD or Nvidia, suggesting that now is an ideal time to invest long-term in Intel.

Should you invest $1,000 in Nvidia right now?

Before buying Nvidia stock, consider this:

THE Motley Fool Stock Advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now…and Nvidia wasn’t one of them. The 10 selected stocks could produce monster returns in the years to come.

Consider when Nvidia made this list on April 15, 2005…if you had invested $1,000 at the time of our recommendation, you would have $740,690!*

Equity Advisor provides investors with an easy-to-follow plan for success, including portfolio building advice, regular analyst updates, and two new stock picks each month. THE Equity Advisor the service has more than quadrupled the return of the S&P 500 since 2002*.

See the 10 values ​​»

*Stock Advisor returns June 10, 2024

Daniel Cook has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Mad Motley has a disclosure policy.

2 Artificial Intelligence (AI) Stocks to Buy and Hold for Big Long-Term Potential was originally published by The Motley Fool

Source Reference

Latest stories