3 Artificial Intelligence (AI) Stocks You Can Buy for $500 and Hold for Decades

Artificial intelligence (AI) is something new and full of exciting potential. But like the internet, artificial intelligence will continue to evolve, so it’s hard to say what the future will look like. So how to invest in artificial intelligence in the long run? Not for next year, but for decades?

If it were me, I would look beyond specific applications of AI and instead focus on what will drive the evolution of AI. At its core, AI needs three things: chips, cloud, and data. They are the ones who power, train and spread AI technology around the world. So you want to invest in artificial intelligence? Look for companies leading in these three areas.

Through this lens, three AI stocks immediately jumped out: Holding arms (ARM 0.15%), Amazon (AMZN 0.33%)AND Alphabet (GOOG 0.61%) (GOOGLE 0.65%).

Buy them all today for around $500 and hold them for decades to reap the benefits of artificial intelligence that is still in its early stages. Here’s the offer for each stock:

Everything “smart” runs on processors, so get the best set of AI chips

Nvidia is in high demand because its GPU chips are used to train AI models, but I think Arm Holdings may be in a better long-term position. Most of the AI ​​innovation you see today is in data centers where powerful AI models like ChatGPT are trained. However, over time, AI technology may spread into everyday life. Vehicles can drive themselves, and your glasses can be as capable as your smartphone – who knows what else will be possible.

Everything the AI ​​touches has to have a computer, and that’s where Arm comes into play. Arm designs the architecture of central processing units (CPUs), which are chips that effectively act as the brain of a computer. The company earns royalties and fees for each chip built using its own designs.

This is a big deal because Arm is dominant. Virtually every smartphone on Earth uses ARM-based chips, and the company is gaining market share in almost every significant technology end market.

According to Statista, ARM’s market share increased from 42% to 49% between 2020 and 2022. This strong momentum clearly bodes well for the company’s future as broader demand for chips grows in the coming decades. It’s hard not to like Arm if you’re an AI investor thinking years ahead.

The AI ​​will run in the cloud, making Amazon an essential AI

There is no cloud in the sky; is in data centers. Companies like Amazon build huge, centralized computer systems and then rent their capacity. It is cheaper for companies to buy computing power in the cloud than to build and maintain their own systems. Amazon started as an e-commerce company, but over time it transformed Amazon Web Services (AWS) into the world’s leading cloud platform with an estimated 31% share of the global cloud services market.

The broad migration of computing to the cloud has made it a natural tie to artificial intelligence, as companies using AI will almost certainly power it through the cloud, just as they would with other technologies. Most of the global cloud services market belongs to a trio of big tech companies: Amazon, Microsoftand Alphabet. Amazon’s proven ability to create and grow new businesses makes it my choice. Amazon is an e-commerce and cloud giant that is building a huge advertising business that could become a bigger venture in the future.

Buy Amazon for its artificial intelligence via AWS, but its collective business and growth-oriented culture (despite its massive size) have made its stock one of the best long-term investments ever. I expect Amazon to continue creating wealth for investors for the foreseeable future.

No company has first-party data like Alphabet

Data is the final component of AI because it needs it for training and learning. Alphabet controls 90% of the world’s internet searches through Google, which has dominated for over two decades to the point that it was formally declared a monopoly in court earlier this year after the US Department of Justice sued Alphabet for anti-competitive practices . Alphabet contains data on almost everything anyone has ever searched for on the Internet, which is an unimaginably powerful trove of first-party data that cannot be replicated anywhere else.

This goes beyond Google. Alphabet owns YouTube, the world’s largest video platform, and Android, the mobile operating system used by 70% of the world’s smartphones. An estimated 3 billion people use Google apps like Gmail to organize their lives. You could say that Alphabet knows you better than you do because it has access to virtually every interaction you have with your computer or smartphone.

Time will tell what will happen to Alphabet in connection with the antitrust lawsuit. Still, Alphabet represents a comprehensive AI stack with a data advantage over probably any other AI company and massive financial resources to leverage that advantage. Like Amazon, the company’s AI capabilities are likely to create enormous shareholder value in the coming decades.