AI Stocks Worth Considering
These days, the buzz around artificial intelligence (AI) is hard to ignore. Major players like Nvidia boast a market cap of about $4.3 trillion, while private firms such as OpenAI and Anthropic have attracted investments totaling tens of billions from private sectors.
So, with all this cash flowing into AI, you might wonder if there’s still potential for growth in the AI market. The answer is, well, yes. Even though Nvidia and similar stocks have high earnings multiples, there are still tech companies that are riding the AI wave and trading at more reasonable prices.
Let’s take a look at two AI stocks worth adding to your portfolio this March.
Main Advantages of Alphabet
One underappreciated winner in the AI space is Alphabet (GOOG), which encompasses Google, YouTube, Android, Google Cloud, and even Waymo. They’re also behind the rapidly developing Gemini AI chatbot.
These various units stand to gain from the growing global AI adoption. For instance, Google Search utilizes AI to improve search results, leading to an uptick in query volumes around the globe. More queries could translate to increased ad revenue, which saw a year-over-year rise of 17% to $63 billion last quarter. And that’s not just it; Alphabet’s other areas, like YouTube and Waymo, benefit too.
Beyond enhancing consumer experiences, AI is also improving ad targeting practices, which could further drive revenues. The Gemini chatbot currently enjoys around 750 million active monthly users on its app, making money through a pro plan with users and businesses.
A key area for Alphabet is its Google Cloud segment. This portion of the business experienced an impressive growth of 48% year-over-year, bringing in $17.7 billion last quarter, alongside significant operating margin improvements. Various AI companies are leveraging Google Cloud’s data centers for their software, spurring high demand.
At present, Alphabet’s stock has a price-to-earnings ratio of 29 times, which seems moderately priced for a company that’s seeing consolidated sales grow at 18% annually. So, Alphabet appears to be a strong AI stock to consider this March.
Amazon’s Strategic Positioning
It turns out some companies thought to be lagging in the AI race, like Amazon (AMZN), are actually leveraging their relationships to stay competitive. While Amazon’s cloud computing growth rate trails behind some rivals, it has a unique connection with AI lab Anthropic, and it features a Rufus bot dedicated to its e-commerce platform.
What helps Amazon significantly is its role as the core cloud computing partner for Anthropic. Together, they’ve been optimizing tailored computer chips for AI models. This collaboration is proving fruitful.
Two years ago, Anthropic saw revenue at a run rate of $100 million, but now it stands at $14 billion. A large portion of this income will be reinvested to enhance AWS for developing new AI models and customer services.
In the last quarter, AWS revenue increased by 24% year-over-year, hitting $35.6 billion, with much credit going to Anthropic and its sizeable budget. If this trajectory continues, we might see accelerated growth by 2026.
Plus, Amazon maintains its strong AWS segment, coupled with a robust e-commerce division, which should ensure steady growth. Predictions suggest that North American retail sales could reach $426 billion by 2025, marking a 10% increase year-over-year and improving profit margins.
Currently, Amazon shares have a P/E ratio of 29, quite similar to Alphabet’s. Both companies are anticipated to maintain a healthy revenue growth rate, making them appealing options for investors in March.
