stocks

The market’s moving higher, and there’s a good chance that many of the stocks in your portfolio are having a good year. That doesn’t mean that you have a portfolio loaded with winners. Every investor has laggards, and for me, one of them is Target (TGT 1.02%). I’ve owned the discount retailer through some good years, and lately some bad ones.

Target shares have been cut nearly in half over the past year. Investors tend to shy away from falling stocks, but this out-of-favor stock is high on my list of potential purchases in November. And it’s not the only name I’m looking at. I believe that Duolingo (DUOL 4.29%) and Crocs (CROX 6.63%) — two other stocks I own that have fallen by at least 40% from their 52-week highs — are also ready to bounce back; I think they’re out-of-favor stocks to buy right now.

Let me dive into what I hope will be a timely contrarian take on Target, Duolingo, and Crocs.

1. Target: down 46%

Before I go into what’s holding Target back these days, I want to talk about its juicy dividend. The cheap-chic chain is currently yielding 5.2%, a historic high. With money-market and fixed-income yields heading lower, Target’s quarterly distributions are worth celebrating.

Target is good for the money; it has found a way to boost its dividend for 54 consecutive years. You know how they say that e-commerce will be the end of brick-and-mortar chains? Well, Target has found a way to deliver hikes every year since the commercialization of the internet. This Dividend King‘s latest guidance calls for a profit of between $7 and $9 per share this year, meaning a healthy payout ratio of 51% to 65%.

Image source: Getty Images.

The dividend is sustainable, despite Target’s recent misfires. The retailer is struggling to connect with shoppers. In-store comparable sales slipped 5.7% in its most recent quarter, with overall comps down 3.8% for the period. It’s losing market share — a sobering reality for a company that used to feast at the expense of its retail stock rivals with its now-fading aspirational brand.

But patient investors are getting more than a bountiful 5.2% yield right now; they’re getting a bargain. Target is trading for just 11 times the midpoint of its earnings guidance this year.

Analysts see a return to revenue and net income growth next year. Wall Street profit targets have been inching higher over the past three months, and the mass-market retailer has exceeded bottom-line expectations in two of the last three quarters. Last month’s quarterly report wasn’t popular with most investors, but at least three major analysts boosted their price targets on the company. While the turnaround will take time and a potential uptick in reinvestment obligations, there are worse places to be than riding it out with big dividend checks coming every quarter.

2. Duolingo: down 40%

Unlike Target, Duolingo isn’t going through growing pains. Revenue growth has topped 40% in each of the last five years. The language-learning company’s top line accelerated in its latest quarter, with a 42% year-over-year surge as its healthiest jump in more than a year.

Duolingo’s shares have still fallen 40% since scoring an all-time high in the spring, which doesn’t seem fair. It wasn’t just revenue picking up the pace since the shares peaked — in the most recent earnings report, profit landed 32% ahead of what Wall Street was modeling. There are concerns about artificial intelligence (AI) leveling the playing field for language learning, but that dismisses Duolingo’s own AI enhancements. Its platform and the gamification of learning have made the company a winner.

Unlike the other two names on this list, Duolingo isn’t cheap; it’s trading for nearly 40 times forward earnings. However, it was trading a lot higher when it lacked today’s momentum. The Duolingo owl is wise. This feels like a buying opportunity in any language.

3. Crocs: down 43%

Like another discarded cheap-chic stock, Crocs is a bargain. The maker of distinctive footwear is trading for just 6 times this year’s projected adjusted earnings. As with Target, revenue and profitability are going the wrong way this year.

Crocs has a history of riding the ups and downs of demand for its comfy hole-laden resin clogs. The same can be said of most shoe stocks. It always finds a way to get back in style, doing so consistently for a couple of decades. Its streak of seven consecutive years of top-line gains may come to an end this year, but it’s not likely to stay down for long.

It doesn’t offer the same chunky yield as Target — there’s no payout at all — but bargains come with different perks. Crocs is cheap, and history is on the side of those who believe when the masses do not.

“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” — Sir John Templeton

Dividend stocks have a few things going for them. Companies with growing dividends tend to be soundly profitable and financially healthy, which are two advantageous qualities to have during periods of economic downturn. Companies with a long dividend history are also more likely to have economic moats and advantages that enable them to pass along price increases and better maintain margins long-term.

Here are two solid companies that boast dividends and could trade higher as they improve their businesses from recent struggles.

Campbell’s is an mmm mmm, good stock

It’s certainly been an interesting ride over the past few years for Campbell’s (CPB -0.34%). Its business mix shifted substantially, with its core soup lineup accounting for roughly 25% of total sales, down from about 40% in fiscal 2017. Snacks are up to 50%, up from less than 30% over the same timeframe.

Image source: Campbell’s.

Beyond its changing sales mix, management has worked to improve operating efficiencies across its supply chain and manufacturing network, while also backing up its brands with more marketing spend. These changes have driven an increase in annual organic sales.

Campbell’s still isn’t done, however. It recently laid out plans to unlock $250 million in savings through fiscal 2028, on top of the $950 million it realized over the past few years. Campbell’s is also driving growth through acquisitions and recently scooped up Sovos Brands, which generates more than $1 billion in annual sales.

Despite moving in the right direction and offering a dividend yield of 4.6%, the stock price has slid 20% year to date. This gives investors a chance to buy low on a consumer defensive dividend stock that is improving its business.

Just do it and pick up some Nike stock

It’s been a bumpy ride over the past three years or so for the athletic apparel leader Nike (NKE 0.09%). But after the stock price spiraled 25% lower over that timeframe, it gives investors an opportunity to not only buy into its potential turnaround, but to enjoy receiving its 2.25% dividend yield while waiting.

Nike has faced recent problems that include a lack of product innovation, softer demand for sportswear, and strained relationships with wholesale customers. The company has proven that, over a long period of time, it can maintain its market share and pricing. But there are a couple of things that could drive this turnaround in the medium term.

First, although Nike’s recovery in China has been slower than desired, there’s still a massive opportunity as the market expands and more developing regions, such as China and Latin America, among others, have swaths of people moving into the middle class.

Second, during fiscal 2025, Nike brought back longtime executive Elliott Hill to serve as its CEO. Given his company knowledge and relationships with crucial partners, investors should be optimistic that he can improve results more quickly.

Buy now on these two stocks?

Both of these companies possess incredibly recognizable global brands, have real potential for stock price upside, and offer investors dividends while they wait for the business to turn around. If Campbell’s executes its savings initiative and Nike can capture growth in developing regions, both could become long-term cornerstones of just about any portfolio and provide some income from healthy dividends. These are definitely two stocks you can hold without worry for a decade.

As companies mature, they often choose to implement a dividend as a way to directly reward shareholders. On the other hand, smaller up-and-coming companies will want to put all the dry powder possible into their ideas to make them succeed.

Coca-Cola (KO -0.52%), Procter & Gamble (PG 0.23%), and Sherwin-Williams (SHW 0.58%) are three industry-leading companies that have been around for over 100 years. Their track records have earned them spots among the 30 components in the Dow Jones Industrial Average (^DJI 0.65%).

Dividends have been an integral part of their capital allocation plans for decades. And because all three companies have steadily grown their earnings over time, they have also been able to increase their quarterly dividends.

Investing $15,000 into each stock could help you generate over $1,000 in passive dividend income per year. Here’s why all three dividend stocks are great buys in October.

Image source: Getty Images.

This beverage behemoth is also a passive income powerhouse

Coca-Cola was one of the few stocks that held up when the market was tanking in response to tariff woes and geopolitical uncertainty in April. That same month, it hit an all-time high. But since then, Coke has been steadily falling while the S&P 500 (^GSPC 0.59%) has been gaining. And after a hot start to the year, Coke is now underperforming the Dow and the S&P 500.

^SPX data by YCharts

Coke’s fundamentals remain intact. The company is generating solid organic growth and diversifying its beverage lineup by leaning into healthier options. Coca-Cola Zero Sugar and Diet Coke are performing well, and Coke is shifting from high-fructose corn syrup to cane sugar in the U.S.

Coke has the beverage lineup, supply chain (through its bottling partnerships), and brand power to adapt to changing consumer preferences. In the meantime, the stock has gotten much cheaper, sporting a 23.6 price-to-earnings (P/E) ratio compared to a 10-year median P/E of 27.7.

Coke yields 3.1%, making it a solid source of passive income. And it has raised its dividend for 63 consecutive years, earning it a coveted spot on the list of Dividend Kings.

P&G is a great value for long-term investors

P&G is in a similar boat to Coke. It has great brands, but consumers are getting hit hard by inflation and cost-of-living pressures.

In June, P&G announced plans to cut 7,000 jobs and exit certain brands and markets as part of a restructuring effort. In July, it announced that its chief operating officer, Shailesh Jejurikar, would take over as CEO on Jan. 1, 2026. These major shakeups, paired with relatively weak results and guidance, may be why P&G is hovering around a 52-week low at the time of this writing.

P&G has essentially three levers it can pull to grow its earnings. It can sell higher volumes of products, it can raise prices, and it can repurchase stock, which increases earnings per share. Volume growth is the most sustainable option because it has fewer limits compared to price increases, which are subject to consumer constraints. And there’s only so much free cash flow P&G generates to buy back its stock (it usually reduces its share count by 1% to 2% per year).

Unfortunately, P&G has been relying heavily on price increases in recent years. And consumers are pushing back, as P&G’s organic growth has drastically slowed.

PG data by YCharts

P&G now sports a P/E ratio of 23.4 and a forward P/E of 21.8 compared to a 10-year median P/E of 25.5. Like Coke, P&G is a Dividend King with a high yield at 2.8%. It’s a great buy for risk-averse investors looking for a reliable source of passive income who don’t mind giving the company time to restructure.

