2 AI Stocks to Turbocharge Your Savings

Here’s why investing in big-tech giants such as Alphabet and Meta can help you gain exposure to the AI segment.

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The letters AI glowing on a circuit board processor.

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Given the artificial intelligence (AI) market is forecast to expand by 30% annually through 2030, it makes sense to increase your exposure to AI stocks and benefit from outsized gains. Here are two AI stocks you can buy to turbocharge your savings in August 2024.

Meta Platforms stock

Valued at US$1.3 trillion by market cap, Meta Platforms (NASDAQ:META) is among the largest companies globally. Since its initial public offering in 2012, the social media giant has returned 1,260% to shareholders, easily outpacing the broader markets.

Despite its massive size, Meta Platforms increased sales by 22% year over year to US$39.07 billion in the second quarter (Q2) of 2024, above estimates of US$38.3 billion. It was the fourth consecutive quarter in which Meta reported growth of over 20%.

With 3.27 billion daily active people, Meta owns the world’s largest social media platforms including Facebook, Instagram, and WhatsApp. It is also the second-largest digital ad company globally, increasing ad revenue by 22%, much higher than the 11% growth reported by Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL).

Similar to other companies, Meta has focused on reducing its cost base to boost the bottom line. Since late 2022, Meta has eliminated roughly 21,000 jobs, allowing it to increase its operating income by 58% to US$14.9 billion. In the last 12 months, Meta’s operating margin has expanded from 29% to 38%.

Alternatively, Meta is spending heavily on disruptive technologies such as AI, augmented reality, and virtual reality. It is also been increasing data centre infrastructure spending to gain a foothold in the AI segment.

Meta expects to spend between US$96 billion and US$99 billion in operating expenses this year, while capital expenditures are estimated between US$37 billion and US$40 billion.

Earlier this year, Meta Platforms started paying investors a dividend of US$2 per share, indicating a yield of 0.4%. Given Meta Platforms’s cash flow per share of US$19.39 per share in the last 12 months, the company has a payout ratio of less than 11%. Analysts remain bullish on META stock and expect it to gain 8% in the next 12 months.

Alphabet stock

Another AI stock you can buy right now is Alphabet, which reported revenue of US$84.74 billion and earnings per share of US$1.89 per share in Q2 of 2024. Comparatively, analysts forecast earnings per share at US$1.84 per share and revenue of US$84.19 billion in the June quarter.

The company increased sales by 14% year over year, driven by ad sales and the cloud business. For the first time, Alphabet’s Google Cloud business surpassed US$10 billion in quarterly sales and US$1 billion in operating profit.

Alphabet’s ad sales have grown from US$58.14 billion to US$64.62 billion in the last 12 months, showing that the company’s flagship business continues to expand, although at a slower pace as enterprises are wrestling with headwinds such as inflation, interest rates, and lower marketing budgets. Further, Alphabet is investing heavily to improve the capabilities of Gemini AI, a competitor to ChatGPT, to gain traction over time.

Priced at 21.4 times forward earnings, Alphabet stock is cheap and trades at a 25% discount to consensus price target estimates.

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.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.

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