3 Artificial Intelligence Stocks to Buy Now and Hold for Decades

Here’s why ARM Holdings (NASDAQ:ARM) stock, Advanced Micro Devices (NASDAQ:AMD) stock and another AI stock are primed to generate strong investor returns beyond this decade

| More on:
A microchip in a circuit board powers artificial intelligence.

Source: Getty Images

The massive rally in artificial intelligence (AI) stocks in 2023 helped create new millionaires in record time. The United States reportedly added 600,000 new millionaires in 2023, thanks largely to gains in AI-related growth stocks. Nvidia’s CEO Jensen Huang views artificial intelligence as a new “commodity,” an insight particularly valuable for long-term investors. As AI gains wider adoption globally, the potential for impressive capital gains grows, potentially minting new millionaires over the next decade.

Palantir Technologies (NYSE:PLTR), ARM Holdings (NASDAQ:ARM), and Advanced Micro Devices (NASDAQ:AMD) stock could generate strong revenue and earnings growth as global AI uptake grows, and reward long-term oriented shareholders with sizeable capital gains over the next decade.

ARM Holdings: An AI stock to buy and hold this decade

ARM Holdings stock, up 81.7% this year, is a successful initial public offering (IPO) stock that’s just getting started on the public equity market. Having IPOed in 2023, ARM stock is poised for explosive growth in its first decade, with AI adoption providing a major tailwind.

The British firm owns the intellectual property for low-cost, energy-efficient processor designs, which it licenses to chip designers and manufacturers. ARM processors will power next-generation AI-powered devices, including mobile phones, AI-personal computers (PCs) like the recently launched Copilot+ laptops, Apple devices, and many neural processing units (NPUs) for budget AI computing.

ARM Holdings projects up to 100 billion AI-ready devices by 2025 and aims to capture over 50% of the Windows PC market within the next five years. Some analysts expect the PC market to grow at 9.1% annually, reaching $315 billion by 2029. Notably, ARM recently signed a multi-year deal with Apple extending beyond 2040. ARM’s architecture is crucial for bringing AI capabilities to Apple’s everyday gadgets, and Qualcomm’s success in the Copilot+ PC market with ARM-based chips could strengthen ARM’s position in AI computing over the next decade.

While ARM Holdings stock appears expensive with a forward price-to-earnings (P/E) ratio exceeding 89, high-quality growth stocks often command higher valuations when entering high earnings growth phases. Wall Street projects strong 297% year-over-year growth in ARM Holdings’ earnings this year.

Palantir Technologies stock: Leveraging commercial AI for growth

Palantir Technologies, a leader in military-grade AI for governments, has leveraged its Gotham AI platform to secure reliable cash flows from government contracts. The company’s recent expansion into private business analytics has sparked a new growth phase, promising double-digit earnings growth for decades.

Palantir’s revenue grew by 21% year over year in the first quarter of 2024. Management raised its annual revenue guidance in May, anticipating U.S. commercial revenue to grow 45% year over year, up from the previously expected 40%. As commercial demand for Palantir’s military-grade AI platform accelerates, annual revenue growth may increase from 17% in 2023 to nearly 20.6% this year.

Despite Palantir Technologies’ stock price exceeding average analyst price targets and its forward P/E of 58.9 appearing high, a price-earnings-to-growth (PEG) ratio of 0.8 suggests the stock could be undervalued relative to its long-term growth potential.

Advanced Micro Devices (AMD) stock: A key player in AI chips for decades

Advanced Micro Devices (AMD), a $271 billion semiconductor stock, is vying for market share in the Nvidia-dominated AI chips market. The company’s data centre revenue surged by 80.4% year over year, and its client segment sales increased by 85% in the first quarter of 2024. The future looks bright as AMD’s latest AI accelerators and AI-ready PC chips gain global traction.

AMD recently secured a key position in the AI-PC chips market. The company’s 3rd Gen Ryzen AI neural processing units (NPUs) should achieve 50 tera-operations per second (TOPS), a benchmark no other PC chip manufacturer has reached. TOPS measures computing power for AI chips, and Microsoft requires a minimum of 40 TOPS NPU for a smooth Copilot+ experience. Currently, Qualcomm’s Snapdragon Elite X chips achieve 45 TOPS, Intel’s upcoming Lunar Lake chips could do 40-45 TOPS, and Apple’s latest M4 chips in the iPad Pro may reach 38 TOPS.

AMD’s advantage in the AI-ready laptop market positions its hardware to power a significant portion of AI-capable personal computers over the next decade. Consequently, AMD stock is a must-hold for investors looking to capitalize on the promising AI chips market. Its forward PE of 29.2 looks decent.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Brian Paradza has positions in Advanced Micro Devices. The Motley Fool recommends Advanced Micro Devices, Apple, Intel, Microsoft, Nvidia, Palantir Technologies, and Qualcomm. The Motley Fool has a disclosure policy.

More on Tech Stocks

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

3 Millionaire-Maker Tech Stocks That Should Be on Your Radar

These three tech stocks have already proven themselves worthy, but have a lot more to prove in the near future.…

Read more »

A close up image of Canadian $20 Dollar bills
Tech Stocks

3 No-Brainer Stocks to Buy With $20 Right Now

These three stocks are easy buys for those who don't have all that much to spend, and want long-term growth…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

1 Tech Stock I’d Buy Before Shopify

Shopify (TSX:SHOP) stock might be stagnating, which could mean this other tech stock is at a prime advantage.

Read more »

man touches brain to show a good idea
Tech Stocks

Nvidia Stock Becomes World’s Most Valuable Company: Buy Now or Beware?

Nvidia (NASDAQ:NVDA) stock is now the world's highest valued company, with a market cap of US$3.34 trillion. So, is the…

Read more »

Dice engraved with the words buy and sell
Tech Stocks

Is Lightspeed Stock a Buy, Sell, or Hold?

Lightspeed (TSX:LSPD) stock was supposed to surge after Dax Dasilva's return, yet it's still stagnating. So, what should investors do…

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

1 of the Best Canadian AI Stocks (With Dividends) to Buy Now

OpenText is an AI stock that trades at a significant discount to consensus price target estimates in June 2024.

Read more »

online shopping
Tech Stocks

3 Reasons to Buy Shopify Stock Right Now

Improving earnings quality, sustained cash flow growth, and another reason support a buy-the-dip thesis on Shopify (TSX:SHOP) stock today

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Tech Stocks

2 Canadian Growth Stocks I’d Stash in a TFSA for the Long Run

Here's why Constellation Software (TSX:CSU) and Shopify (TSX:SHOP) are two top Canadian stocks long-term investors should consider.

Read more »