Sherwin-Williams’ recent pullback is a buying opportunity

The paint and coatings giant had been a steady market outperformer to the point where it earned its spot in the Dow last year, replacing commodity chemical giant Dow Inc. But Sherwin-Williams’ stock has underperformed the major indexes this year largely due to high interest rates, which are impacting many of its end markets.

Sherwin-Williams benefits from increases in consumer spending and economic growth. Higher borrowing costs have been a drag on the housing market and home improvement projects, as evidenced by Home Depot‘s lackluster earnings growth over the last couple of years.

Still, Sherwin-Williams has the makings of an excellent dividend stock for long-term investors. It has 46 consecutive years of dividend raises, but its yield is just 0.9% because the stock price has outpaced its dividend growth rate — gaining 352% over the last decade, which is even better than the S&P 500’s 244% increase.

Sherwin-Williams has an excellent business model. It sells its products through its own retail stores, online, and partnerships with retailers like Lowe’s Companies. It also has a sizable coatings business and industrial and commercial paints business. Coatings are used to protect surfaces across various industries, including automotive, aerospace, and marine.

Add it all up, and Sherwin-Williams is a great buy in October.

Quality companies at attractive valuations

Coke, P&G, and Sherwin-Williams may not light up a growth investor’s radar screen. But all three companies pay growing, ultra-reliable dividends.

Coke and P&G have discounted valuations compared to their historical averages, whereas Sherwin-Williams is roughly in line with its 10-year median valuation.

Add it all up and these are three picks ideally suited for investors looking to round out their portfolios with non-tech-focused ideas.

Dividend yields have been on a downward trend over the past year due to rising stock prices. The S&P 500‘s dividend yield is down to less than 1.2%, approaching its lowest level on record. Because of that, it’s getting harder to find stocks with attractive payouts.

However, it’s not impossible. Clearway Energy (CWEN 0.67%) (CWEN.A 0.89%), Realty Income (O 0.83%), and Verizon (VZ 0.55%) currently stand out for their high dividend yields. The trio pays sustainable and steadily rising dividends, making them appealing options for those seeking to generate passive income.

Image source: Getty Images.

A powerful dividend stock

Clearway Energy’s dividend currently yields 6.3%. The company owns one of the country’s largest clean power platforms. It sells the electricity generated by its wind, solar, energy storage, and natural gas assets to utilities and large corporations under long-term, fixed-rate power purchase agreements (PPAs). Those contracts supply Clearway with stable and predictable cash flow to support its high-yielding dividend.

The company aims to pay out between 70% and 80% of its steady cash flows in dividends, retaining the remainder to invest in new income-generating renewable energy assets. The company has already secured several new investments, including plans to repower some existing wind farms and agreements to purchase several renewable energy projects currently under development. These secured investments position Clearway to grow its cash flow per share by more than 20% over the next two years. That should support a dividend increase of more than 10% from the current level by the end of 2027.

Clearway has multiple drivers to support its continued growth beyond 2027. It can repower additional wind farms, add battery storage to existing facilities, buy development projects from a related company, and acquire operating assets from third parties. The company believes it has the financial capacity to support 5% to 8%+ annual cash flow per share growth beyond 2027, which could support dividend increases within that target range.

A very consistent dividend stock

Realty Income’s dividend yield is 5.4%. The real estate investment trust (REIT) pays dividends monthly, making it even more attractive to passive income-seeking investors.

The REIT also has a stellar record of increasing its dividend. It has raised its payment 132 times since its public market listing in 1994. Realty Income has increased its dividend for 112 consecutive quarters and more than 30 straight years. It has grown its payout at a 4.2% compound annual rate during that timeframe.

Realty Income backs its high-yielding and steadily rising dividend with a diversified real estate portfolio (retail, industrial, gaming, and other properties). It invests in high-quality properties secured by long-term triple net leases (NNN), which provide it with very durable and stable cash flow. The REIT pays out about 75% of its cash flow in dividends, retaining the rest to reinvest in additional income-generating properties. Realty Income sees a staggering $14 trillion investment opportunity in NNN real estate, giving it a long growth runway.

The streak continues

Verizon leads this group with a 6.4% dividend yield. The telecom giant backs its big-time payout with recurring cash flow as consumers and businesses pay their wireless and internet bills.

The company generates massive cash flows ($38 billion in operating cash flow is expected this year), providing it with the funds to invest in projects that maintain and expand its networks, pay dividends, make acquisitions, and repay debt. Verizon is currently using its strong financial profile to acquire Frontier Communications in a $20 billion deal aimed at enhancing its fiber network. The company’s growth investments should enable it to continue expanding its copious cash flows.

Verizon’s financial strength and growing cash flows have enabled it to continue increasing its dividend. The company recently delivered its 19th consecutive annual dividend increase, the longest current streak in the U.S. telecom sector. With more growth ahead, that streak should continue.

Big-time income boosters

Clearway Energy, Realty Income, and Verizon pay high-yielding dividends backed by strong financial profiles. They also have solid records of increasing their dividends, which seem likely to continue. That makes them great stocks to buy right now to boost your passive income.

If you’re ever in need of a new stock pick, you can always borrow an idea or two from Berkshire Hathaway‘s (BRK.A 0.55%) (BRK.B 1.06%) portfolio of holdings hand-picked by Warren Buffett himself. And you should. Given enough time, Berkshire shares consistently outperform the broad market largely due to the conglomerate’s investments in publicly traded companies.

Not every Berkshire Hathaway holding is always a great buy, however. Sometimes they’re trading at too steep of a valuation for newcomers, and other times, they’ve just turned into clunkers.

With that as the backdrop, here’s a closer look at two Warren Buffett stocks you can feel good about buying today, but one name you might want to avoid until something big changes for the better.

Image source: The Motley Fool.

Buy: American Express

Many investors don’t realize that — through the attrition of other holdings as well as its own growth — credit card outfit American Express (AXP 0.55%) is now Berkshire Hathaway’s second-biggest stock holding, accounting for 17% of the outfit’s portfolio of publicly traded equities. Underscoring this bullishness is the fact that Berkshire also holds stakes in Visa and Mastercard, but has chosen to only hold much smaller positions in both.

Then again, it’s not difficult to see what the Oracle of Omaha has seen in AmEx since first establishing the position back in the 1990s. It’s not just a payment middleman like the aforementioned Mastercard and Visa. It operates an entire consumerism ecosystem, serving as the card issuer as well as the payment processor, while also managing a perks and rewards program that’s attractive enough for some members to pay up to $900 per year to hold the plastic. These perks include credit toward hotel stays and ride-hailing, cash back on grocery purchases, and discounted entertainment, just to name a few. Although some have tried, no rival has been able to successfully replicate this offering.

Of course, it’s worth pointing out that American Express’s cardholders tend to be a bit more affluent than average, and are therefore mostly unfazed by economic soft patches. As CEO Stephen Squeri pointed out of its Q2 numbers despite the turbulent economic backdrop at the time, “Our second-quarter results continued the strong momentum we have seen in our business over the last several quarters, with revenues growing 9 percent year-over-year to reach a record $17.9 billion, and adjusted EPS rising 17 percent.”

Buy: Kroger

It’s not a major Berkshire holding, and certainly not one that’s talked about much by Buffett (or anyone else, for that matter). But Kroger (KR -0.08%) is quietly one of Berkshire Hathaway’s best-performing stocks.

You know the company. With 2,731 stores producing annual sales on the order of $150 billion, Kroger is one of the country’s biggest grocery chains. Oh, it doesn’t grow very quickly, or produce a ton of profit; this year’s expected top-line growth of around 3% is only likely to lead to operating income of a little less than $5 billion. That’s just the nature of the well-saturated, low-margin food business.

What Kroger lacks in growth firepower, however, it makes up for in surprising consistency.

Although the volatile food business doesn’t exactly lend itself to it, not only has this company not failed to produce a meaningful full-year profit every year for over a decade now, but has roughly doubled its bottom line during this stretch. Making a point of remaining relevant by doing things like entering the e-commerce realm has helped a lot.

More important to would-be investors, although the grocer’s reported growth doesn’t seem all that impressive, the company’s found other ways to create considerable shareholder value. Its quarterly dividend payment has grown by a hefty 250% over the course of the past decade, for example, boosted by stock buybacks that have roughly halved the number of outstanding Kroger shares. In fact, reinvesting Kroger’s dividends in more shares of the increasingly scarce stock over the course of the past 30 years would have consistently outperformed an investment in the S&P 500 during this stretch.

Avoid: UnitedHealth Group

Finally, while Buffett was willing to dive into a small position in beleaguered health insurer UnitedHealth Group (UNH -0.43%) a few weeks back, you might not want to do the same just yet…if ever.

But first things first.

Yes, there’s some drama here. UnitedHealth shares have been beaten down since April, starting with a surprise shortfall of its first-quarter earnings estimates, followed by then-CEO Andrew Witty’s abrupt resignation for “personal reasons” in May. Then in July, the company confirmed that the U.S. Department of Justice was investing its Medicare billing practices. Its second-quarter earnings posted later that same month also missed analysts’ estimates due to the same high reimbursement costs that plagued its first-quarter results. All told, from peak to trough, UNH stock fell 60% in the middle of this year.

As Buffett himself has said, of course, you should be fearful when others are greedy, and greedy when others are fearful. Taking his own advice, he recently plowed into a stake in a long-established company that’s likely to be capable of overcoming all of its current woes. Berkshire now owns 5 million shares of UNH that are currently worth a little less than $2 billion.

Except, maybe this is one of those times you don’t follow Buffett’s lead, recognizing that UnitedHealth Group — along with the entire healthcare industry — seems to be running into these regulatory and pricing headwinds more and more regularly. UnitedHealth’s Medicare business ran into similar legal trouble back in 2017, for instance, while its pharmacy benefits management arm OptumRX was sued by the Federal Trade Commission just last year for artificially inflating insulin prices. It would also be naïve to not notice the federal government is increasingly scrutinizing every aspect of the nation’s healthcare industry, now that care costs have raced beyond reasonable affordability.

And for what it’s worth, although UnitedHealth has managed to continue growing its top line every year for over a decade now, actual operating profits and EBITDA stopped growing early last year, not counting the recent unexpected surges in its medical care costs.

UNH Revenue (TTM) data by YCharts

What gives? The entire healthcare industry may be at a tipping point, so to speak, and not in a good way. Although this wouldn’t necessarily be catastrophic for UnitedHealth, it certainly would undermine its value to investors. If nothing else, you might want to wait on the sidelines for the proverbial dust to settle before following Buffett into this uncertain trade.

Some companies seem like obvious slam-dunk investments. They have a combination of durable business models, visible growth profiles, and strong financials. Because of that, you don’t have to think twice when considering whether to buy these stocks.

Enbridge (ENB 0.04%), Brookfield Infrastructure (BIPC 2.58%) (BIP 4.92%), and Brookfield Asset Management (BAM 0.15%) stand out to a few Fool.com contributing analysts as no-brainer buys for 2025 and beyond. Here’s why they think these stocks will be great long-term investments.

Image source: Getty Images.

Enbridge has dividend investors covered today and tomorrow

Reuben Gregg Brewer (Enbridge): It is easy to get caught up in the fact that Enbridge has increased its dividend, in Canadian dollars, for 30 years and currently has a lofty 5.5% dividend yield. Those two facts do, indeed, make it a very attractive dividend stock.

But what about the business that backs the dividend? That’s where the real magic is here. Enbridge started out largely transporting oil through its fee-based energy infrastructure system. Looking at the direction the world was going, it started to add more and more natural gas transportation assets to its system, including regulated natural gas utilities. And, along the way, it dipped its toe into clean energy investments, with some sizable stakes in offshore wind farm assets in Europe. The trend is what’s important to note.

Essentially, Enbridge is a reliable dividend-paying energy stock that is changing its business along with the changing energy needs of the world. That is, in fact, the goal that management is pursuing. And it means that you, as a dividend investor, can comfortably own Enbridge even through the ongoing, likely decades-long, shift from dirtier fuels to cleaner ones.

The only drawback here is actually tied to the lofty dividend yield. Enbridge isn’t likely to be a fast-growing business, so the yield is going to make up a huge portion of your total return. But if you are focused on generating a large income stream from your investments, that probably won’t bother you much, if at all.

Strong earnings and dividend growth ahead

Neha Chamaria (Brookfield Asset Management): Brookfield Asset Management is among the largest alternative asset managers in the world, with over $1 trillion of assets under management (AUM). It’s a global powerhouse, operating in over 50 countries across five verticals: infrastructure, renewable power and energy transition, real estate, private equity, and credit. Here’s why the stock has caught my attention: The company has just announced bold growth plans through 2030.

Of its $1 trillion AUM, roughly $560 billion is fee-bearing capital. That’s the portion of its assets on which Brookfield Asset Management charges management fees, also its primary source of revenue. As of Dec. 31, 2024, 87% of that fee-bearing capital was perpetual (fees coming from its permanent capital vehicles and funds) or long-term (fees locked in for at least 10 years). That makes Brookfield Asset Management’s revenue and cash flows incredibly stable and predictable and also supports dividend growth. Brookfield Asset Management last increased its dividend by 15% earlier this year.

Brookfield Asset Management expects to more than double its fee-bearing capital base to $1.2 trillion by 2030, driven by growth in existing businesses and new verticals like insurance and wealth management. The company is off to a strong start in 2025, with its fee-based earnings rising 16% year over year in the second quarter. Notable recent announcements include an agreement with tech giant Google to deliver up to 3,000 megawatts of hydroelectric capacity in the U.S. during the quarter and a $10 billion investment in Sweden to develop artificial intelligence infrastructure.

With its earnings stability and massive growth targets, Brookfield Asset Management is a rock-solid stock to buy for 2025 and beyond.

Focused on capitalizing on these megatrends

Matt DiLallo (Brookfield Infrastructure): Brookfield Infrastructure is a leading global infrastructure investor. Part of the Brookfield Corporation family, along with Brookfield Asset Management, this entity owns and operates a diversified portfolio of crucial infrastructure assets across the utility, energy midstream, transportation, and data sectors.

The company focuses on deploying capital into infrastructure that capitalizes on three major global investment megatrends: digitalization, decarbonization, and deglobalization. The company sees a multitrillion-dollar investment opportunity ahead across these themes, particularly in infrastructure to support AI, such as data centers, semiconductor fabrication facilities, and natural gas power plants. Brookfield has already committed to investing significant capital to capitalize on this opportunity, including building a backlog of $5.9 billion of data infrastructure capital projects that it expects to complete over the next two to three years.

Brookfield has also secured several acquisitions this year. It’s investing $1.3 billion to buy interests in a U.S. refined products pipeline system, a U.S. bulk fiber network provider, and a North American railcar leasing portfolio. These new investments will boost its cash flow as the deals close in the coming quarters.

Brookfield’s powerful combination of organic growth drivers and acquisitions-driven expansion positions it to deliver more than 10% annual funds from operations (FFO) per share growth in 2025 and beyond. That will drive Brookfield’s ability to increase its more than 4%-yielding dividend by 5% to 9% annually. This compelling mix of income and growth makes Brookfield a no-brainer stock to buy and hold for the long term.

You don’t need to be ultra-wealthy to start building wealth in the stock market. With just $1,000, investors can buy into promising growth stories and put their money to work in businesses shaping the future. The key is choosing companies with strong tailwinds, clear expansion potential, and the ability to multiply in value over time. Even a modest sum split between the right names can grow meaningfully over the years.

Two stocks that stand out right now are American Resources (AREC 0.72%) and Freshworks (FRSH 0.32%). By allocating roughly $500 to each, investors gain exposure to two very different but compelling growth opportunities: one in the critical minerals powering the clean-energy transition, and the other in software that helps businesses connect with customers more effectively.

Image source: Getty Images.

The critical minerals moonshot

American Resources exemplifies how quickly narratives can transform stock prices. The company spent years as a struggling coal producer before pivoting toward rare earth elements and critical minerals essential for clean energy infrastructure. That strategic shift coincided perfectly with Washington’s push to reduce dependence on Chinese mineral supply chains. The stock has responded accordingly, surging 173% in 2025 as investors price in a future where American Resources supplies the lithium, graphite, and rare earths needed for the energy transition.

The opportunity is massive. The U.S. imports nearly 100% of its rare earth elements despite their critical importance in electric vehicles, wind turbines, and defense applications. Government support for domestic production has never been stronger, with billions in federal funding flowing toward securing supply chains. American Resources is in a position to capture this spending through both its existing operations and development projects. The company’s ReElement Technologies subsidiary focuses on battery material recycling and purification, adding another revenue stream tied to the circular economy.

But small-cap stocks with market values under $500 million carry outsized risks. American Resources remains pre-revenue on many initiatives, burning cash while building out capabilities. Commodity prices swing wildly — what looks like a secular growth story today could become a cyclical disaster tomorrow if rare earth prices collapse. Ultimately, this is a high-risk bet on management execution and Washington’s support for critical minerals — not a play on today’s numbers.

The software discount special

Freshworks tells the opposite story — a profitable growth software company punished for sins it’s already addressing. The customer engagement platform posted over $200 million in revenue last quarter, representing low-teens growth year over year. That’s not hypergrowth, but it’s steady expansion in a market where Salesforce and ServiceNow leave plenty of room for competitors targeting small and mid-sized businesses. Yet the stock has shed 23% of its value this year.

The numbers suggest Freshworks deserves better. Gross margins exceed 84%, typical for quality SaaS businesses. Operating losses are narrowing each quarter as the company balances growth investments with cost discipline. The product suite keeps expanding with AI-powered features for customer support, IT service management, and customer relationship management — capabilities that smaller businesses need but can’t afford from enterprise vendors. With over 68,000 customers globally, Freshworks has proven product-market fit.

The bearish case centers on competition and profitability timing. Salesforce and ServiceNow dominate enterprise accounts with deeper functionality and stronger ecosystems. Reaching profitability might take several more quarters, and the market has shown little patience for companies still burning cash. If the economy weakens, small business customers could churn faster than larger enterprises. But at just 18.5 times forward earnings, much of this pessimism appears priced in.

The $1,000 portfolio

Splitting $1,000 between American Resources and Freshworks creates an intriguing barbell strategy. American Resources offers lottery-ticket exposure to the critical minerals boom — if the company executes and government support continues, the stock could multiply from here. Freshworks provides a more traditional growth story with improving fundamentals, trading at a discount to both the S&P 500 and its closest peers.

Over the past few years, investors have witnessed in real time how breakthroughs in artificial intelligence (AI) have sparked a new revolution in the technology sector. The next frontier — quantum computing — promises an even greater leap forward, unlocking efficiency and solving problems that strain the limits of today’s classical machines.

Together, the fusion of AI and quantum computing is expected to create trillions of dollars in economic value over the coming decades. While many companies are dabbling in quantum systems at the margins, two of the industry’s most influential players are already weaving this emerging capability into their broader strategies.

Let’s explore how Nvidia (NVDA -0.62%) and Alphabet (GOOG 0.55%) (GOOGL 0.61%) are positioning themselves to remain leaders at the cutting edge of AI’s next transformation.

