Many technology stocks have been flying high over the past year, in part due to the industry's shift toward artificial intelligence (AI). That boom is creating massive competition, and many tech companies are trying to cash in.
But what tech stocks have the stamina to impress over the next 10 years, not just 10 months? To find those, you need to look for companies that are far and away the leaders in their respective markets -- and that continually innovate to stay on top. Here are three doing exactly that.
1. Nvidia
Many investors might feel like they have missed the train with Nvidia (NASDAQ: NVDA). I get it. But it might be wise to readjust your thinking by asking yourself which companies are positioning themselves to dominate 10 years from now.
Nvidia is one such company, with an estimated 70% to 95% share of the AI chip market. And its recent release of the H200 AI processor, the successor to its ultra-popular H100 chip, already has more demand than supply, according to management.
To understand how big AI demand will be in the coming years, Goldman Sachs says companies will spend $1 trillion over the next few years to build their AI ambitions. If that figure sounds too abstract, consider that Reuters recently reported that nations worldwide are investing in their own AI systems, including the Japanese government, which is building an AI supercomputer using thousands of Nvidia H200s.
Investors likely won't see the same gains Nvidia has seen over the past couple of years, but with the AI race just beginning, it still has plenty of time to run. While not cheap at a forward price-to-earnings ratio (P/E) of 41, shares are down about 8% over the past three months. That recent pullback opens up a potential buying opportunity for investors looking for a decade-long AI play.
2. Broadcom
If you're interested in choosing an AI investment that's a little off the beaten path, then Broadcom (NASDAQ: AVGO) could be the tech stock for you. The company is benefiting from a niche in the AI market with its application-specific integrated circuits (ASICs), which are increasingly in demand.
These chips help with general-purpose AI tasks, and leading tech companies including Meta and Alphabet are tapping into them to meet their artificial intelligence goals. Demand for ASICs has risen as companies fight for AI dominance, tripling Broadcom's AI sales in the most recent quarter to $3.1 billion.
Management says it will finish 2024 with an estimated $12 billion in AI revenue, up from its previous estimate of $11 billion. And there could be more on the way. Estimates from J.P. Morgan put Broadcom's total addressable market for AI chips at $150 billion over the next four to five years.
If all that weren't enough, Broadcom recently made a strategic investment when it bought software company VMware, which it is using to sell cloud platform services to companies wanting a private cloud or hybrid cloud system (a mix of public and private). These cloud computing platforms will become increasingly important to companies looking to set up their own AI cloud systems in the coming years.
Broadcom's shares currently trade at a forward P/E of about 27, making the stock far less expensive than some of its AI chip rivals.
3. CrowdStrike
Cybersecurity is a problem that will never quite go away, especially as criminals find new ways to thwart existing systems. The good news is that there are companies, including CrowdStrike Holdings (NASDAQ: CRWD), at the leading edge of security that enlist AI in the fight.
CrowdStrike has used AI in its Falcon security platform for years, but it has made it even smarter by launching Charlotte AI last year for security analysts. The integrated generative AI system allows analysts to find threats and fix problems, and management says companies that use Charlotte AI save two hours daily in their security operations.
The company's lead in this space could continue to pay off in the decade ahead as more companies rely on AI for security. Morgan Stanley estimates that by 2035, AI cybersecurity will be a $135 billion market, nine times larger than it was in 2021.
CrowdStrike's customers have already experienced the benefits of its platform and are signing up for more services. About 65% of customers in the second quarter adopted five or more security modules on Falcon, and 45% have six or more.
CrowdStrike's stock is a bit expensive, with a forward P/E of 82. But the stock's recent dip of about 20% over the past three months has opened up a buying opportunity for this tech leader that's at the forefront of AI cybersecurity.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, CrowdStrike, Goldman Sachs Group, JPMorgan Chase, Meta Platforms, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
3 Tech Stocks You Can Buy and Hold for the Next Decade was originally published by The Motley Fool