Long-term investors have to think differently when evaluating stocks. Looking decades into the future is as much about preventing unnecessary risk and loss as it is about maximizing profits. Ideally, these investors find a compromise somewhere in the middle.
When it comes to artificial intelligence (AI) stocks, your best bet is to find a middle ground. Do you want to harness AI to significantly grow your portfolio over the next few decades? You need to focus on AI stocks that have the most long-term potential. Your best option in this space might be an obscure company that no one is talking about… or it might be a clear AI champion with a proven ability to be a winner. It all depends on what you feed into your investment thesis.
Here are three reasons why Microsoft (Nasdaq: MSFT), Amazon (Nasdaq: AMZN)and alphabet (Nasdaq: GOOG) (Nasdaq: GOOGL) Over the long term, this could be the best AI stock money can buy.
1. They own the cloud layer of the economy
Developing and operating AI models poses significant technical challenges. many Thousands The adoption of AI chips leads to huge energy consumption: it is estimated that a single query on ChatGPT consumes 15 times more energy than a Google search.
This spending partly explains why ChatGPT's developer, OpenAI, partnered with Microsoft. Many businesses can benefit from AI technology, but only a few can own and operate it. Most companies entering the space end up paying for access to AI technology, rather than building it themselves.
AI overlaps perfectly with cloud computing, with most of the world's cloud resources owned and operated by a handful of companies. Microsoft, Amazon, and Alphabet own roughly 67% of the global cloud market. Most of the connected world today runs on this infrastructure, making it ideal for distributing AI technologies to the masses.
We are already seeing these cloud giants embedding AI products and services in the cloud, and it makes too much sense: dominating the cloud is a big hurdle for others to overcome, and these three may continue to dominate the cloud for the foreseeable future. and AI Thanks to that for many years to come.
2. Abundant financial resources gave the company a major advantage in the AI field
It's as if these companies metaphorically won the lottery, became big and powerful, and then won again when AI emerged as a perfect fit for their existing business models. Again, most companies cannot compete with the deep pockets of Microsoft, Amazon, and Alphabet.
In fact, these three companies generated a combined total of over $184 billion in free cash flow in the past year alone — that's discretionary cash profits these companies have at their disposal. This includes capital investment and business investment. For example, buying AI chips and building data centers.
Look at their operating cash flows and subtract these investments: these companies collectively made over $300 billion in just one year.
These companies operate hundreds of data centers around the world and can afford to build even more to keep up with the demands of AI. It's an arms race, and there's little chance of an outsider coming in and winning. Realistically, these companies are only competing with each other.
3. Nvidia is only one part of the AI equation, and it could eventually be replaced
Investors should not forget NVIDIA (NASDAQ: NVDA)has quickly grown into a potential AI rival to these companies in terms of size and scale. I'm not saying that Nvidia won't be a great investment or a significant player in AI over the coming decades.
But also consider this: Chips are a component of AI, but they are not AI itself. Chips are only one part of the equation. So far, Nvidia has done a great job of establishing itself as the de facto leading supplier of AI chips.
Still, Nvidia is relying on Microsoft, Amazon, and Alphabet to continue building out their AI infrastructure using its chips. Whether that will continue forever is unclear. Again, it's entirely possible that Nvidia will remain a major player in AI chips for the foreseeable future. But it's at least worth wondering whether these well-funded tech giants will fund Nvidia with billions of dollars forever.
There is no need to switch to a competitor's AI chip. Advanced Micro DevicesInstead, Microsoft, Amazon and Alphabet could design custom chips for their own internal use, decentralizing their chip suppliers from the dominant Nvidia. Custom chips aren't easy, but if any company can do it, it's probably these three.
So do the big three cloud companies need Nvidia, or does Nvidia need them? There's no clear answer to that question right now. But the potential for internal chip design is enough to endorse Microsoft, Amazon, and Alphabet as top AI stocks to own for decades to come.
Should I invest $1,000 in Microsoft right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, and NVIDIA. The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
3 Unstoppable Artificial Intelligence (AI) Stocks to Buy for Decades was originally published by The Motley Fool.
