Even before AI, these companies were great long-term buys. AI just increased their value propositions.
Artificial intelligence (AI) has taken over the business world during the past couple of years. The stock market has followed as investors rush to take advantage of the new growth opportunities the technology has presented. At this point, it seems impossible to avoid a tech company that isn’t dealing with AI in some form or fashion.
Not all companies dealing with AI are created equal, though. Many may use the technology but lack the long-term appeal. If you have $3,000 available to invest, the following three AI stocks are worth buying and holding for the long term. They have proven business models and stand to gain a lot from the emerging technology.
Image source: Getty Images.
1. Taiwan Semiconductor Manufacturing
On the outskirts, Taiwan Semiconductor Manufacturing (TSM 4.58%) — also known as TSMC — may not seem like an AI company, but it’s just as important to advancing the technology as virtually any other participant. TSMC is a semiconductor (chip) foundry that manufactures chips for a wide range of applications, including smartphones, electric vehicles, game consoles, TVs, and graphics processing units (GPUs). The latter is why it’s important to AI.
TSMC’s AI role comes down to manufacturing the critical chips that go inside the data centers that train AI models. It has around a 70% market share in the global foundry industry, but when it comes to the advanced AI chips, it’s virtually a monopoly. This new demand is largely why its high-performance computing (HPC) segment accounted for 60% of its total revenue in the second quarter.
TSMC is the start of the AI pipeline. Without it, companies like Nvidia and Advanced Micro Devices wouldn’t be able to ship their AI chips at their current scale. TSMC expects AI-related revenue to double this year.
TSM Revenue (Quarterly) data by YCharts.
AI aside, TSMC’s role in the tech ecosystem has made it indispensable. It’s not as if there aren’t other semiconductor foundries; they just don’t compare to TSMC’s effectiveness and scale. This position makes it a company that should be successful for quite some time.
2. Alphabet
Google’s parent company Alphabet (GOOG 0.41%) (GOOGL 0.34%) is also a key piece to the AI ecosystem, especially when it comes to research. It’s responsible for key breakthroughs that have advanced the technology to where it is today.
Alphabet’s Google Cloud also continues to grow impressively. In the second quarter, its revenue increased 32% year over year to $13.6 billion, leading all of Alphabet’s segments. Having a strong in-house cloud platform allows the company to power and scale its own AI models.
It’s not just for in-house use, either. It’s a service that many companies can rely on, including Meta Platforms, which just signed a six-year, $10 billion deal to make Google Cloud its main AI infrastructure provider. The co-signing by Meta shows that even Alphabet’s big-name peers (and competitors) trust its capabilities.
It also helps that Alphabet’s stock seems to be valued cheaply right now. It’s trading around 23.4 times expected earnings over the next 12 months, which is the lowest of the “Magnificent Seven” stocks, by far. If you’re buying and holding onto the stock for the long term, this will likely work out well in your favor.
TSLA PE Ratio (Forward) data by YCharts.
3. Microsoft
Some tech companies excel at one thing, while others do a few things pretty well. Microsoft (MSFT 0.74%) is one of the handful that does a lot of things extremely well. It has its hands in many industries and is a top player in virtually all of them.
Similar to Alphabet, Microsoft has a cloud platform (Azure) that allows it to be a key piece of AI infrastructure. It also has a long-term partnership with ChatGPT’s creator OpenAI, which gives it direct and early access to industry-leading AI technology.
This is a key advantage for Microsoft because it allows it to integrate the technology into its ecosystem of products and services. Microsoft has Office software (Excel, PowerPoint, Teams, etc.), Windows operating systems, GitHub, and many other platforms, and all of these stand to gain from AI integration.
Microsoft already has a stronghold on enterprise software, which should only increase its value proposition as these products and services become more efficient. If you’re going to be in the tech world for the long term, it helps to have corporate customers because they spend more, tend to have longer contracts, and are less likely to cut back on services whenever the economy isn’t ideal.
Microsoft is a staple in the business world that thousands of companies rely on for their daily operations. If I had to pick one Magnificent Seven stock to hold onto for life, it would be Microsoft.
Stefon Walters has positions in Microsoft and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.