Top AI Stocks: Alphabet vs. Apple

Top AI Stocks: Alphabet vs.  Apple

If you had to pick a theme for 2023 (besides maybe Taylor Swift), it would definitely be artificial intelligence (AI).

This technology has taken the world by storm, with countless companies restructuring their businesses to prioritize the development of artificial intelligence. The AI ​​market was worth $137 billion last year, and Grand View Research estimates it will expand at a compound annual rate of 37% through the end of the decade. At this point, the market should exceed $1 trillion in annual revenue.

Given these optimistic forecasts, optimistic investors flocked to companies with the most potential in the industry, sending in more money. Nasdaq-100 The index has risen by 65% ​​since the beginning of the year. But even with this rally behind us, it’s not too late to add AI stocks to your portfolio and benefit from the industry’s long-term growth.

the alphabet (Google 0.76%) (Gog 0.65%) And apple (Camel -0.56%) They are two attractive options that invest heavily in artificial intelligence. But what is the best AI stock right now?

the alphabet

As the owner of powerful brands such as Google, Android, YouTube, and Chrome, Alphabet has huge potential in the field of artificial intelligence. The company has already used these platforms and the billions of visitors they attract to become a digital advertising powerhouse. Therefore, it is clear that Alphabet could benefit from bringing AI upgrades to the various services it offers to its broad user base.

The tech giant is already taking steps to do just that. It plans to launch its most advanced large language model (LLM) ever, Gemini, in 2024. The new model is expected to be highly competitive with OpenAI’s ChatGPT-4, with capabilities to process different forms of information such as text, video and images. My voice.

Gemini “represents one of the largest scientific and engineering efforts we have undertaken as a company,” Alphabet CEO Sundar Pichai said in a blog post. The LLM program could open the door to countless AI growth opportunities for Alphabet, allowing it to improve Google Search, deliver more efficient advertising, and bring new AI tools to Google Cloud.

Furthermore, earlier this month the company announced a new set of chips specifically designed and optimized for training AI models. The soon-to-be-released hardware is nearly three times faster than previous generations of chips and strengthens Alphabet’s position in the industry.

apple

Apple has taken a slower approach to artificial intelligence than its competitors like Alphabet. MicrosoftAnd Amazon. However, this is no reason to count it.

The company has a proven talent for taking established technologies, adding its own unique design language and delivering products that reach dominance in the consumer market. The tech giant has done this through smartphones, tablets, wireless headphones and smart watches. Other companies dominated every product category before Apple arrived on the scene and took over. It has the brand recognition and financial resources to do the same in the AI ​​space.

Additionally, while Alphabet and other technology companies have focused their AI efforts on the commercial sector, Apple has focused on the consumer market. Throughout this year, the iPhone maker has gradually introduced AI-enabled features across its product lineup, which could make it a major driver of growth in public adoption of the technology.

The company could benefit greatly from the brand loyalty it has gained with consumers as it continues to expand its AI offerings.

AAPL free cash flow chart

Data by YCharts.

It’s too early to know Apple’s long-term plans for artificial intelligence. However, this chart shows that free cash flow reached nearly $100 billion this year. It has the funds to weather potential headwinds and invest heavily in the industry.

In fact, Apple’s R&D spending increased by more than $3 billion in fiscal 2023, primarily due to a greater focus on generative AI.

The company faces significant challenges, but I wouldn’t bet against Apple thriving in AI over the next decade.

Is Alphabet or Apple the better AI stock?

Alphabet and Apple have strong long-term AI prospects. However, Alphabet appears to have a more established role in the market so far. Its diverse services provide almost endless opportunities to monetize its AI technology. Meanwhile, the promise of Gemini and its new AI chips is too good to ignore.

AAPL PE ratio chart

Data by YCharts.

Moreover, based on its price-to-earnings ratios and price-to-free cash flow ratios, Alphabet looks like the better deal. So, in my view, Alphabet is the best choice, and a no-brainer AI stock to buy now.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Microsoft. The Motley Fool has a disclosure policy.

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *