Top Stocks to Hold Forever: Embracing the AI Revolution
When I invest in a stock, my plan is to hold it for three to five years before reevaluating its standing. In this time frame, a company’s performance typically becomes more important than fleeting market trends. Still, I have a few stocks in my portfolio that I don’t intend to sell unless significant changes occur.
Today, three stocks on my “hold forever” list stand out as strong buys. These companies are heavily involved in the artificial intelligence (AI) sector and are well-positioned to benefit from the ongoing technological evolution.
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Amazon
Amazon (NASDAQ: AMZN) is an integral part of many Americans’ lives. Most people have shopped on its marketplace, and I do a substantial amount of my shopping on its platform.
However, my greater excitement lies in Amazon’s cloud computing branch, Amazon Web Services (AWS). This segment provides clients with computing power for a variety of needs, including running websites and processing data for AI models. AWS allows businesses to operate with less physical asset management, enhancing flexibility in scaling their processing power. Impressively, it accounted for 50% of Amazon’s operating income in Q4, despite representing only 15% of its revenue.
According to Grand View Research, the cloud computing market is expected to grow annually by 21%, reaching $2.39 trillion by 2030. With its strong foothold in both consumer goods and cloud services, Amazon makes a compelling stock to buy and hold.
Alphabet
The investment outlook for Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) shares many similarities with that of Amazon. While Amazon leads U.S. e-commerce, Alphabet dominates the search engine market with Google. This established enterprise generates significant revenue through advertising.
Alphabet also has a cloud service. In Q4, Google Cloud’s revenue increased by 30% year over year, surpassing AWS’s growth of 19%. Although AWS remains larger, generating $28.8 billion compared to Google Cloud’s $12 billion, both are benefiting from favorable market conditions.
Significantly, Alphabet has invested heavily in AI, and its Gemini generative AI model is performing exceptionally well. Some investors worried that Alphabet’s dominance might slip with AI advancements from competitors. However, Google has adapted and continues to hold its leading position in the market.
Currently, Alphabet shares are available at an appealing valuation of 20.6 times expected forward earnings.
GOOGL PE Ratio (Forward) data by YCharts.
Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing (NYSE: TSM) is also on my buy-and-hold-forever list mainly due to its stronghold in the chip foundry market. It leads the industry in manufacturing capabilities and partners with major tech companies such as Nvidia and Apple to produce their designed chips.
This positioning places it at the center of the AI race, significantly influencing its financial results. Looking ahead, management anticipates revenue from AI-related chips to grow at a compound annual growth rate in the mid-40s over the next five years. Overall, they expect the company’s revenue growth rate to approach 20%, which is impressive given Taiwan Semiconductor’s scale.
Investing in Taiwan Semiconductor is a bet on the increasing demand for advanced technology chips. As technology continues to evolve, this prediction seems almost certain, making Taiwan Semiconductor a strong buy-and-hold option now. Currently trading at 22.6 times forward earnings, it presents a good value.
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John Mackey, the former CEO of Whole Foods Market, an Amazon subsidiary, is on The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is also a board member. Keithen Drury holds positions in Alphabet, Amazon, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has investments in and recommends Alphabet, Amazon, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a comprehensive disclosure policy.
The views expressed here are solely those of the author and do not necessarily represent those of Nasdaq, Inc.