Nvidia: GPUs, CUDA, and infrastructure

Nvidia’s rise throughout the AI revolution is deeply rooted in its dominance of the GPU market, where its chips have become the backbone of generative AI development. What investors may not fully realize yet is that the company’s ambitions extend beyond supplying accelerators to train large language models (LLMs). Quietly, Nvidia has been laying the groundwork for a prominent role in the quantum era.

A key part of this strategy is Nvidia’s software architecture, CUDA. CUDA includes tools designed to bridge classical computing systems with quantum-inspired research. At the moment, Nvidia’s CUDA quantum (CUDA-Q) platform is used by a number of academic institutions, as well as integrated with existing developers such as IonQ and Rigetti Computing.

This is a savvy move, as Nvidia is doing all of this without committing massive capital expenditures (capex) to build quantum machines from scratch. Instead, the company is positioning itself as the connective backbone across both hardware and software supporting the next wave of advanced computing applications.

Image source: Getty Images.

Alphabet: Willow, Cirq, and DeepMind

Alphabet has carved more direct inroads into quantum computing through its Google Quantum division.

A central focus is Willow, a processor built to scale quantum workloads more efficiently. To drive adoption, Alphabet introduced Cirq — an open-source software framework that enables developers to design quantum algorithms and run them directly on Google’s infrastructure. The company’s internal research lab, DeepMind, adds another dimension that gives Alphabet the unique advantage to test quantum technologies in-house and refine them at a faster pace.

What makes this approach so compelling is that Alphabet weaves these efforts into a vertically integrated stack. The company’s hardware, software, and research converge within a single ecosystem — allowing emerging services like Google Cloud and Gemini to compete from a position of strength against entrenched rivals like Microsoft Azure and Amazon Web Services (AWS).

Are Nvidia and Alphabet good buys right now?

Nvidia and Alphabet are each building durable platforms optimized for the next phase of advanced computing.

For Nvidia, the company’s GPUs and CUDA architecture are already indispensable to AI infrastructure. Moreover, the company’s collaborations in quantum computing create additional tailwinds across both hardware and software for the data centers of tomorrow. Meanwhile, Alphabet is stitching quantum into a broader, diversified ecosystem that spans processors, software frameworks, cloud distribution, and research.

For both companies, quantum computing is not the ultimate destination, but rather a strategic layer that reinforces their long-term growth prospects — positioning each as resilient, differentiated platform businesses in an increasingly competitive landscape.

I think that each company’s early bets on quantum computing will look shrewd in hindsight as these applications evolve from research-driven environments into real-world value creation.

For investors with patience, owning shares of both Nvidia and Alphabet today offers exposure to two businesses not just benefiting from the AI boom, but actively writing the narrative of its next chapter. For these reasons, I see both stocks as no-brainer opportunities right now.

Artificial intelligence (AI) stocks have outperformed the stock market by a wide margin this year. The Morningstar Global Next Generation Artificial Intelligence Index, which provides exposure to about 50 top AI companies, is up 37% in 2025 (as of Sept. 19). The S&P 500 index has increased by 13% over that same time frame.

Because of how much growth there has already been in the AI sector, most of these stocks aren’t cheap. But that doesn’t mean you’re out of luck with investment opportunities. The global AI market is projected to grow at a compound annual rate of 29% through 2032, according to research by Fortune Business Insights.

So, which companies are best positioned to capitalize on that growth? Here is a pair of AI stocks worth considering for your portfolio.

Image source: Getty Images.

1. Nvidia

There are plenty of AI success stories out there, but none has been bigger than Nvidia (NVDA 0.35%). It’s the top company by market cap and the first to reach a value of $4 trillion.

Nvidia’s size and the fact that it’s trading at a high valuation (39 times forward earnings) scare off some investors. However, it has consistently delivered excellent results over the last two-plus years, beating earnings expectations and seeing revenue rise by more than 50% year over year for nine consecutive quarters.

Most of that is data center revenue as tech companies invest in Nvidia graphics processing units (GPUs) for the training and inference of their AI models. Nvidia is the dominant player here — estimates put its share of the AI chip market at 85% to 90%.

Nvidia is also taking steps to expand its reach. It recently invested $5 billion to take a roughly 5% stake in Intel. Intel is the leader in CPU market share, and data centers need AI GPUs and CPUs. Intel will now be making custom CPUs for Nvidia, allowing Nvidia to advance its technology.

On a negative note, China has reportedly banned its tech companies from using Nvidia AI chips due to tensions with the U.S. That effectively cuts Nvidia off from a major market. However, trade talks between the U.S. and China are ongoing, so it remains to be seen if this is a long-term issue.

2. Meta Platforms

Meta Platforms (META -1.46%), which owns Facebook, Instagram, and several other companies, is making a significant push into AI. So far this year, CEO Mark Zuckerberg has:

• Hired away top AI talent from rival companies to form Meta Superintelligence Labs, with pay packages reportedly as high as $300 million.
• Invested $14.8 billion to take a 49% stake in Scale AI, a data labeling start-up.
• Committed to investing at least $600 billion in U.S. data centers and infrastructure through 2028.

Meta is incorporating AI through various aspects of its business. It launched a Meta AI assistant and has woven generative AI tools into its existing apps, including Messenger and WhatsApp. Meta Glasses are getting an upgrade to AI smart glasses. And it now offers AI advertising tools to enhance and optimize campaigns.

Advertising is also how Meta can afford to invest so heavily in AI. Its revenue over the trailing 12 months is $179 billion, with about 98% of that coming from advertising. Ad revenue gives Meta a sizable war chest — it has also generated $50 billion in free cash flow over the last 12 months.

It hasn’t all been smooth sailing for Meta lately. The tech giant’s Meta Ray-Ban Display glasses recently failed in two live demos, leading to an awkward moment for Zuckerberg and bad publicity for Meta’s AI ambitions. However, the glasses are getting positive early reviews.

Overall, this is a business with strong financials that’s betting big on AI to enhance its products and services. It’s also not overly expensive, trading at 28 times forward earnings. With its valuation, cash flow, and AI ambitions, Meta is one of the better tech investments currently available.

Warren Buffett is a legend in the investing world, known for taking a disciplined approach to allocating capital, favoring durable businesses with strong competitive moats and management teams with high integrity. His success stems from embracing simplicity and resisting market noise, compounding returns over the course of decades.

Buffett’s investing style has yielded extraordinary long-term results, turning Berkshire Hathaway into a trillion-dollar business, and reinforcing the importance of taking a long-term approach to investing. If you’re looking for stocks to add to your diversified portfolio, here are three no-brainer Buffett stocks to buy now.

Image source: The Motley Fool.

Visa

As a global leader in digital payments, Visa (V -0.01%) has had decades to establish a robust payment network worldwide. It benefits from network effects, as each new customer or merchant added strengthens its ecosystem and reinforces Visa’s dominance. In 2023, Visa processed a total of $6.3 trillion in purchase volume, giving it a 32% global market share and a 52% share in the U.S.

The Visa brand is trusted worldwide, and its infrastructure is deeply embedded in commerce. Visa’s growth is tied to secular trends, such as digitalization, e-commerce, and global financial expansion, which are structural tailwinds that should continue to support it in the long term.

Not only that, but Visa doesn’t issue credit or assume consumer risk. Instead, it earns fees from transactions, making its revenue model resilient across economic cycles. As a result, it has a capital-light business structure that enables high margins and robust free cash flow.

Some investors have expressed concern about the potential threat to Visa’s business from stablecoins. Visa’s management sees it differently, believing stablecoins are an opportunity to solve payment problems, particularly in emerging markets and cross-border money movement. The payments company looks to leverage its strengths and integrate stablecoins into its broader payments ecosystem.

Visa’s sound business and strong network provide it with durable competitive advantages, allowing it to grow alongside an expanding economy, making it an excellent Buffett stock to buy today.

Amazon

Amazon (AMZN -0.28%) has been a visionary in the e-commerce market, building up an incredibly strong position during the past few decades. However, Berkshire didn’t invest in the e-commerce giant until 2019, and it was one of Buffett’s investment managers, Todd Combs or Ted Weschler, who initiated the position.

Amazon’s core retail business operates on razor-thin margins as it strives to maintain its position as the lowest-cost retailer in the U.S. Its dominance is rooted in logistical mastery and data-driven innovation. However, it’s Amazon’s smart reinvestment of profits back into the business that has driven its growth.

The company is laser-focused on optimizing its logistics networks to improve efficiency and reduce costs. Key to this was transforming fulfillment into regional hubs, which stock items closer to customers, resulting in faster delivery, fewer packages, and lower costs. The company continues to invest in its fulfillment network, utilizing artificial intelligence (AI) and robotics. It has deployed Deep Fleet, an AI system that serves as a traffic management system to coordinate robots and improve travel efficiency by 10%.

In addition, Amazon Web Services (AWS), the market leader in cloud computing, transformed the company into a cash-generating powerhouse. Last year, Amazon raked in nearly $40 billion in operating income from this business alone. AWS’s high-margin, recurring revenue model provides stability and fuels reinvestment across Amazon’s ecosystem.

Amazon’s consistent growth in free cash flow, combined with its strong position in multiple sectors with solid growth potential, makes it an excellent long-term investment.

Chubb

Chubb (CB 0.85%) operates as one of the world’s largest publicly traded property and casualty insurers and is recognized as the largest commercial lines insurer in the U.S. With operations in 54 countries and territories, Chubb truly has a global reach.

What makes it stand out is its breadth of knowledge combined with its disciplined underwriting and conservative risk management. This broad-based approach diversifies Chubb’s insured risk to various geographies, customers, and product areas, helping support long-term, sustainable growth.

