Artificial intelligence (AI) is currently viewed as one of the most promising investment opportunities in recent history. Amazon CEO Andy Jassy has highlighted generative AI as potentially the most significant technological advancement since the emergence of cloud computing and possibly even the internet.
Wall Street has recognized the potential of AI, evident in the rising interest in AI-related companies over the past two years. However, these companies recently experienced a downturn due to specific industry challenges. Earlier this year, a China-based company, DeepSeek, introduced an AI chatbot developed with considerably fewer resources than other leading companies, causing a stir in the industry. Broader economic challenges, such as trade tensions initiated during the Trump administration, have also contributed to this dip.
Despite these challenges, the current decline is being seen as an opportunity to invest in leading AI stocks that show strong potential. Apple and Microsoft are considered part of the “Magnificent Seven” and remain attractive options for long-term investors, despite their market caps approaching $3 trillion.
Apple entered the AI market later than some competitors, introducing Apple Intelligence features to its latest devices and operating systems. Although initial reactions were muted, Apple’s history of successfully enhancing existing technologies suggests potential for future success. Apple has a vast ecosystem comprising 2.35 billion active devices, which it can monetize in various ways, supported by its strong global brand. Additionally, Apple’s services segment supports over a billion paid subscriptions, especially in sectors with promising futures such as fintech. As this segment gains prominence, it is expected to positively impact Apple’s finances. Apple is also noted for its solid income stock status, having increased its dividend by 92% over the past decade. Even with a 12% decline in share value this year, its stock continues to appeal to long-term investors, particularly those reinvesting dividends for potentially higher returns.
Microsoft has been investing in OpenAI, the developer of ChatGPT, for several years. This foresight allowed Microsoft to integrate AI into its cloud computing services, significantly boosting growth. Microsoft’s Azure has been a key growth driver, with a reported revenue of $69.6 billion in a recent fiscal quarter, a 12% increase from the previous year. Azure’s revenue rose by 31% year-over-year, outpacing other segments. Microsoft’s AI business now exceeds an annual run rate of $13 billion, showing a 175% increase year-over-year, indicating strong potential for continued growth. Microsoft remains a leader in computer operating systems and maintains robust performance in its gaming and productivity tools sectors. The company’s strong branding and consistently increasing dividends, up nearly 168% over the past decade, combined with a cash payout ratio just under 30%, cater to long-term investors seeking growth and income, despite a 6% decline this year.
John Mackey, Amazon subsidiary Whole Foods Market’s former CEO, sits on The Motley Fool’s board of directors. Prosper Junior Bakiny holds positions in Amazon, and The Motley Fool owns and recommends shares of Amazon, Apple, and Microsoft. The Motley Fool also recommends certain options related to Microsoft.
