Stocks to buy

There is a lot of buzz today around artificial intelligence, or AI, and how it is taking over our lives. Created through machine learning, it is about training a system with ample data to make inferences about all the new data. AI has been around for a few years but since the start of 2023, it seems like it is everywhere. With the need for advanced technology growing, AI has already become a main driver across industries, from robotics to Big Data and the internet of things. It has started to transform the software development space and is going to be huge this year. However, the market is still in the early stages of AI adoption and smart investors know that AI growth stocks are where the potential lies.

There are many artificial intelligence stocks on the market, but only a few have the potential to make it big. If you want to tap into the future of AI, consider pure-play AI stocks for your portfolio. Growing interest and an investment surge in AI makes it an ideal time to take your position. Let’s take a look at the best AI growth stocks to add to your portfolio:

Microsoft (MSFT)

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One of the first companies that comes to mind when we think of the best AI growth stocks is Microsoft (NASDAQ:MSFT). Already a solid player in the industry, Microsoft was recently in the news for increasing its stake in OpenAI, the creator of ChatGPT. The revolutionary tool has shown how far AI can go and how capable it is in generating images, texts, ideas, and sounds. This year, Microsoft made a $10 billion investment, a sizeable increase from its previous investment of $1 billion in 2019.

Microsoft recently added “AI-generated stories” to its Bing search engine to give users a better insight into AI. MSFT stock is trading at $280, up 18% in the past six months, and is inching closer to the 52-week high of $315, making it one of the best artificial intelligence stocks to own today. AI justifies its higher valuation and I believe the company’s investments will pay off in the near term. 

Microsoft CEO Satya Nadella sees AI as the next big computing platform and this investment is just step one in the company’s AI transition. Apart from this investment, the company is harnessing the power of AI in multiple ways, including clinical documentation and healthcare. 

This month, Microsoft also introduced Dynamics 365 Copilot, a tool designed to assist with many businesses’ day-to-day tasks including marketing, sales, and customer service. The technology is still being tested but, if successful, could transform the current automated chat experience. Microsoft is a proven performer, no matter the state of the tech industry, making it a stock to buy and hold onto.

Nvidia (NVDA)

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Another artificial intelligence stock to watch out for is Nvidia (NASDAQ:NVDA). A leader in the graphics chip industry, it is making the most of the AI boom and could become one of the biggest players in the world. Its data center segment has shown a steady rise in the share of the total revenue of the company and managed to top the gaming segment in revenue last year. Despite the drop in tech stocks and the market turmoil, NVDA stock was standing strong because AI was one of the driving forces behind its growth. 

The stock is currently trading at $265 and is up more than 100% in the past six months. Nvidia recently launched a set of inference platforms designed for generative AI and its chips are already popular for handling large workloads. Because it has applications that are required to run AI apps, Nvidia should remain in demand and relevant in the upcoming years.

In the upcoming years, Nvidia intends to make self-driving car processors another revenue stream. Since cars with self-driving capabilities gather ample amounts of data from cameras and sensors in real-time, AI is then used to make complex decisions — something Nvidia intends to start contributing to in the next few years. NVDA stock does not come cheap and it is currently trading at 24.8 times sales, but the growth potential is massive.

Alphabet (GOOG, GOOGL)

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Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), the parent company of Google, is another top artificial intelligence stock to buy for long-term growth. It recently acquired Alter, an AI avatar startup that allows creators and brands to express their virtual identities, for $100 million. In order to get an edge in the AI sector, companies need to make ongoing investments and Alphabet has the liquidity to do so. It also has the experience and resources to make a mark in the AI industry.

The company’s recent history is not without setbacks. Between the partnership of Microsoft with OpenAI and their ChatGPT tool, as well as the relatively unsuccessful launch of Google’s own AI-equipped service, Bard, GOOG stock has taken hits in recent months. However, the company has many years of experience in deep learning and it can help with a smooth transition into AI.

GOOGL stock is on sale currently which is also another reason to buy. The stock is trading at $105 today and is down 25% in the past year. Considering its history and growth potential, it is cheap for the tech sector.

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.