Disciplined underwriting is vital to Chubb’s success across various market cycles. The company stresses disciplined underwriting and will not take any business below what it deems an adequate price. For example, Chief Executive Officer Evan Greenberg noted that the insurer has “begun walking away where necessary” in specific markets where insurers have become more aggressive in their pricing. While this may limit growth, it also shows Chubb’s commitment to steady, profitable growth over time.

Chubb’s ability to price risk accurately and maintain underwriting discipline across market cycles has resulted in industry-leading combined ratios. This translates to steady underwriting profits, even in volatile environments, and is also a big reason Chubb has raised its dividend payout for 32 consecutive years. For investors seeking steady growth over time, Chubb is another excellent Buffett stock to consider today.

The semiconductor industry is the beating heart of the artificial intelligence (AI) revolution. Developing AI models wouldn’t be possible without powerful chips and advanced networking equipment, and for them to continue getting “smarter,” semiconductor suppliers will have to deliver more and more computing capacity.

For that reason, Nvidia (NVDA -0.82%) CEO Jensen Huang expects data center operators to spend up to $4 trillion on upgrading their infrastructure to meet demand from AI developers by 2030. Nvidia will be a major beneficiary of that spending over the next five years, but so will many of its peers and competitors.

Here are five semiconductor stocks to buy right now.

Image source: Getty Images.

1. Nvidia

Let’s start with the most obvious pick. Nvidia’s graphics processing units (GPUs) for data centers are the gold standard for AI development. The company just started shipping a new GPU called the GB300, which is based on its Blackwell Ultra architecture, and it’s up to 50 times more powerful in certain configurations than its flagship H100 chip, which dominated the market in 2023 and most of 2024.

The latest AI reasoning models consume significantly more tokens (words and symbols) than older one-shot large language models (LLMs), because they spend more time “thinking” in the background to weed out errors before generating outputs. This calls for more computing power, which is expected to drive explosive demand for the GB300 from the best AI developers like OpenAI, Anthropic, Meta Platforms, and xAI.

Nvidia generated a record $41.1 billion in data center revenue during its fiscal 2026’s second quarter (ended July 27), which was up 56% year over year. That number also grew by a staggering 1,081% compared to the same quarter in fiscal 2023, which was right before the AI revolution started gathering momentum. If AI infrastructure spending really does hit $4 trillion over the next five years, Nvidia will probably be one of the best stocks investors can own.

2. Broadcom

Broadcom (AVGO 0.15%) supplies AI accelerators (a type of data center chip) to at least three hyperscalers, including Alphabet. These chips have become a popular alternative to GPUs because they can be customized to suit the needs of each customer, so they offer more flexibility.

Broadcom is also a top supplier of networking equipment. Its Ethernet switches regulate how fast data travels between chips and devices, and its new Tomahawk Ultra variant delivers industry-leading low latency and high throughput, which facilitates faster processing speeds with less data loss.

Broadcom’s AI semiconductor revenue soared by 63% to $5.2 billion during its most recent quarter, but it might just be getting warmed up. The company says its three hyperscale customers plan to deploy over 1 million AI accelerators each in 2027, creating a $90 billion opportunity. Separately, a new mystery customer recently placed a $10 billion order for accelerators, and Wall Street is speculating it could be OpenAI.

3. Advanced Micro Devices

Advanced Micro Devices (AMD -0.03%) supplies chips for some of the world’s most popular consumer electronics, from Sony‘s PlayStation 5, to the infotainment systems inside Tesla‘s electric vehicles. However, the company is now laser-focused on catching up to chipmakers like Nvidia in the AI data center business.

AMD’s latest MI350 series of GPUs are based on a new architecture called Compute DNA 4, and they are 35 times faster than its previous generation that launched less than two years ago. Next year, AMD will start shipping the MI400 series, which will be paired with specialized hardware and software systems to create a fully integrated data center rack called Helios, delivering a tenfold improvement in performance relative to the MI350 series.

This highlights how quickly AMD is progressing from a technological perspective. The company is slowly capturing market share already, but these new chips could cement its position as a real player in the data center space for the long term.

4. Micron Technology

GPUs wouldn’t be as efficient without high-bandwidth memory (HBM), which stores data in a ready state to accelerate processing speeds. Simply put, more HBM capacity allows the GPU to unleash its maximum performance, which is essential in data-intensive AI workloads.

Micron Technology‘s (MU -2.83%) HBM3E solution for the data center offers industry-leading capacity and energy efficiency, and it’s embedded in Nvidia’s Blackwell Ultra GPUs and also AMD’s MI350 series. But the company will raise the bar again next year with its HBM4 solution, which will offer 60% more performance and 20% less power consumption.

Simply put, investors who believe Nvidia and AMD will sell truckloads of data center GPUs over the next five years should also be bullish on Micron’s business.

But it gets better, because some smaller AI workloads are slowly migrating to personal computers and smartphones, so they also require higher memory capacities. That’s great news for Micron because it’s a major player in those markets, too.

5. Taiwan Semiconductor Manufacturing

Finally, Taiwan Semiconductor Manufacturing (TSM -0.58%) could be the ultimate picks-and-shovels play as AI infrastructure spending ramps up. It’s the world’s largest semiconductor fabricator, and Nvidia, Broadcom, and AMD are just a few of its top clients.

Taiwan Semi offers unmatched expertise when it comes to manufacturing the most advanced chips. It works with the smallest nodes in the industry, so it can pack more transistors into each chip which is the key to unlocking processing power and energy efficiency. That is an ideal combination when it comes to AI GPUs.

Investors who own Taiwan Semi stock won’t be too concerned about which chip giant wins the AI race, because whether it’s Nvidia, Broadcom, or AMD, the demand for manufacturing capacity is only heading in one direction: up.

Quantum computing isn’t as well known as artificial intelligence (AI), but a small group of these stocks has generated astounding returns in just a year or two.

These companies are trying to build and commercialize the next innovation of the computer. Instead of using bits, the most basic unit of digital information and the foundational component of the computer, quantum computers use qubits that can process data in much more complex ways, allowing these machines to compute much more complicated equations.

If researchers are correct, quantum computers will be able to play instrumental roles in developing new and more effective drugs and tackling some of the biggest problems in society like climate change, which would obviously send these stocks to multiples of what they are today. While there is still much to achieve and certainly associated risks, here are two quantum computing stocks up at least 2,200% to throw $200 at.

Image source: Getty Images.

Rigetti Computing: Up 2,847% in past year

Yes, you read that correctly: Rigetti Computing (RGTI 0.52%) is up over 2,800% (at the time of this writing) in just one year. Perhaps due to the artificial intelligence revolution, investors have noticed the quantum computing space and started to believe these machines are not only possible, but can live up to the hype.

To really understand how quantum computers work, you need to be well versed in quantum mechanics, but Rigetti builds its machines in house with superconducting qubit-based quantum processors that are highly scalable and offer both fast gate times and fast program execution times. In July, Rigetti announced that its 36-qubit system had achieved 99.5% median two-qubit gate fidelity, which is a strong measure of accuracy. The company also said this system achieved a 2 times reduction in its median 2-qubit gate error rate from its previous best results.

Rigetti believes these results will pave the way for it to build and release a quantum computer with over 100 qubits (the more qubits, the more powerful the system) and similar accuracy before the end of the year.

Rigetti also just announced that it has been awarded a three-year contract from the Air Force Research Laboratory for $5.8 million. Rigetti will partner with a Dutch quantum start-up to work on developing advanced superconducting quantum networking, which would essentially be the next evolution of the internet with capabilities that could include functions like sending communication that can’t be hacked.

While Rigetti has a high ceiling, investors should understand that the company still makes very little in revenue, is losing money, and trades at a $7.8 billion market cap. So if things don’t go as planned or quantum computers turn out to be difficult to develop or do not live up to the hype, the stock could get hit hard.

D-Wave Quantum: Up 2,278% in past year

D-Wave Quantum (QBTS 0.51%) is another quantum computing stock that has been a moonshot over the past year. D-Wave differs from others in the quantum computing space because it uses annealing quantum computing technology, which uses concepts from quantum physics to identify the most precise solution in a more energy-efficient manner.

In a J.P. Morgan report on quantum computing, analysts praised D-Wave’s Advantage2 prototype, which has over 1,200 qubits with 20-way connectivity, and a goal to eventually build a system with 7,000 qubits.

“This prototype claims significant speedups over classical supercomputers,” the report said. “Developed with a lower-noise, multilayer superconducting integrated circuit fabrication stack, the Advantage2 prototype demonstrates substantial performance gains on hard optimization problems, such as spin glasses, and shows improved performance on constraint satisfaction problems. … However, (D-Wave’s) approach is limited to specific problem types, and they face debates about the broader applicability of quantum annealing.”

Clearly, the potential for D-Wave is there and it could even stand out in a standout industry. But like Rigetti, the company still doesn’t have much revenue and is reporting losses, while trading at a $7.85 billion market cap.

Investing is all about trying to predict the future before it becomes the present, so I understand to some degree why investors are gung-ho about quantum computing. But investing is also about future risk management. That’s why I still only recommend a smaller, more speculative position in quantum computing stocks, whether that’s a few hundred dollars or a few thousand. It all depends on your specific financial profile.

Artificial intelligence (AI) is one of the most important growth opportunities for many technology companies in recent years. Sure, some companies don’t have clear avenues to benefit from the technology and are just benefiting from the hype, but there are plenty of companies that have experienced significant growth from artificial intelligence — and also make good investments.

If you’re in the market for a few AI stock ideas, here are two that could continue to benefit from the increasing demand for artificial intelligence hardware and software.

