Some describe AI as a “revolution” comparable to the rise of the internet or a contemporary “gold rush” that could enhance productivity and corporate profits. However, skeptics view this technology as merely a “narrative” that investors are embracing as stock prices soar, a rationale for unjustified price hikes. Despite Fortune 500 companies investing billions in AI, there is limited economic data demonstrating its ability to enhance productivity.
Nonetheless, most experts anticipate these benefits will materialize—it’s just a matter of time. Certain companies are already reaping substantial rewards from the AI surge. Erika Klauer, a technology equity portfolio manager at Jennison Associates, a firm managing $194 billion in assets, stated, “AI is proving to be worth the investment for many industries.” She emphasized the remarkable opportunity AI presents.
Jennison and Klauer, focusing on long-term investments in high-growth companies, have embraced the AI boom by acquiring shares in the semiconductor powerhouse Nvidia. Mark Baribeau, the firm’s head of global equity, identified Nvidia as the leading company in the fourth era of computing driven by generative artificial intelligence. He projected Nvidia as the top stock pick for 2024, a prediction that has since seen an over 80% surge.
Klauer highlighted two crucial sectors—healthcare and sovereigns—that are poised to fuel growth for AI-related stocks like Nvidia. In healthcare, advancements in medical imaging, genomics, and drug discovery are generating significant demand for AI services. On the other hand, the desire of nation-states to develop their AI systems independently is expected to drive growth for select AI companies.
The investment in AI by nation-states is driven more by social and national security concerns rather than economic conditions, ensuring stable, long-term growth. Klauer believes that companies positioned to capitalize on growth in healthcare and sovereign sectors—providing chips, chip-making equipment, and data centers for AI operations—will thrive in the coming years.
For investors eyeing the long term, Klauer recommends three AI stocks for the next decade:
ASM Lithography
ASM Lithography, a semiconductor equipment giant with a $402 billion market cap, plays a pivotal role in enabling companies to produce semiconductors. Leveraging advanced technology, ASM Lithography serves as a key player in the semiconductor industry, catering to major foundries like Taiwan Semiconductor, Samsung, and Intel.
Nvidia
Nvidia, a semiconductor behemoth, is identified as another top AI stock for the next decade. With a robust track record of innovation and market expansion, Nvidia is well-positioned to capitalize on growth opportunities in various sectors, including software, autonomous vehicles, robotics, and gaming.
Microsoft
Microsoft, particularly its cloud computing platform Azure, stands out as a top AI stock for the next decade. Azure’s strong performance, outpacing competitors like Amazon Web Services, coupled with its role in facilitating AI development, positions Microsoft as a key player in the AI landscape.
Honorable mention: Broadcom
Broadcom, a $625 billion tech giant known for its semiconductor and infrastructure software products, is highlighted for its networking chips crucial for data centers powering AI systems. Klauer views Broadcom as a solid long-term bet due to its dominance in networking chips essential for accelerating AI workloads in data centers.
