smartest

The S&P 500 index (SNPINDEX: ^GSPC) is trading near all-time highs. Since the Vanguard S&P 500 Index ETF (VOO 0.60%) tracks the S&P 500, it is also trading near all-time highs. And it could still be a smart move to buy the index via an investment in the exchange-traded fund.

But there might be a smarter choice, if you take valuations into consideration. Which is where another Vanguard exchange-traded fund (ETF) comes into play. Here’s what you need to know.

Just get started

One of the biggest things any investor can do is get started. So if you have $1,000 to invest and you’ve never done so before, it could be a very good idea to just buy the market. By default, that would be the S&P 500 index for most investors. And then you should just keep buying the market every single month to benefit from dollar-cost averaging.

Image source: Getty Images.

Since all of the products that track the same index basically do the same thing, the Vanguard S&P 500 ETF is going to be a top choice. With an expense ratio of just 0.03%, it is one of the cheapest ways to gain exposure to the S&P. Why pay more for the same basic service? As the chart below shows, the market has recovered from even the worst bear markets and then moved on to reach even higher highs.

^SPX data by YCharts.

If you have $1,000 or $10,000 (or even more) to invest, just getting started is going to be the smartest move. Then, keep going and never look back.

Sure, in the near term, you might suffer through some paper losses. But over the long term, history suggests you’ll still make out just fine. If buying when things are expensive is just too much for you, however, you might find that the Vanguard Value ETF (VTV 0.51%) is an even smarter choice.

Why go the value route?

A $1,000 investment in the Vanguard Value ETF will buy you around five shares of the exchange-traded fund. What you will end up owning is a portfolio of large U.S. companies that have valuations that are low relative to the broader market. With the S&P 500 near all-time highs, that’s not an insignificant issue.

Putting some numbers on this might help. The Vanguard Growth ETF (VUG 0.56%), the opposite extreme from the value ETF, has an average price-to-earnings ratio of around 40. That’s pretty expensive, but you would expect that, given its focus on growth.

The Vanguard S&P 500 Index ETF has an average P/E of about 29. Still pretty high, thanks to the fact that some very large technology stocks (which tend to be growth-focused) are driving its performance. The Vanguard Value ETF’s average P/E is a little under 21. It wouldn’t be fair to call 21 cheap, but it is most certainly cheaper than both the S&P 500 and Vanguard Growth ETF.

The same trend exists with the price-to-book-value ratio (P/B). The Vanguard Growth ETF comes in with a P/B ratio of 12.5, the Vanguard S&P 500 Index ETF sits at 5.2, and the Vanguard Value ETF is the lowest on the valuation metric at just 2.8. While it won’t necessarily save you from a bear market, focusing on value stocks when growth is in favor could soften the pain of a deep downturn.

Get started first, but consider a value component when you do

To reiterate the theme here, the most important investment decision you can make is to start investing in the first place. The second one is to keep it up even when times get tough on Wall Street. But if you have already made those choices, then maybe it makes sense to consider taking a more nuanced approach with what you choose to buy.

If all you have is $1,000 to start, perhaps consider splitting it between the S&P 500 Index ETF and the Value ETF, to lean you toward cheaper stocks. If you already have a portfolio, then the smartest move could be to put a grand into just the Value ETF to help diversify you away from the growth stocks that are leading the market into the nosebleed seats.

One of the great things about equity markets is that excellent stocks can be had at almost any price, making them accessible to most people. Even with $100, it’s possible to find outstanding, growth-oriented companies to invest in. Of course, what qualifies as “the smartest” stock to buy with any amount of money will differ from one investor to the next, depending on factors such as risk tolerance, goals, and investment horizon.

One growth stock trading for well below $100 that can meet many investors’ demands is Novo Nordisk (NVO -2.96%). Here is why the Denmark-based company is an excellent stock to buy right now.

Image source: Getty Images.

A wonderful contrarian opportunity

Quality growth stocks tend to be highly sought after. There is often a higher demand for shares of these companies than are available. That’s why their prices rise. Sometimes, though, these otherwise excellent companies encounter challenges that lead to a sell-off, providing investors with a wonderful opportunity to pick up their shares at a discount.

In my view, that’s what we have with Novo Nordisk. True, the company has faced some challenges, and it has paid for them as shares have remained southbound for over a year. Its financial results haven’t been as strong as expected. It hit a series of surprising clinical setbacks while losing market share to its rival, Eli Lilly.

However, Novo Nordisk’s prospects remain very strong. Novo Nordisk’s claim to fame is that it has been a major player in the diabetes drug market for decades. That remains the case. As of May, it had a 32.6% share of the diabetes market and a 51.9% share of the GLP-1 space. While its hold in these fields declined compared to last year, it remains a dominant force in both.

