The hype around artificial intelligence (AI) is well-deserved. AI represents a groundbreaking technology poised to transform existing industries and create new ones over the coming decades. According to an analysis by Bloomberg Intelligence, the market for generative AI is poised to reach $1.3 trillion by 2032. That’s a 43% annualized growth rate from today.
Generative AI involves creating content using computer systems and large language models (LLMs) like ChatGPT. As you might imagine, the investment upside is tremendous for cutting-edge companies with the chips, models, data, and applications to help generative AI realize its potential.
The Five Generative AI Stocks on the Cutting Edge
1. Nvidia
Nvidia’s (NASDAQ: NVDA) graphics processing unit (GPU) chips are the go-to for training AI models. That’s where AI digests vast amounts of data to learn. The company captured the market with its Hopper architecture (H100 chip) and is starting to roll out Blackwell, its next-generation AI chip line.
Nvidia’s business performance over the past two years is arguably unprecedented, and it’s poised to continue as AI hyperscalers like Microsoft and other big technology companies invest billions of dollars to build the capacity to support generative AI’s growth. Nvidia’s stock may seem expensive at a forward price-to-earnings (P/E) ratio of 48, but analysts estimate the business will grow earnings by an average of 38% annually over the long term.
That’s a price/earnings-to-growth (PEG) ratio of just 1.3, meaning the growth justifies the valuation. The stock might be volatile along the way, especially after such a strong 24-month run, but the long-term upside remains compelling.
2. Broadcom
Broadcom (NASDAQ: AVGO) is a chip and enterprise software company that’s making waves in the generative AI space. They’ve developed a range of products that enable the development of AI models at scale. Their technology is already being used by some of the biggest players in the industry, including Microsoft and Google.
Analysts estimate Broadcom will grow earnings at an impressive 23% annual rate over the next five years, making it a compelling addition to any portfolio.
3. Amazon
E-commerce giant Amazon (NASDAQ: AMZN) may not be an obvious generative AI winner at first glance, but they operate Amazon Web Services (AWS), the world’s largest cloud-computing platform, making them a critical partner for any company deploying AI technology in real-world applications.
Additionally, Amazon has first-party data on the customers who shop on its site or use any of the services included in its Amazon Prime subscription. It has unleashed a network of over 100 million active smart devices via its Alexa technology, a perfect distribution system for generative AI applications.
Amazon is involved in various industries, such as e-commerce and digital advertising, so it’s a bit more diversified than other AI stocks. Analysts estimate Amazon will grow earnings at a brisk 22% annually over the next three to five years, which is plenty of time to make the stock a buy today at its current forward P/E ratio of 36.
4. Microsoft
Microsoft (NASDAQ: MSFT) has been making significant investments in AI research and development, including the acquisition of several AI startups. They’ve also developed a range of AI-powered products, including Azure Machine Learning and Cognitive Services.
Analysts estimate Microsoft will grow earnings at an impressive 18% annual rate over the next five years, making it a solid addition to any portfolio.
5. Alphabet
Alphabet (NASDAQ: GOOGL) is the parent company of Google, which has been at the forefront of AI research and development for several years. They’ve developed a range of AI-powered products, including Google Assistant and TensorFlow.
Analysts estimate Alphabet will grow earnings at an impressive 16% annual rate over the next five years, making it a compelling addition to any portfolio.
Should You Invest in These Generative AI Stocks?
Before you invest in these stocks, consider this:
- The Motley Fool Stock Advisor analyst team has identified what they believe are the 10 best stocks for investors to buy now.
- Nvidia wasn’t on that list when it was published, but if you had invested $1,000 in April 2005, you’d have made over $900,000 by January 2025.
These five generative AI stocks are poised to capitalize on the rapidly growing market for AI technology. With estimated growth rates ranging from 16% to 38%, they’re definitely worth considering as part of your investment portfolio.
Conclusion
The future of artificial intelligence is bright, and these five generative AI stocks are well-positioned to reap the rewards. With their innovative products, strong management teams, and significant market share, they’re poised to deliver impressive returns for investors in the coming years.
By investing in these companies, you’ll be tapping into the rapidly growing market for AI technology, which is expected to reach $1.3 trillion by 2032. Whether you’re a seasoned investor or just starting out, these stocks are definitely worth considering as part of your portfolio.
Disclaimer
The Motley Fool recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft.
