2 AI stocks you can buy and own for the next decade

The adoption of artificial intelligence (AI) promises to add tremendous value to the economy by increasing worker productivity, accelerating product development, and providing a greater variety of services for consumers and businesses. It’s a lucrative opportunity for investors, with Statista projecting that the AI ​​market will quadruple to $826 billion by 2030.

Here are two profitable AI software companies that should be relatively safe for the next 10 years.

1. Palantir Technologies

Palantir Technologies (NYSE: PLTR) is a major manufacturer of AI software that is used by major corporations and the US government. Its latest financial results continue to point to a big opportunity that could deliver handsome returns to shareholders.

After seeing growth slow amid macroeconomic headwinds last year, the company is starting to see revenue pick up again. Revenue rose 27% year-over-year in the second quarter, driven by balanced growth from commercial and government transactions.

Organizations are spending more money with Palantir because it helps them improve operational efficiency and speed time to market with new products, all while keeping their data safe. Palantir distinguishes itself from competitors by targeting projects where it adds the most value, such as expensive and complex projects that other companies are unwilling to tackle.

Palantir builds deep relationships with customers, and this is most evident in its strong growth with government. In the second quarter, Palantir’s US government business grew 8% from the previous quarter and 24% year-over-year.

Importantly, Palantir is becoming a very profitable business, which also helps it stand out. Its adjusted free cash flow margin to revenue increased from 15% in Q4 2022 to 22% in the most recent quarter.

While there will be winners and losers in the AI ​​market, Palantir’s growing revenue and free cash flow show it will be one of the winners.

2. Microsoft

Microsoft (NASDAQ: MSFT) is the £800 gorilla in software, with millions of users using Windows, Office and LinkedIn every day, in addition to its enterprise cloud services business. Its large installed user base will be valuable as it seeks to transform and leverage the implementation of AI functions across the business.

Office 365 ad revenue grew 13% year-over-year in the fiscal fourth quarter that ended in June, driven in part by Copilot for Microsoft 365. The number of people using Copilot for work nearly doubled quarter-on-quarter another.

The story continues

But AI will also lead to new product categories that could benefit Microsoft’s consumer business in the long run. Microsoft recently unveiled new Copilot+ PCs that bring more AI enhancements to the user experience.

Wall Street is largely bullish on Microsoft because of the growth opportunity in its Azure cloud business, which is the second largest cloud service provider. Revenue from Azure and other cloud services grew 29% year-over-year, with AI services contributing 8 percentage points to the growth. This contribution from AI is higher than in previous quarters, suggesting that Microsoft is gaining momentum in the AI ​​market.

Microsoft will be one of the safest AI stocks for the long term. It’s a financial powerhouse with $74 billion in free cash flow behind $245 billion in revenue. It has the cash resources to invest in innovative new technologies while providing growing streams of free cash flow to fuel shareholder returns.

Should you invest $1,000 in Palantir Technologies right now?

Before buying stock in Palantir Technologies, consider the following:

The Motley Fool Stock Advisor the analyst team has just identified what they think they are 10 best stocks for investors to buy now… and Palantir Technologies was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $641,864!*

Stock advisor provides investors with an easy-to-follow blueprint for success, including portfolio construction guidance, regular updates from analysts, and two new stock picks every month. The Stock advisor the service has more than four times return of the S&P 500 since 2002*.

See the 10 stocks »

*The stock advisor returns starting August 6, 2024

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Palantir Technologies. The Motley Fool recommends the following options: long $395 January 2026 Microsoft calls and short $405 January 2026 Microsoft calls. The Motley Fool has a disclosure policy.

2 AI Stocks You Can Buy and Hold for the Next Decade was originally published by The Motley Fool