Novo Nordisk also continues to post competitive financial results for a pharmaceutical giant. The company’s sales for the first half of the year increased by a strong 16% year over year to 154.9 billion Danish kroner ($24.2 billion).

Further, the diabetes and obesity drug markets are rising fast due to several factors. Both conditions have skyrocketed in recent decades, and drugmakers are now developing highly innovative therapies to address them. Novo Nordisk is still at the forefront of this race. Even if the company has a smaller slice of the pie, that’s not a significant problem if the pie is substantially larger.

Can Novo Nordisk continue to launch innovative medicines and stay ahead of most of its peers, excluding Eli Lilly? The company’s pipeline suggests that it can, and could even catch up with its eternal rival. Consider Novo Nordisk’s potential triple agonist (a medicine that mimics the action of three gut hormones), UBT251.

In a 12-week phase 1 study, UBT251 resulted in an average weight loss of 15.1% at the highest dose. The usual caveats regarding early-stage studies apply. Still, UBT251 looks promising, especially since there is no single triple agonist approved for weight loss yet. And that’s just the tip of the iceberg. Novo Nordisk has several other exciting candidates through all phases of clinical development. And those that have already passed phase 3 studies, such as CagriSema, should generate massive sales for the drugmaker.

According to some projections, CagriSema could rack up $15.2 billion in revenue by 2030. Ozempic and Wegovy, Novo Nordisk’s current bestsellers, should also remain among the top-selling medicines in the world through the end of the decade. So, Novo Nordisk’s medium-term outlook seems promising.

There are more reasons to buy

Novo Nordisk appeals to growth-oriented investors, but it is also a great pick for dividend seekers and bargain hunters. For those seeking income stocks, the Denmark-based drugmaker is a great choice, given its strong track record. The company’s forward yield is not exceptional at 2.9% — although that’s much better than the S&P 500‘s average of 1.3% — but Novo Nordisk has consistently increased its dividends over the past decade.

NVO Dividend (Annual) data by YCharts

Finally, Novo Nordisk’s shares are trading at 14 times forward earnings, whereas the average for the healthcare industry is 17.3. Even with the challenges it has faced recently, Novo Nordisk’s strong pipeline and lineup, solid revenue growth, and excellent prospects in diabetes and weight management make the stock highly attractive. The company’s shares are changing hands for about $59, so $100 can afford you one of them.

Buying and holding solid growth stocks for a long time is a tried and tested way of making money in the stock market. This philosophy not only allows investors to capitalize on disruptive and secular growth trends but also helps them benefit from the power of compounding.

Nvidia (NVDA -4.84%) is a classic example of what a smart growth stock can do for your portfolio. Anyone who bought just $200 worth of this semiconductor stock five years ago is now sitting on massive gains, as that investment is now worth $2,700. Nvidia is still a solid investment despite such outstanding growth in recent years.

Shares of Nvidia are now trading under $200 each (at around $185 as of this writing), thanks to the stock splits executed by the company in recent years. So if you have just $200 in investible cash, buying Nvidia with that money could turn out to be a smart move. Let’s look at the reasons why.

Nvidia’s AI-fueled growth isn’t going to stop anytime soon

Artificial intelligence (AI) has been the single most important catalyst for Nvidia’s surge. As the world was wowed by the abilities of OpenAI’s ChatGPT in November 2022, Nvidia’s graphics processing units (GPUs) were working behind the scenes to train the large language model (LLM) powering the chatbot.

Since then, LLMs have been deployed for building not just chatbots, but also for other tasks such as language translation, text generation, text summarization, image generation, writing code, automating workflows, and content creation, among other things. Businesses and governments are using the help of AI models to improve their efficiency and productivity.

Nvidia is at the center of this AI revolution because its GPUs have been the go-to choice for hyperscalers and cloud infrastructure providers looking to tackle AI workloads. This is evident from Nvidia’s commanding share of 92% in AI data center GPUs. Of course, competition from the likes of Broadcom and AMD could be a thorn in Nvidia’s side in the future, but there is ample opportunity for all the players in the AI chip market to make a lot of money in the coming years.

Citigroup estimates that AI infrastructure spending by major technology companies is likely to exceed $2.8 trillion through 2029, with half of that spending expected to take place in the U.S. itself. That’s a big jump from the investment bank’s earlier forecast of $2.3 trillion. This massive spending is going to be fueled by the growth in AI compute demand.

The enterprise and sovereign demand for AI compute has been robust. According to a survey conducted by the Federal Reserve Bank of St. Louis, workers using generative AI applications are 33% more productive each hour. 

Cloud computing capacity available at major hyperscalers and other infrastructure providers is greatly outpaced by demand. Oracle, Amazon, Microsoft, Alphabet, and others are sitting on massive revenue backlogs of more than $1 trillion. So it can be safely said that AI spending over the next four years has the potential to hit Citigroup’s $2.8 trillion mark.