Image source: Getty Images.

1. Broadcom

Broadcom (AVGO -1.23%) makes application-specific integrated circuits (ASICs) for AI data centers that are custom to client needs. The company’s XPUs have become an integral part of many AI data centers, including ones built by Meta and Alphabet.

What makes Broadcom an intriguing opportunity is that it’s not just a bet on AI processors. In addition to its AI semiconductor designs, the company also sells networking products, like switches, and its purchase of VMware a few years ago makes it a formidable software player as well. Software sales rose 17% to $6.7 billion in the third quarter (ended Aug. 3), and now account for nearly 43% of the company’s total revenue.

The result of Broadcom’s software and hardware prowess is impressive sales and earnings growth. Total revenue rose 22% in Q3 to $15.9 billion and non-GAAP earnings popped 36% to $1.69 per share. Broadcom’s AI revenue jumped 63% in the quarter to $5.2 billion, and management expects continued growth in the current quarter — with AI sales estimated to reach $6.2 billion.

Management estimates that the company’s AI revenue could reach up to $90 billion annually by 2027, which means Broadcom and its investors may have more to look forward to.

2. Microsoft

Microsoft (MSFT -0.51%) has spent the past few years implementing OpenAI‘s ChatGPT bot into its suite of software — from Microsoft 365 to GitHub — and now has millions of customers using its Copilot AI. That’s been a boon to nearly all of the company’s services, and in Q4 (ended June 30), the company’s sales rose 18% to $76 billion and non-GAAP earnings popped 24% to $3.65 per share.

As important as its software offerings are, one of the biggest AI opportunities for Microsoft comes from its cloud computing service, Azure. Microsoft CEO Satya Nadella said on the company’s Q4 earnings call that Azure surpassed $75 billion in annual revenue — a 34% increase — and that, “We continue to lead the AI infrastructure wave and took share every quarter this year.”

AI infrastructure will continue to be important for the company for years to come, considering that Goldman Sachs research estimates that global AI cloud computing revenue could reach an estimated $2 trillion by 2030. Microsoft has 20% of the cloud computing market right now, and continues to take market share away from Amazon. With its current cloud computing position and the huge potential for AI cloud sales, Microsoft will likely continue to benefit from this emerging space for years to come.

Keep this in mind when investing in AI

There are some signs that the U.S. economy is slowing down. The August jobs report was worse than expected, spurring the Federal Reserve to cut interest rates at its most recent meeting.

But even if there’s a slowdown, it’s important to keep in mind that artificial intelligence is now mission-critical for many companies. That means that it’s unlikely that there will be a significant pullback in investments or focus by companies anytime soon. While nothing is certain, Microsoft and Broadcom look poised to ride the wave of growing demand for AI hardware and services.

Warren Buffett was onto something when he said that his “favorite holding period is forever.” Like Buffett, I prefer to buy stocks that I hope to be able to own for a long time.

The “Oracle of Omaha” and I share another thing in common: We both like dividend stocks. Over the long run, dividends can boost total returns significantly. Do I own any “forever” dividend stocks? Yep. Here are three income stocks I never plan to sell.

Image source: Getty Images.

1. AbbVie

Dividend Kings, an elite group of stocks that have increased their dividends for at least 50 consecutive years, are natural candidates to buy and hold. I think AbbVie (ABBV 0.19%) is one of the best Dividend Kings of all. The drugmaker has increased its dividend for 53 consecutive years. Its forward dividend yield is 2.95%, which is lower than the average over the last five years only because AbbVie’s stock has performed really well.

AbbVie makes therapies that target over 75 conditions. Its top-selling products treat autoimmune diseases, cancer, and neurological disorders. With an aging population, I expect the demand for safe and effective drugs for these therapeutic areas will continue to grow over the next few decades.

Probably the biggest risk for an established pharmaceutical company like AbbVie is that it won’t be able to successfully navigate a patent cliff. However, AbbVie has already demonstrated its ability to handle key patent expirations with ease.

Humira was once the top-selling drug in the world, but its sales began to plunge after biosimilar rivals entered the U.S. market in 2023. AbbVie didn’t skip a beat, though. The company already had two successors to Humira on the market. It had also reduced its dependence on its top blockbuster drug through strategic acquisitions and internal development. I’m confident that AbbVie will be able to survive and thrive when future losses of exclusivity come, too.

2. Brookfield Infrastructure Partners

Brookfield Infrastructure Partners (BIP -0.52%)has grown its distribution by a compound annual growth rate of 9% over the last 16 years. Its distribution yield tops 5.5%. That’s the kind of income that many investors would love to keep flowing and growing. I know I do.

The good news is that Brookfield Infrastructure is targeting average annual distribution growth of between 5% and 9%. Even better news is that its business should support this growth.

This limited partnership owns cell towers, data centers, electricity transmission lines, pipelines, rail, terminals, toll roads, and other infrastructure assets on five continents. These assets generate steady cash flow, with 85% of Brookfield Infrastructure’s funds from operations (FFO) contracted or regulated.

What I especially like about Brookfield Infrastructure, though, is its overall strategy. The LP buys infrastructure assets when they’re valued attractively. It enhances the value of those assets by managing them well. And when the opportunity arises, Brookfield sells mature assets and recycles the cash into new investments. This approach should work for a long time to come.

3. Realty Income

Realty Income‘s (O 0.17%) forward dividend yield of 5.45% isn’t too far behind Brookfield Infrastructure’s distribution yield. The real estate investment trust (REIT) also has an impressive track record, with 30 consecutive years of dividend increases and 132 monthly dividend increases since listing on the New York Stock Exchange in 1994.

Real estate can be a volatile market. However, Realty Income has demonstrated remarkable stability through up and down economic cycles. It has even delivered a positive operational return (the sum of dividend yield and adjusted FFO) for 29 consecutive years.

Importantly, Realty Income’s portfolio is well diversified. It owns more than 15,600 properties spread across every U.S. state, the U.K. and seven European countries. The REIT’s tenants represent 91 industries.

I expect Realty Income to generate solid growth over the long term, too. Its total addressable market is around $14 trillion. Roughly $8.5 trillion of this opportunity is in Europe, where the REIT faces minimal competition.

The S&P 500 hit another record high this week. It’s now up about 18% over the past year. That has most stocks trading at much higher valuations than they were a year ago. The rally has also compressed dividend yields.

Despite the market’s rally, there are still some attractive opportunities, especially for investors seeking higher dividend yields. Enterprise Products Partners (EPD -0.58%), Energy Transfer (ET -0.80%), and Clearway Energy (CWEN -0.02%) (CWEN.A -0.11%) stand out to a few Fool.com contributing analysts right now. Here’s why they’re compelling buys even as the S&P 500 is at an all-time high.

Image source: Getty Images.

Enterprise Products Partners is strong and still growing

Reuben Gregg Brewer (Enterprise Products Partners): Nobody is going to accuse Enterprise Products Partners of being a hare. It is, decidedly, a tortoise. But given the huge 6.8% distribution yield, few income-focused investors aren’t likely to complain. That’s doubly true when you consider that this master limited partnership’s (MLP’s) distribution is covered by a huge 1.7x by distributable cash flow. A lot would have to go wrong before the distribution was at risk.

Adding to the feeling of security here is the fact that the company is investment-grade rated. Even if distribution coverage faltered, Enterprise Products Partners could lean on its balance sheet for a little while to muddle through a difficult period. But even that is unlikely because the MLP’s business is fee-based. Essentially, it charges customers for using its energy infrastructure assets, like pipelines. The prices of oil and natural gas are far less important than demand for these globally vital fuels. Even when commodity prices are weak, demand for energy still tends to be resilient.

This helps explain why Enterprise Products Partners has been able to increase its distribution annually for 27 consecutive years. That streak, meanwhile, is likely to continue, noting that the MLP is in the middle of a $6 billion capital investment program. As those new projects come online, cash flow will grow and support continued distribution growth. The level of the S&P 500 index, high or low, isn’t likely to change any of these facts much.

The coming growth reacceleration

Matt DiLallo (Energy Transfer): Energy Transfer stands out in today’s high-priced stock market. Units of the master limited partnership (MLP) are currently down about 15% from their 52-week high. As a result, the company has the second-lowest valuation in the energy midstream sector, at less than nine times earnings, which is well below the sector average of 12 times earnings. That low valuation is a big reason why Energy Transfer’s yield is 7.5%.

Slowing growth is the main factor driving down the MLP’s unit price this year. Energy Transfer expects its earnings to be at or below the low end of its guidance range, implying less than 4% growth. That’s well below the 10% compound annual growth rate the company delivered from 2020 through 2024. Energy Transfer has fewer growth catalysts this year as it hasn’t completed many expansion projects or major acquisitions.

However, that’s about to change. Energy Transfer is investing $5 billion into organic capital projects this year, with most expected to come online by the end of 2026. These projects should begin providing meaningful incremental cash flow starting in 2026 and continuing into 2027, which should fuel a growth reacceleration during that period. In addition, the company has more projects in the backlog, including the $5.3 billion Transwestern Pipeline Expansion Project, which should enter service by the end of the decade. It also has several other projects under development.

Energy Transfer is currently in the best financial shape in its history. That puts it in a strong position to continue approving growth capital projects and make acquisitions when the right opportunity arises.

With its unit price down and an exciting growth reacceleration set to kick off in 2026 and ramp up into 2027 as new projects launch, Energy Transfer stands out as a compelling buy right now. It can provide investors with an attractive income stream and high-octane upside potential.

Lock-in dividend growth through at least 2027

Neha Chamaria (Clearway Energy): Clearway Energy yields a hefty 6.3%. That high yield is backed by rising dividends, with the company even setting out dividend per share goals through 2027. The stock, however, has slipped nearly 15% in the past two months. It’s a compelling opportunity to buy.

