While some AI stocks are starting to shine, it's clear that others are solid long-term investments.
What happened to the artificial intelligence (AI) gathering?
It's a question many investors are asking, and for good reason.Stock prices of the most popular AI stocks such as Nvidiait's been getting cooler over the past few weeks.
Nevertheless, you must remember that navigating volatile and volatile markets is essential to your buy-and-hold strategy. Moreover, despite the current pessimism permeating the market, the AI ​​revolution is set to progress for years to come. That means there are still great AI stocks out there.
Here are two that our Motley Fool contributor panel thinks are worth considering and one to avoid.
Microsoft stock is a safe harbor for AI investors looking to escape recent volatility
Jake Larch (Microsoft): Sometimes it's best to keep things simple.That's why my best AI stocks to own right now are microsoft (MSFT 0.59%).
To be sure, Microsoft's stock price is unlikely to rise parabolically even if the AI ​​rally picks up steam again. However, what the stock price lacks in exuberance it makes up for in stability. It's easy to fall asleep knowing you own Microsoft for the long term.
Microsoft is moving full speed ahead with AI, but it's far from a one-trick pony. The company has many business segments, including gaming, enterprise and personal computing software, cloud services, and advertising. This diversification should reassure investors, as the company relies on more than just AI growth to drive revenue, profits, and cash flow.
In its most recent quarter (three months ending March 31, 2024), Microsoft generated revenue of $61.9 billion, an increase of 17% year over year. The important thing is thatApproximately $8.4 billion was returned to shareholders through dividend payments and share buybacks.
That means Microsoft investors are being rewarded for waiting until the volatility in the AI ​​sector subsides. This isn't true for all AI stocks, and it's one of the big reasons investors should still consider Microsoft stock a buy.
Soaring profits make Amazon a bargain worth picking up today.
Justin Pope (Amazon): Amazon (AMZN -1.07%) Today seems like an exciting shopping experience without any hesitation. The technology giant is a key pawn in the upcoming AI game thanks to its market leadership in cloud services with AWS. Amazon has integrated his AI capabilities into his AWS, making it the foundation for customers to build and run AI models. That's your 10-second elevator pitch. However, the company's recent short-term performance highlights the value of the stock today.
The company just delivered great results in the first quarter. Operating cash for the past 12 months rose 82% year over year to more than $99 billion. It's difficult to value Amazon's stock based on earnings or free cash flow, since it stubbornly invests most of its profits into growing its business.Unlike meta platform and alphabetthere are no dividends here.
By comparing stock price and operating cash flow, investors can learn about Amazon's true value. As you can see below, even though Amazon's stock price has soared more than 70% over the past year, its operating cash flow multiple is currently near the lowest it's been in a decade.
There may still be room for Amazon's impressive rally. Business is booming on all fronts, and long-term investors have a diverse multi-headed monster packed with growth in e-commerce, cloud, and advertising, and the impact one industry has on the broader business. Prevent giving. Buy Amazon with confidence and expect great profits in the long term.
AI-generated profits alone may not be enough to save this stock
Will Healy (C3.ai): At first glance, C3.ai (A.I. -1.73%) It may look like a stock to buy. The company develops AI-enhanced enterprise software that integrates with companies' existing software infrastructure, putting it on par with other fast-growing AI stocks.
Additionally, the company's price-to-sales (P/S) ratio is below 10. It's not “cheap,” but it's comparable to many other AI companies that continue to trade at high valuations.
However, when investors examine the business more closely, they may find significant problems. As an example, it expects more than 35% of its fiscal 2024 revenue to be generated by oilfield services majors. baker fuse. The company's current contract with Baker Hughes expires in April 2025, so without a new deal, revenue could disappear quickly.
In addition, C3.ai may remain in poor financial condition even if it continues its business relationship with Baker Hughes. In the first nine months of fiscal year 2024, sales amounted to his $224 million, an increase of 15% year over year. This lags far behind many other AI stocks that are growing earnings at a much faster pace.
Additionally, operating expenses for the period were $363 million, nearly 1.5 times revenue. This resulted in a net loss of $207 million for the first three quarters of fiscal 2024.
Indeed, the company has around $723 million in liquidity, indicating it can maintain this pace in the short term. Nevertheless, it's unclear whether the company will ever turn a profit, a situation that could explain why C3.ai stock gave back most of its 12-month profit.
Between the uncertainty of the relationship with Baker Hughes and the huge financial losses, investors are probably better off putting their money into other AI stocks.
Suzanne Frey, an Alphabet executive, is a member of the Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Jake Lerch has held positions at Alphabet, Amazon, and Nvidia. Justin Pope has no position in any stocks mentioned. Will Healy has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends his C3.ai and 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.