The Two Best Artificial Intelligence Stocks to Buy Right Now

The Artificial Intelligence (AI) market will have a significant impact on economic productivity and growth. It is an area ripe for long-term winners, but as with any new technology, there will be winners and losers. A simple criterion for a better chance of winning is to invest in AI leaders that are profitable and generating significant free cash flow from their operations.

Artificial Intelligence Chip LeadersINVISTA (NASDAQ: NVDA)and Google's parent companyAlphabet ((NASDAQ: GOOG) (NASDAQ: GOOGL)) is the leader of the pack. Probably no other companies have spent more on AI technology than these two. Their current valuations seem cheap relative to their growth, which could lead to spectacular returns over the next decade.

1. INVISTA

Nvidia's stock has soared 2,54% in the last year due to strong demand for its powerful graphics processing units (GPUs) for AI-based applications, and the company's dominance of the AI chip market has left others scrambling to get a piece of the action.Intelrespond in singingAdvanced Micro DevicesNew chips are being introduced in hopes of competing with Nvidia, but that's easier said than done.

Nvidia is more than just a GPU company. It provides the software, systems, and algorithms that create the platform for data scientists and artificial intelligence researchers. That's why it's able to achieve extremely high margins, turning $0.49 of every dollar of revenue into profit. Last quarter, Nvidia's free cash flow increased to $27 billion on a 12-month basis, providing plenty of ammunition to invest in more innovation.

Some investors are skeptical about how long Nvidia's reign will last. That's why the stock's valuation is relatively low. The forward price-to-earnings ratio of 38 is low for a company with triple-digit earnings growth.

But Nvidia's development is far from over. Later this year, Nvidia will begin shipping its new H200 GPU, which offers a quantum leap in AI performance over the H100 that is currently driving the company's growth. In addition, management sees a growing interest in AI from governments around the world that want to invest in AI and build large-scale language models in their own languages. This will significantly extend Nvidia's growth runway.

In total, Nvidia has everything you need for an AI investment. It's profitable, it dominates the GPU market, and the stock is reasonably valued relative to its future prospects.

2. Alphabet (Google)

Over the past 12 months, Alphabet's stock price has risen by 47%, exceedingStandard & Poor's 500The company's investments in Google's search artificial intelligence and digital advertising businesses are important reasons to consider holding the stock. The company's investment in Google's search artificial intelligence and digital advertising business is an important reason to consider holding the stock.

Google is the leader in the digital advertising market, but it's facing theMicrosoftCompetition from Bing. Google's market share in search has declined in recent years, which could put pressure on Alphabet's advertising revenue growth. That's why the stock is conservatively valued, with a forward P/E ratio of 22, which is lower than the average stock.

However, Alphabet's strengths in data and artificial intelligence are underestimated. With billions of users on YouTube and Google, the company has a huge amount of user data to make its AI models smarter, and it has the resources to keep investing.

It is investing billions of dollars in new servers and data centers while growing its free cash flow to $69 billion by 2023. alphabet plans to significantly increase its spending in 2024 to prepare for the growth opportunity of more AI applications for曏's individual users, advertisers, developers, government and cloud enterprise customers.

Speaking of the cloud, artificial intelligence will have a major impact on the growth of Google Cloud, one of the largest providers of enterprise cloud services. In the fourth quarter, Alphabet's cloud revenue grew 26% year-over-year, and the business unit is starting to turn a profit, which could benefit the stock.

Alphabet is a relatively safe AI stock with strong capitalization. It is a solid choice as a core holding in a diversified portfolio.

Should you invest $1,000 in Nvidia now?

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Suzanne Frey is an Alphabet executive and board member of The Motley Fool. John Ballard owns shares of Advanced Micro Devices and Nvidia. The Motley Fool recommends Advanced Micro Devices, Alphabet, Microsoft and Nvidia. The Motley Fool recommends Advanced Micro Devices, Alphabet, Microsoft, and Nvidia. The Motley Fool recommends Intel and also recommends the following options: Intel January 2023 $57.50 Call Options Long, Intel January 2025 $45 Call Options Long, Microsoft January 2026 $395 Call Options Long, Microsoft January 2026 $405 Call Options Short, Intel January 2026 $405 Call Options Short, and Intel January 2026 $405 Call Options Short. The Motley Fool has a disclosure policy.

The Two Best AI Stocks to Buy Right Now was originally published by The Motley Fool.