Based on Clearway Energy’s last quarterly dividend payout, its annualized dividend per share (DPS) comes up to $1.78 per share. The company is targeting a DPS of $1.98 in 2027, which is a neat 11% growth in absolute terms. Since Clearway Energy typically raises its dividend every quarter, that goal looks easily doable. Also, it has its growth plans in place to back those dividends.

Clearway Energy is among the largest clean energy companies in the U.S. with a focus on wind, solar, and battery storage. Its parent company, Clearway Energy Group, has a renewables pipeline of 29 gigawatts. So there’s ample opportunity for growth for Clearway in the form of asset dropdowns from its parent. And it can always supplement growth through third-party acquisitions.

With 2025 kicking off on a strong note thanks to wind project repowering, acquisitions, and opportunities from its parent, Clearway Energy recently upped its guidance. It expects to generate $2.50-$2.70 in cash available for distribution (CAFD) per share in 2027. That should comfortably cover its targeted 2027 DPS, making this high-yield renewable energy stock a solid buy now.

It wasn’t a big surprise that Federal Reserve Chairman Jerome Powell cut interest rates at the Fed’s September meeting on Wednesday. In July, he implied in no uncertain terms that a rate cut was coming, and the likelihood was that it was going be a quarter of a point. That’s what has happened. The governing body also signaled that two more cuts would come at its next two meetings, in October and December.

Powell noted that there are mixed signals in the economy, which made it a difficult decision. Normally, the Fed keeps rates high until inflation backs down, and right now, inflation is higher than the Fed wants it to be. Nonetheless, the once-strong job market is beginning to falter, and a reduction in interest rates should stimulate the economy and employment opportunities.

A more active economy with more jobs and money flowing is great news for most businesses, and some companies will feel the change more acutely. Visa (V 1.19%), SoFi Technologies (SOFI 4.96%), and Carnival (CCL -2.86%) (CUK -2.67%), are three stocks that should benefit in a big way.

Image source: Getty Images.

1. Visa: The best indicator of spending habits

Visa is the largest credit card company in the world, and its performance tells the story of the economy to some degree. Because it’s a credit card network, its processed volume is a strong indication of how people are spending. And because it targets a wide range of demographics, its message is fairly universal.

The purpose of cutting interest rates is to boost the economy, and Visa is a major beneficiary of higher spending. Visa’s core business is providing the network, or infrastructure, that moves money from a customer’s partnering bank to a merchant, taking a small cut of each transaction. Although it has branched out to other services, they mostly center around different ways of moving money. More money flowing means more money for Visa.

It has been performing well despite the higher interest rates. In the 2025 fiscal third quarter (ended June 30), revenue increased 14% year over year, and payments volume was up 8%. It’s highly profitable, since it has a simple, low-cost model, and net income increased 8% over last year in the quarter.

Lower interest rates should further boost Visa’s earnings, benefiting this Warren Buffett-backed stock. Visa is a solid long-term investment, offering value to most portfolios.

2. SoFi: A young bank disruptor

Banks have a two-sided relationship with interest rates. They make more money on net interest income when rates are higher, but they also suffer from higher default rates because consumers struggle to pay back loans. They also take out loans at lower rates for that reason, and altogether, banks usually do better with lower rates.

That goes for the industry as a whole, but I’m picking SoFi in particular partly because of its large lending segment, and partly because it’s growing much faster than almost any other bank, which means it stands to gain a lot from an improving economy.

SoFi is a neobank, a cadre of digital banks that have no physical branches and offer a modern take on financial management. In addition to student, personal, and home loans, it offers a broad array of standard banking services and typically beats out national averages on savings rates for deposits.

It also offers non-standard services like cryptocurrency trading on its app, and it recently said it would offer international money transfers on a Blockchain network. That could offer real value, since sending money internationally is often a complicated, expensive, and long process.

SoFi’s lending segment struggled last year when interest rates were at a high, and it has already benefited from lower rates with accelerated revenue growth and better credit metrics. Even lower rates should help all of its segments, which, aside from lending, include financial services, like bank accounts and investing, and tech platform, which is a business-to-business financial infrastructure.

As it becomes a larger and more formidable player in finance, it should be able to weather future uncertainty even better.

3. Carnival: Great performance, high debt

Carnival is sailing through smooth seas as customers continue to sign up for its cruises. Demand is at historical highs, operating income is at a record, and the company is ordering new ships and launching new destinations to meet all of this demand.

There’s only one kink in the business: it has massive debt. It’s been paying it off responsibly, but it’s still more than $27 billion. This year, it has refinanced $7 billion at better rates, saving millions on interest. It will now be able to refinance more of its debt at lower rates.

Outside of the debt, the investment thesis for Carnival is strong. It’s the largest global cruise operator, and demand has stayed healthy despite high inflation. That’s resiliency.

Carnival stock is still cheap today due to the concerns about the debt, but as it pays it down and becomes more profitable, expect the stock to keep climbing.

There are several great companies capitalizing on the artificial intelligence (AI) boom that would make solid stocks to buy right now. But among leading tech giants, Alphabet (GOOG 1.27%) (GOOGL 1.23%) stands out.

The stock is up over 75% since hitting a 52-week low in April, but it still trades at a reasonable valuation. With 2 billion users and one of the best enterprise cloud services available, Alphabet is well-positioned to help investors outperform the market.

Image source: Getty Images.

How Google is benefiting from AI

Earlier in the year, some investors were concerned about Google’s competitive position as more people started using ChatGPT and other models to look up information. This overlooked the power of Google’s Gemini AI model, which has emerged as one of the best models out there.

Gemini powers all the company’s consumer services, like Search, and it is making a difference in the company’s financial performance. Revenue from Search — the company’s largest business — grew 12% year over year in the second quarter. This momentum reflects increasing search queries with AI Overviews.

Google is also competitively positioned in cloud services. The number of new customers using Google Cloud jumped 28% quarter over quarter in Q2. Management credits this momentum to its global base of AI-optimized data centers, custom AI chips, storage, and software offerings.

It can’t be emphasized enough that Google’s AI capabilities are only possible because of the company’s substantial free cash flow. It generated $67 billion in free cash flow over the last year, while spending $67 billion in capital expenditures for technology and AI infrastructure.

Google has the resources to deliver the best AI experiences for its users, yet Alphabet stock trades at a forward price-to-earnings multiple of 25. That’s a reasonable multiple to pay for a company that just reported a 22% year-over-year increase in earnings last quarter.

Say what you want about his boring buy-and-hold approach to picking stocks. Just don’t deny Warren Buffett’s market-beating results. Shares of his company — conglomerate Berkshire Hathaway — have reliably outperformed the S&P 500 (^GSPC 0.49%) since he took the helm back in 1970. Investors only needed to remain patient enough to let time do the bulk of the genius investor’s work.

The thing is, he’s as good at his job today as he’s ever been. That’s why you’d be wise to poach a few of his picks while you still can before Buffett steps down as Berkshire’s CEO at the end of this year.

With that as the backdrop, here’s a closer look at three of Berkshire Hathaway’s holdings that would be great additions to almost anyone’s portfolio right now.

Image source: Motley Fool.

Apple

Anyone keeping tabs on Apple (AAPL 3.25%) of late almost certainly knows it’s been a challenging year for the company. What was supposed to be a solid 2025 fueled by demand for its AI-capable iPhones and its custom-built artificial intelligence (AI) solutions has been anything but solid. As it turns out, not only were Apple’s suite of AI tools a disappointment, consumers aren’t exactly clamoring for handheld access to such technology anyway. That’s a big reason this stock’s still down from its late-December peak even with its bounceback from April’s low.

It’s also worth noting that Berkshire has been paring back its stake in Apple since early last year, and by quite a bit, from more than 900 million shares then to only 280,000 now. Although it’s not clear if Buffett and his lieutenants culled the bulk of their Apple position specifically because of Apple’s AI headwinds, it is clear Berkshire’s chiefs no longer felt comfortable holding such a big stake in the company.

Well, good news for faithful Apple shareholders is on the horizon. Wedbush Securities analyst Daniel Ives recently noted, “We believe that iPhone 17 [the newest iteration of the smartphone] preorders will be up 5%-10% vs. last year as we estimate that roughly 20% of the 1.5 billion users worldwide have not upgraded their phones over the past four years.”

This jibes with similar optimism from JPMorgan (JPM 0.51%) analyst Samik Chatterjee as well as analysts with Morgan Stanley (MS 0.29%). This suggested demand also indirectly indicates faith in Apple’s top-down overhaul of its AI-powered digital assistant — which flopped last year — will be ready when it’s re-released early in the coming year.

It’s also possible that consumers just weren’t ready to embrace first-generation AI technology and were simply waiting to see what it was and how it worked. Even Apple’s die-hard fans could have been looking to sidestep the bumps in the road that any new tech tends to run into.

Whatever the case, after a tough year, Apple appears to be getting back to its old impressive self.

For what it’s worth, despite all the recent selling, Apple is still Berkshire Hathaway’s biggest stock holding, occupying more than 20% of its portfolio of publicly traded companies.

Kroger

Kroger (KR -0.48%) will never be a high-growth name, for the record. The grocery industry is just too mature and too competitive.

Not every investment has to be a growth stock, though. You could still do well with a dividend-paying value name like this one.

Kroger is, of course, one of the nation’s biggest grocery chains, operating 2,731 stores that serve more than 11 million customers every day. Last year, it turned in a net operating profit of more than $3.8 billion and net income of nearly $2.7 billion, which is huge by grocery store standards.

