3 AI Stocks to Buy Hand Over Fist in March
If you've followed the technology sector even the slightest bit over the past year or so, you've noticed the mania for artificial intelligence (AI). It's almost unavoidable at this point.
Although recent AI developments pushed it into the mainstream, the technology existed for decades. That said, we're still in the early stages of learning what the technology can truly become, which gives investors a chance to get in on the emerging industry. For investors interested in adding AI-related stocks to their portfolios, the following three companies are great options.
1. Microsoft
There's a strong argument that OpenAI's ChatGPT is the reason that AI has hit the mainstream. After it was released to the public in November 2022, it took just two months or so for ChatGPT to hit 100 million monthly active users. And aside from OpenAI, there was probably no company happier about this than Microsoft (NASDAQ: MSFT).
Microsoft and OpenAI have an ongoing partnership that has put Microsoft at the forefront of AI-driven computing capabilities. It began with Microsoft making an initial $1 billion investment in OpenAI in 2019 and has since developed into a full collaboration (and an expanded investment) that mutually benefits both companies.
OpenAI gets to use Microsoft's Azure as its cloud computing platform -- which is vital because of the supercomputing power it provides -- and Microsoft gets exclusive licenses to OpenAI's large language models, which allow it to integrate them into its products and services and boost its competitive advantage.
Microsoft's diverse suite of products and services distinguishes it from other tech companies, and adding OpenAI's advanced technologies will only enhance this. It should also positively affect Microsoft's financial results, which have been on an impressive run over the past five years.
2. Taiwan Semiconductor Manufacturing Company
Taiwan Semiconductor Manufacturing Company (NYSE: TSM) (TSMC) may not seem like an obvious AI stock, but it's as crucial to the AI pipeline as arguably any other company.
To understand TSMC's role in AI, you need to understand how we get to end consumer-facing products like ChatGPT, Bard, and other generative AI applications. For AI to be effective, it must be trained using lots of data -- quantities that must be stored in specialized data centers.
Data centers rely on graphic processing units (GPUs), which are essentially the brains of AI computing systems. TSMC and the semiconductors it manufactures for its client companies are crucial in this process. These GPUs rely heavily on TSMC's best-in-class manufacturing processes.
This AI domino effect hasn't impacted TSMC's financials yet, but the company's CEO said he expects sales of its AI-related semiconductors to grow at a compound annual rate of 50% for at least the next few years. By 2027, AI-related semiconductors are expected to be responsible for a percentage of the company's revenue in the high teens.
TSMC is one of the more important players in bringing AI to life, and its role in that ecosystem can't be easily replicated.
3. Amazon
Amazon (NASDAQ: AMZN) relied on AI for a while to supplement its e-commerce business. Its AI systems analyze customers' purchase and search histories, behavior (such as time spent on pages and navigation across pages), and other data to provide personalized shopping recommendations that improve the shopping experience and, ideally, increase its sales.
AI long bolstered Amazon's e-commerce business, but recent developments have exposed other parts of the company's business to it, such as its market-leading cloud service, Amazon Web Services (AWS).
AWS is the world's leading cloud computing platform, and it consistently adds AI and machine learning tools that allow users and companies to build their own AI applications. Although e-commerce is Amazon's bread and butter, AWS is its primary profit center and will continue to be for quite some time, particularly as it continues to expand its suite of AI products.
Amazon has been investing heavily in its AI capabilities, and it's hard to imagine it will stop soon -- especially because the company's free cash flow has returned to typical levels, giving it the financial flexibility to accelerate its AI research and development.
Amazon is a company that has its hand in a lot of different industries, many of which it acts as the leader. As its AI capabilities continue to evolve, it's a company investors will want to be a part of for the long haul.
Where to invest $1,000 right now
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for two decades, Motley Fool Stock Advisor, has more than tripled the market.*
They just revealed what they believe are the 10 best stocks for investors to buy right now… and Microsoft made the list -- but there are 9 other stocks you may be overlooking.
*Stock Advisor returns as of March 25, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Stefon Walters has positions in Microsoft. The Motley Fool has positions in and recommends Amazon, Microsoft, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
3 AI Stocks to Buy Hand Over Fist in March was originally published by The Motley Fool
