Why We Should Be Paying Attention to AI Stocks
Artificial intelligence is at the forefront of the market today, and for good reason. It holds significant promise in transforming modern life, and we’re just at the beginning stages of its evolution.
Let’s dive into three standout AI stocks that are making waves right now.
Nvidia
Nvidia (NASDAQ: NVDA) spotted the AI trend early on and made a strategic decision to offer CUDA free to universities and research centers, which paid dividends in the long run. This move has created a solid barrier against competition, making it difficult for developers to switch to alternatives. As a result, Nvidia commands over 90% of the GPU market for AI tasks.
Their strategy doesn’t stop at chips; Nvidia’s proprietary NVLink allows multiple GPUs to function collectively, an essential advantage as AI models advance in complexity. Just recently, they committed to invest up to $100 billion in OpenAI, granting them a look into future trends and collaboration prospects that will help define AI development.
According to their CEO, Jensen Huang, there’s a prediction that spending on AI in data centers might soar to $4 trillion in the coming years, positioning Nvidia to capture a substantial slice of that budget.
Alphabet
Alphabet (NASDAQ: GOOGL, NASDAQ: GOOG) is setting itself up to be a top player in the AI landscape of the next decade. Their Gemini model has sparked fast growth and stands as a leading foundational model. This initiative propels both their AI endeavors and enhances search functionalities within their cloud computing division.
Alphabet fortified its position in the search arena by becoming the default option for devices worldwide, thanks to its ownership of popular platforms like the Chrome browser and Android OS. Notably, their collaboration on a search revenue-sharing agreement with Apple boosted this momentum. In tandem with the shift towards AI, they’ve utilized the Gemini model in their search capabilities, introducing features that transition users seamlessly between AI-optimized searches and a chatbot.
On the other end, Google Cloud has been on a rapid growth trajectory, supported by their unique fully integrated AI stack. With innovations in custom AI chips and analytics tools, Alphabet’s contributions will keep them ahead in the competition.
Amazon
Although most people associate Amazon (NASDAQ: AMZN) with its e-commerce platform, behind the scenes, it’s a powerhouse for AI and robotics. The company basically kickstarted the cloud computing industry, and it’s one of the markets reaping massive benefits from the surge in AI.
Amazon Web Services (AWS) is their most profitable and fastest growing segment. Last quarter, AWS revenues jumped by a stunning 17.5%, reaching close to $31 billion with over $10 billion in operating income. Increased use of AWS for AI workloads has driven growth, with tools like Bedrock allowing users to leverage excellent foundational models customizable for their needs and SageMaker facilitating the creation and training of proprietary models.
Recently, they also launched an open-source setup designed for building AI agents, complemented by Agentcore, which provides a secure space for large-scale deployments. Plus, Amazon’s development of its AI chips, Trainium and Inferentia, enhances efficiency and reduces operational costs.
Finally, AI integration spans across Amazon’s e-commerce to optimize profitability. With over a million robots functioning in warehouses coordinated by the DeepFleet AI framework, they’re improving item storage predictions, streamlining delivery routes, and refining advertising strategies. The cumulative effect surges operating margins, where North American income leaped 47% on a mere 11% rise in revenue last quarter.
So overall, Amazon is strategically positioned to capitalize on the AI boom over the next decade.
Noteworthy Investment Insight
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Geoffrey Seiler holds shares in Alphabet. The Motley Fool also has stakes in Alphabet, Amazon, Apple, and Nvidia and subscribes to a disclosure policy.