But still — groceries? Don’t dismiss the way this company is modernizing (and even digitizing) this old brick-and-mortar business. For instance, while its same-store sales grew 3.4% year over year during the second quarter of 2025, its online sales improved by 16%. That’s business which could have easily been lost to rival Walmart or in some instances even lost to Amazon. Indeed, e-commerce now accounts for about one-tenth of Kroger’s revenue.

In the meantime, Kroger is monetizing its online presence in an even more creative way — through advertising. National brands can now pay the grocer for more prominent promotion at Kroger.com.

Perhaps the most meaningful way Kroger builds long-term value for shareholders, however, is with its dividend paired with stock buybacks. The forward-looking yield of 2% isn’t exactly thrilling, but it’s based on a dividend payment that’s now been raised for 19 consecutive years at an average annualized growth rate of 13%. At the same time, persistent stock repurchases have whittled down the number of outstanding shares of Kroger from roughly 1.6 billion as of 2000 to less than 700 million now, with another $2.5 billion just waiting to be spent on buybacks before the end of this year.

This might help put things in perspective: Between the buybacks, reinvested dividends, and the stock’s simple price appreciation, over the course of the past 20 years, an investment in Kroger stock would have outperformed the same-sized investment in an S&P 500 index fund.

BYD Company

Finally, add BYD Company (BYDDY 0.28%) to your list of Buffett stock picks that just might belong in your portfolio as well.

You may think you’ve never heard of it, but you’re probably more familiar with it than you realize. Remember the electric vehicle (EV) company that became bigger than Tesla (as measured by unit sales) early this year? That’s BYD. You’ve just heard little about it because the Chinese company primarily serves the Chinese market.

That’s changing, though. While you still can’t purchase a BYD-made EV in the United States, registrations of BYD vehicles in Europe soared more than 200% to 13,503 in July of this year, extending a growth streak that’s most definitely taking a toll on Tesla’s share in the EV-receptive market.

In fact, the company’s so confident of this continued growth that it’s committed to manufacturing all of its EVs intended for European drivers within Europe by 2028. Indeed, BYD is aiming to sell half of its cars outside of China by 2030. With a fleet of seven massive cargo ships that can each carry thousands of vehicles, it could do it regardless of where these cars end up being manufactured.

Although U.S. consumer interest in EVs is only lukewarm (at best), the International Energy Agency predicts the worldwide number of EVs will quadruple between the end of last year and 2030.

It’s admittedly not Buffett’s usual kind of stock pick. He’s frequently touted the value of America’s capitalistic economy and the ingenuity it inspires, and tends to limit his holdings to U.S. stocks. For the record, it’s not as if Berkshire owns a massive number of BYD shares. Its 162.6 million shares are only worth about $2.3 billion at this time or less than 1% of Berkshire Hathaway’s stock portfolio.

The fact that Buffett made the unusual trade in the first place back in 2008 and has since stuck with most of the position this whole time, however, speaks volumes about its potential.

Tech giants continue to announce more capital investment in artificial intelligence (AI) technology. Demand remains strong from large enterprises looking to gain better insights from their data using AI-powered services in the cloud.

Two companies that are benefiting from these trends are Alphabet (GOOG 1.27%) (GOOGL 1.23%) and Amazon (AMZN 0.23%). These companies are in a strong competitive position to bring AI innovation to consumers and enterprises, and better yet, their stocks are reasonably valued relative to their earnings potential.

Image source: Getty Images.

1. Alphabet 

Shares of Alphabet have surged in 2025 as investors begin to recognize Google as an AI juggernaut. Google’s Gemini AI model powers intelligent features across all the company’s services, including Search, Google Cloud, and other apps. With 2 billion people using services like Google Search and Gmail every day, that makes Google one of the top consumer brands profiting from AI.

Google Search is having a strong year, all thanks to AI. Search revenue grew 12% year over year in Q2. New features like AI Overviews and AI Mode are driving more search frequency and new use cases for Search that is fueling more advertising revenue.

On the enterprise side, Google Cloud is seeing tremendous demand for AI services. Businesses are migrating their data to leading cloud platforms to access AI-powered analytics and application-building tools. This drove an impressive 32% year-over-year increase in cloud revenue last quarter, while the segment’s operating profit more than doubled.

AI is also bringing internal improvements to Google’s operations, such as automating more than 30% of its code. This frees up time for Google’s engineers to work on new ideas that can speed up its product development. This has the potential to accelerate its growth over the next decade, which isn’t reflected in the stock’s valuation.

Management plans to spend $85 billion in capital expenditures in 2025, up from the previous estimate of $75 billion. This is to meet the growing demand for cloud and other services, signaling that Google’s future growth is undervalued.

Even after the recent climb, the stock still trades at a forward price-to-earnings (P/E) multiple of 23 based on 2026 estimates. This is attractive for an AI-first company that should deliver double-digit annualized earnings growth over the long term.

2. Amazon

Amazon is another tech juggernaut that would make a solid addition to any investor’s portfolio right now. Its financial results have been solid this year, with improving sales and profitability in its largest business, e-commerce. But Amazon is also the leading cloud services provider, which is raking in billions in annualized revenue for enterprise AI services.

Amazon Web Services (AWS) generates $116 billion in annualized revenue. This represents 18% of the company’s total revenue, but produces most of the company’s profit. While AWS is facing greater competitive pressure from Microsoft Azure and Google Cloud, it continues to sign major deals with global brands. Last quarter, AWS signed new agreements with PepsiCo, Peloton, and Warner Bros. Discovery, among others.

Demand for AI is so great it is stretching AWS’ computing capacity. Specifically, generative AI solutions are experiencing triple-digit year-over-year growth. This means as Amazon invests in bringing more compute capacity online, AWS revenue could accelerate in 2026.

AI is also benefiting Amazon’s e-commerce operations through more intelligent delivery routing, inventory placement, and faster order processing, with more than 1 million robots at its warehouses. This shows a valuable synergy taking shape where AI improves the efficiency of the e-commerce business, while higher revenues from e-commerce help fund more investment in research and development for AI innovation in cloud services.

In many ways, Amazon has become an AI-first business, making it a solid choice for investors looking for a relatively safe business to invest in AI for the long haul.

The stock is trading at a forward P/E of 30 times, using next year’s earnings estimate. This is reasonable for a business that just posted a year-over-year earnings increase of 33%, partly driven by AI-driven cost efficiencies in e-commerce. Analysts expect the company to deliver 17% annualized earnings growth, which could double the stock by 2030.

We’re quite possibly at the start of what could be a major technological shift with the onset of artificial intelligence (AI). No one knows what new products, services, or companies will be created. However, with estimates of 25-fold growth in the AI market between 2023 and 2023 (according to a UN Trade and Development report), this can’t be ignored.

Smart investors will consider ways of betting on this trend. But you don’t have to search far and wide. If you’re ready to invest $3,000, here are two top AI stocks to buy and hold for the long term.

Image source: Getty Images.

Dominant forces in the internet age

Two of the most successful businesses of all time are Alphabet (GOOG 1.27%) (GOOGL 1.23%) and Meta Platforms (META -0.26%), which rose to dominance as the internet became much more prevalent. Without a doubt, these are two of the best AI stocks investors should look at.

Alphabet and Meta are in very advantageous positions. They already have thriving business models with offerings that reach vast audiences. Alphabet has six products that each serve more than 2 billion people. During the month of June, Meta’s family of apps had 3.48 billion daily active users.

I believe a sound strategy is to find businesses that are leveraging AI to improve their existing offerings. In this way, the new technology can be used to upgrade the user experience instead of trying to create something completely new. These companies are doing a great job in this regard.

Alphabet’s Gemini model is embedded in its various products and services. And Search, which investors have worried could easily get disrupted by chatbots, counts more than 100 million monthly active users combined on the AI Mode feature in the U.S. and India.

Meta is using AI to provide better content recommendations. This is working so well that it led to a 6% jump in time spent on Instagram in the latest quarter.

These companies generate their revenues primarily from digital advertising efforts. They’re both utilizing AI to help their customers create more effective, creative, and successful ad campaigns. Meta founder and CEO Mark Zuckerberg called out the opportunity of improving the ad experience.

“If we deliver on this vision, then over the coming years I think that the increased productivity from AI will make advertising a meaningfully larger share of global GDP than it is today,” he said on the first-quarter earnings call in 2025. This could lead to much more revenue down the road.

I think AI will simply widen the already huge economic moats that Alphabet and Meta have developed. It seems extremely unlikely that these businesses will get disrupted anytime soon. As they push forward with their respective AI capabilities, it becomes even more challenging for companies to encroach on their territory.

Money is not a concern

Businesses are spending huge amounts of money on AI strategies. Alphabet and Meta are no different. Combined, their capital expenditures are set to total $154 billion in 2025, with increases coming in the years ahead. These numbers are hard to overlook.

While the returns from this AI investment are uncertain, which is the market’s biggest worry, these companies are in such strong financial shape that it should be less of a concern. Alphabet ended Q2 with $95 billion in cash, cash equivalents, and marketable securities on its balance sheet. Meta had $47 billion. With incredibly lucrative business models, demonstrated by the tens of billions in profits generated each quarter, they have the resources to move fast and position themselves to be leaders in the AI age.

Cheapest of the “Magnificent Seven”

What’s particularly exciting about these two companies is that investors don’t have to chase expensive valuations in order to gain exposure to AI in their portfolios. There’s undeniably a lot of buzz in this area of the market. However, Alphabet and Meta trade at the cheapest price-to-earnings ratios of all the “Magnificent Seven” constituents.

With $3,000, investors can buy about six shares of Alphabet and about two shares of Meta. These might be the only AI stocks you’d need to own.