Following the recent market pullback, a number of high-quality tech stocks based in artificial intelligence (AI) are now trading at more attractive prices. This is a great opportunity to purchase shares of these market-leading companies.
Let’s look at two AI stocks that investors can buy and hold for the next decade.
1. Alphabet
While known for its Google search engine, Alphabet (GOOGL -4.83%) (GOOG -4.89%) has a strong collection of businesses. Google is still its prized possession and for good reason. It holds about a 90% global market share for search and is the world’s largest digital advertising platform. While there are a number of AI-powered competitors looking to make inroads, none have the scale of users or network of advertisers that Google has.
In addition, Alphabet owns YouTube, the most watched streaming service. As a stand-alone entity, YouTube is the fourth largest digital advertising platform in the world. The company’s model of sharing advertising revenue with its creators reduces heavy upfront content spending and leads to strong profitability.
Meanwhile, Alphabet is leaning heavily into AI. The company owns the world’s third largest cloud-computing platform where it helps customers develop their own specialized AI models and applications through its Vertex AI platform. The platform enables customers to use Gemini or other foundational models as a starting point. Alphabet is also using Gemini to help improve its search results and power its AI Overviews.
AI Overviews should eventually lead to new monetization opportunities. Historically, Google has only displayed ads on about 20% of its searches, with cost-per-click being a big source of its ad revenue. However, it uses other ad formats through its AdSense platform, such as display, text, and video ads, and could use these types of ads to generate revenue for its AI Overviews. It also operates the Gemini generative AI chatbot. While still behind some competitors, the chatbot is starting to improve and catch up. The company is also ahead in some AI areas, such as text-to-video, where its Veo 2 platform has demonstrated strong results, given its training on YouTube videos.
In addition, Alphabet is leading the way in autonomous driving and robotaxis with its Waymo unit. It is currently the only company offering paid rides in the U.S. and has been expanding to new cities. It has also begun to take share in more established markets like San Francisco as customers become more comfortable with the technology. While Alphabet needs to drive down the prices of its technology, it is clearly the leader in this emerging space.
Even further out, Alphabet is a leader in quantum computing with its Willow chip. Last year, the company made a major breakthrough in the space. One of the big issues with quantum computing is that it is error prone especially as it scales, but Willow has begun reducing errors as it scales. Quantum computing is still far from commercial applications, but this once again demonstrates how Alphabet is a technology-leading enterprise. The ability to innovate and adapt is the key for turning a tech company into a good, long-term investment.
Image source: Getty Images.
2. Microsoft
Like Alphabet, Microsoft (MSFT -2.96%) has a collection of market-leading businesses with strong AI ties. The company was one of the first big tech companies to embrace AI when it made a large investment in OpenAI, the maker of ChatGPT, and partnered with the start-up.
Microsoft’s use of OpenAI’s AI models has helped drive its own cloud business, Azure. The platform provides customers with the infrastructure to train their own AI models while offering AI-powered analytics, security, and management tools. Though the business has been capacity-constrained, Microsoft is spending heavily building out data centers to keep up with demand.
Meanwhile, the company has incorporated AI assistant copilots throughout its offerings. The biggest push has been with the copilots for its Microsoft 365 subscription service, which includes access to its popular work productivity tools, such as Word, Excel, and PowerPoint. The company is advancing how its copilots can help workers become more productive. A cost of $30 per month per enterprise user presents a big opportunity for the company moving forward. The company also recently added new security AI copilot agents, extending its market for AI copilots.
While Microsoft has relied on OpenAI, it isn’t standing still. It has been reported that the company is developing its own in-house AI reasoning models, as well as starting to work with other third-party models. This will help reduce its dependence on OpenAI and allow it to use its own AI models to help power its copilots going forward.
Currently, Microsoft and OpenAI’s partnership agreement runs through 2030, and the two companies remain close. However, the software giant is clearly looking ahead; having its own internal AI model options certainly gives it future leverage.
Microsoft has also developed its first video game AI model called Muse. It will look for the AI model to help speed up new game development, as well as possibly preserve classic games that can be used on modern hardware. Gaming is a big business for Microsoft through its Xbox hardware and gaming studios, including Activision Blizzard. It will be exciting to see how it will incorporate AI into its games and make them better.
While Microsoft continues to see solid growth through the help of its AI offerings, the possibilities of what comes next are what makes the stock attractive. The company has been very adaptive over the years, transitioning to a subscription-as-a-service model for its productivity software and then later as one of the first big tech companies to embrace AI.
It is this ability to plan ahead and adapt that makes Microsoft a stock to buy and hold for a long time.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Microsoft. 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.
