Artificial intelligence (AI) is this decade's most prominent investing theme so far. As AI-powered applications took the world by storm, Wall Street fell in love with AI stocks.
With the AI wave far from cresting, three Motley Fool contributors take a closer look at three of their favorite AI stocks: Amazon (AMZN 0.38%), Qualcomm (QCOM 0.38%), and Nvidia (NVDA +0.87%).
Image source: Getty Images.
Amazon's cloud leadership makes the stock a no-brainer for the AI wave
Justin Pope (Amazon): Artificial intelligence will change the game for Amazon, a company that's already wildly successful by any measure.
NASDAQ: AMZN
Key Data Points
Amazon Web Services, or AWS for short, is the world's leading cloud platform, with a 30% share of the global cloud infrastructure market. AWS generated more than 58% of the company's total operating income over the past four quarters, but only 17% of total net revenue.
Many artificial intelligence (AI) applications, which are software at their core, will run on cloud computing platforms. Amazon and other cloud companies continually invested billions of dollars to build data centers to expand their cloud capacity to accommodate all this demand. Research from Goldman Sachs estimates that AI will drive sustained cloud growth, boosting global cloud computing revenue at a 22% annualized pace, to $2 trillion by 2030.
It seems likely that AWS, which grew revenue by 17% year over year in the first quarter, will sustain healthy growth for the foreseeable future as long as AI momentum continues. Amazon is building out an AI ecosystem on AWS, including Bedrock, a platform for developing generative AI applications such as virtual agents. Amazon's market leadership should help it upsell its cloud customers and retain them on AWS for their AI needs.
Analysts estimate Amazon will grow earnings by an average of 17% annually over the long term. I think those are fair growth expectations given Amazon's AI opportunities, as well as its continued growth potential in e-commerce, digital advertising, streaming, and Prime subscription service. It makes the stock a buy at its current price-to-earnings ratio of 33, a reasonable valuation for such a growing, world-class company.
Low-cost AI could stoke demand for this company's products
Will Healy (Qualcomm): Admittedly, investors may not necessarily think of Qualcomm when looking at stocks that will take AI to new heights.
NASDAQ: QCOM
Key Data Points
Its longtime client, Apple, appears poised to stop using its smartphone chipsets in the iPhone. Additionally, Qualcomm's ties to China could put pressure on the stock should U.S.-China relations continue to deteriorate.
Nonetheless, DeepSeek's breakthrough dramatically lowered the cost of developing AI models. Qualcomm's chipset business, which made up 64% of the company's revenue in the first half of fiscal 2025 (ended March 30), relies on an AI-driven upgrade cycle that presumably benefits from low-cost AI.
Moreover, Qualcomm applied its technical capabilities to the automotive and Internet of Things (IoT) industries in recent years. Over the last year, these segments grew revenue by 60% and 31%, respectively, and such successes are likely to put a brighter spotlight on its AI.
Qualcomm may have already begun to benefit. It generated $22.6 billion in revenue in the first two quarters of fiscal 2025, 17% higher than year-ago levels. Costs and expenses grew 13% over the same period, and thanks to lower investment income and higher income taxes, the $6 billion in net income increased by 18% over the last year.
When considering that growth, one must also assume Qualcomm stock prices in its challenges. It sells at a P/E ratio of 15, even after bouncing off the 52-week lows reached in early April.
Low valuations are not necessarily a reason to buy a stock. However, considering Qualcomm's potential to transform parts of the AI industry, investors may want to buy this semiconductor stock while it is still inexpensive.
Nvidia continues to deliver incredible revenue growth
Jake Lerch (Nvidia): When it comes to AI stocks, it's impossible to ignore Nvidia.
NASDAQ: NVDA
Key Data Points
Simply put, Nvidia remains the king of AI stocks. Since January 2020, Nvidia shares gained more than 2,200% -- meaning a $5,000 investment made on Jan. 1, 2020, would now be worth nearly $120,000.
Yet, even after this magnificent run, Nvidia is showing no signs of slowing down. Indeed, the company just notched another fantastic quarterly report (for the three months ending on April 30, 2025), beating expectations for both revenue and earnings.
Highlights included:
- Revenue of $44.1 billion, up 69% from a year earlier.
- Net income of $18.8 billion, up 26% year over year.
- Share repurchases totaling $14.1 billion during the quarter.
While the report was a stunning success for the company, there was one fly in the ointment: Nvidia's gross margin fell from 78% to 61% over the last year. However, management attributed most of the drop to a write-off due to export restrictions to China. In effect, Nvidia's AI chips are so powerful that the U.S. government restricted their delivery to geopolitical rivals like China. Consequently, Nvidia couldn't deliver products that were earmarked for sale to the Chinese market and was forced to write off the inventory this quarter. Going forward, management noted that gross margin should rebound back into the 70% to 75% range later this year.
At any rate, Nvidia continues to show why it is riding the AI wave as well as -- if not better than -- any other company. Its AI chips remain the go-to product for AI developers. Demand remains strong, and the company continues to deliver the red-hot growth that has powered its stock to an eye-popping market cap of more than $3 trillion.
For investors looking for an AI stock with staying power, Nvidia is a name to consider.
