Artificial intelligence (AI) isn’t going anywhere.
Identifying stocks that you can buy and hold for the next decade is a great goal for every investor. These low-maintenance stocks can deliver excellent returns and hardly require any attention.
However, they aren’t easy to identify because they require you to understand what will happen over the next 10 years. If you rewind the clock a decade, many events, like the rise of artificial intelligence (AI), cryptocurrency, and the COVID-19 pandemic, were difficult or impossible to predict. So, there is a bit of luck involved.
However, I think these three are easily stocks that will outperform the market over the next decade, and they’re using AI to do it.
Image source: Getty Images.
1. Alphabet
Alphabet (GOOG +3.33%) (GOOGL +3.53%) was supposed to be one of the victims of the artificial intelligence arms race. However, it has proven that it’s a force to be reckoned with. Its primary business is the Google Search engine, which was supposed to be replaced by various generative AI products.
Google has integrated AI search overviews, which seamlessly combine AI and traditional search. This has been a wildly successful combination, and has led to impressive 15% year-over-year growth during Q3 for this mature business.
Today’s Change
(3.53%) $10.21
Current Price
$299.66
Key Data Points
Market Cap
$3616B
Day’s Range
$293.85 – $303.92
52wk Range
$140.53 – $306.42
Volume
74M
Avg Vol
36M
Gross Margin
59.18%
Dividend Yield
0.27%
Gemini has emerged as a top generative AI model, which secures Alphabet’s AI future. Furthermore, Alphabet is also thriving in the cloud computing realm, which is providing computing power to AI and non-AI clients alike. This segment grew revenue at a 34% year-over-year pace during Q3, and shows no signs of slowing down. This wing can provide massive growth for Alphabet, as there is a general shift to the cloud in regular business workloads on top of all the new AI workloads coming online.
Alphabet is here to stay, and it has several other technologies, such as quantum computing and self-driving cars (Waymo), in its back pocket. I think this future-proofs Alphabet, making it an excellent stock to buy and hold over the next decade.
2. Amazon
Investors may only think of Amazon (AMZN +1.51%) as the sprawling commerce business where nearly anything can be purchased. While this isn’t a wrong perspective, Amazon is so much more than that, and its most impressive divisions aren’t what consumers traditionally think of when they hear about Amazon.
Today’s Change
(1.51%) $3.28
Current Price
$220.42
Key Data Points
Market Cap
$2359B
Day’s Range
$215.20 – $222.21
52wk Range
$161.38 – $258.60
Volume
2.8M
Avg Vol
47M
Gross Margin
50.05%
Dividend Yield
N/A
Two of Amazon’s most exciting segments are its advertising services and cloud computing. Amazon is sitting on a gold mine of advertising information because consumers come to their website to shop for products.
This gives Amazon Prime advertising space, and this division has been a huge growth driver for Amazon over the past few years. In Q3, ad revenue rose 24% year over year to $17.7 billion. That makes it about a fourth the size of Amazon’s online store segment, showcasing how big a deal this has become for Amazon.
Amazon Web Services (AWS) is benefiting from the same tailwinds as Google Cloud, but because most of Amazon’s business is low margin, it makes up a greater portion of Amazon’s operating margins. Without AWS, Amazon’s profits wouldn’t look the same, as 66% of Amazon’s operating profits came from AWS during Q3. With AWS growing at an impressive 20% pace and expected to sustain that growth for some time, the future looks bright for Amazon.
3. Taiwan Semiconductor
Last is Taiwan Semiconductor (TSM 0.96%). Taiwan Semiconductor is the world’s largest chip foundry by revenue, and nearly every company that has an AI computing unit utilizes TSMC chips. This places Taiwan Semi in a neutral position in the AI arms race, as it doesn’t care if it’s selling chips to Nvidia, AMD, or Google with its custom AI chips (tensor processing units).
Taiwan Semiconductor Manufacturing
Today’s Change
(-0.96%) $-2.67
Current Price
$274.83
Key Data Points
Market Cap
$1426B
Day’s Range
$266.88 – $278.67
52wk Range
$134.25 – $311.37
Volume
925K
Avg Vol
13M
Gross Margin
57.75%
Dividend Yield
1.05%
Taiwan Semiconductor also has innovative technology on the way. Its 2nm (nanometer) chips consume about 25% to 30% less power than the previous 3nm chip generation. This efficiency gain is a huge deal because we’re starting to run into a power crunch for AI data centers. However, that’s not the only technology Taiwan Semiconductor has in the pipeline.
Taiwan Semiconductor’s continual innovation will ensure that it always has a market to sell to. While it may go through ups and downs over the next decade, the peaks are always higher than the valleys, which makes Taiwan Semiconductor a great stock to buy now and hold over the next decade.