In the aftermath of a recent market decline, several prominent technology stocks in the artificial intelligence (AI) sector are now available at more attractive prices, presenting a considerable opportunity to acquire shares in these leading companies. This article highlights two AI stocks that are recommended for a long-term investment approach over the next decade.
### 1. Alphabet
Alphabet, widely recognized for its Google search engine, retains a robust portfolio of businesses. Despite facing competition from AI-powered rivals, Google maintains approximately 90% of the global market share for search and holds the position of the largest digital advertising platform worldwide. Its extensive user base and advertiser network remain unmatched by competitors.
Alphabet also owns YouTube, the most frequently viewed streaming service, ranking as the fourth largest digital advertising platform globally. YouTube’s revenue-sharing model with creators boosts profitability by reducing significant upfront content expenses. Furthermore, Alphabet is significantly investing in AI through its third-largest cloud computing platform, which supports customers in developing specialized AI models and applications via its Vertex AI platform. This platform allows customers to utilize Gemini or other foundational models to enhance their offerings. Additionally, Alphabet employs Gemini to improve search results and power AI Overviews.
As AI Overviews evolve, they are expected to create new monetization opportunities. Historically, Google has displayed ads on only about 20% of its searches, with cost-per-click generating substantial ad revenue. However, it also uses other ad formats, such as display, text, and video ads, through its AdSense platform, which could be utilized to monetize AI Overviews. Moreover, Alphabet’s Gemini generative AI chatbot, though still trailing some competitors, is making progress. The company is also making strides in areas like text-to-video with its Veo 2 platform, leveraging training on YouTube videos.
Alphabet leads in autonomous driving and robotaxis through its Waymo unit, currently the only company offering paid rides in the U.S. Waymo is expanding to new cities and gaining market share in established areas like San Francisco, where customers are becoming more familiar with the technology. As it continues to decrease technology costs, Alphabet strengthens its leadership in this emerging sector.
Furthermore, Alphabet is advancing quantum computing with its Willow chip, having achieved a significant breakthrough last year. Although quantum computing is still distant from commercial application, Alphabet’s innovations and adaptations highlight its status as a technology trailblazer, making it a strong long-term investment.
### 2. Microsoft
Microsoft, akin to Alphabet, maintains a collection of market-leading businesses with substantial AI involvement. The company was an early adopter of AI, investing significantly in OpenAI, the developer of ChatGPT, and forming a partnership with the startup.
Microsoft’s deployment of OpenAI’s AI models has enhanced its Azure cloud business, providing customers with infrastructure to train AI models while offering AI-powered analytics, security, and management tools. Although the business faces capacity constraints, Microsoft’s investment in data center expansion aims to meet demand.
Microsoft has integrated AI assistant copilots across its product offerings, with a major focus on copilots for its Microsoft 365 subscription service. This service includes well-known productivity tools like Word, Excel, and PowerPoint, and aims to enhance user productivity. At a cost of $30 per month per enterprise user, this presents a significant opportunity. The company has also introduced new security AI copilot agents, broadening its AI copilot market.
Despite its reliance on OpenAI, Microsoft is developing its own in-house AI reasoning models and collaborating with other third-party models to reduce dependency and enhance its offerings. The partnership with OpenAI, which extends through 2030, remains strong, but Microsoft’s internal AI development provides future flexibility.
In the gaming sector, Microsoft has introduced its first video game AI model, Muse, aimed at accelerating new game development and preserving classic games for modern hardware. Gaming is a major business for Microsoft, which includes Xbox hardware and gaming studios like Activision Blizzard. The integration of AI into gaming promises innovative enhancements.
While Microsoft continues to experience growth driven by its AI capabilities, its adaptability and forward-thinking strategies make the company an appealing long-term stock investment. Its transition to a subscription-as-a-service model for productivity software and early adoption of AI underscore its capacity to evolve and remain a compelling choice for investors.