Nvidia is expected to generate $206.4 billion in revenue in the current fiscal year, an increase of 58% from the previous year. So the company still has a lot of room for growth considering that the annual AI spending over the next five years is likely to clock a run rate of $560 billion, according to Citigroup’s estimates. Analysts have therefore become more bullish about Nvidia’s potential growth in the coming fiscal years.

NVDA Revenue Estimates for Current Fiscal Year data by YCharts

The valuation makes the stock a no-brainer buy

The above chart tells us that Nvidia can keep growing at healthy rates despite having already achieved a high revenue base. Not surprisingly, the company’s bottom-line growth is expected to exceed the broader market’s.

For instance, Nvidia’s projected earnings growth rates of 50% for the current fiscal year and 41% for the next fiscal year are much higher than the S&P 500 index’s expected earnings growth rates of 9% and 14%, respectively. Given that Nvidia is now trading at 30 times forward earnings, investors are getting a good deal on this AI stock. It is available at a slight discount to the tech-heavy Nasdaq-100 index’s earnings multiple of 33.

All this makes Nvidia a smart growth stock to buy with just $200, as this company has the potential to witness a significant jump in its market cap over the next five years that could help multiply that investment substantially.

One of the many big geopolitical stories in the world today is the changing tariff regime in the United States. Key trading partner China is retaliating in a way that only China can, by limiting access to rare-earth metals, which are vital in the technology sector.

And that has led to a huge boon for MP Materials (MP -10.99%), which produces rare-earth metals in the United States. Does this make MP Materials a smart buy?

Image source: Getty Images.

What’s going on in the tariff world?

The new administration in Washington D.C. is raising tariffs on foreign countries that export products to the U.S. market. Given that U.S. consumers represent a valuable customer group, the tariffs are a very big deal. Impacted countries are attempting to negotiate and/or retaliate in an effort to limit the impact that tariff changes will have on their economies. China is one of the largest exporters to the United States and negotiations have been tense.

China’s wild card is the fact that it is the world’s largest producer of rare earth metals. These metals are used in electronics, including in highly sensitive high-tech gear that might be used for defense purposes. In the face of U.S. tariffs, China has been more than willing to limit access to rare-earth metals. And that is potentially a large problem for the United States.

This is where MP Materials comes in, since it is a U.S.-based supplier of rare earth metals. It didn’t just appear overnight, the company went public a few years ago. The whole idea of the business is to produce rare earth metals from within a politically and economically stable country, giving technology-driven customers what might be seen as a more reliable supply option for these vital materials. In hindsight, MP Materials’ timing could hardly have been any better.

There have been big investments in MP Materials

The importance of MP Materials is highlighted by two big events. First, on July 10, the U.S. government made a $400 million investment in the business, which included convertible securities. Second, and just five days later, Apple announced a $500 million partnership with MP Materials around rare-earth metals.

Not surprisingly, MP Materials’ stock price rose dramatically on the news. That, in turn, allowed MP Materials to sell $650 million worth of stock at attractive prices for the company. Demand for the shares was so high that the sale was upsized from $500 million, showing that investor appetite for MP Materials’ story is large. And why not? The story is quite compelling.

There’s just one problem. MP Materials is still building out its business. It likely has ample cash to do that today, but there is still material execution risk. If building the business, which has both mining and processing aspects to it, doesn’t go smoothly, investors could quickly turn negative on the stock. Similarly, if tariff tensions ease, the excitement around MP Materials could also wane. Notably, the bottom of the company’s income statement is in the red.

MP data by YCharts

The fact that MP Materials is losing money as it makes the large capital investments needed to build out its business is hardly surprising. The problem is that investors are likely buying the short-term rare earth metals story, not the upstart business story. The second story, which is fundamental to the business right now, could require years to play out. And yet MP Materials’ stock price has risen more than 140% since July 9, the day before the government investment was announced.

Thinking long term will be key

At this point, it looks like a lot of good news has been priced into MP Materials’ stock. That has diminished the opportunity here for investors, even though the opportunity for the business looks very attractive. If you buy MP Materials today, it would be a smart move to think long term because in the short term, any negative news could lead to a swift drawdown in what has become a story stock.

That said, conservative investors will probably want to watch from the sidelines for a little bit to see how well MP Materials executes on its investment plans. The company has plenty of cash to work with at this point, but it still needs to make good use of that money for the quick stock price advance to make financial sense for investors.

When it comes to making money in the stock market, stock price appreciation gets a lot of attention because it’s the most straightforward way to do so. You buy a stock for one price, sell it for a higher price, and make a profit. Simple enough. However, dividends can be just as effective at making money from stocks in many cases.

Assuming you’re investing in high-quality stocks or exchange-traded funds (ETFs), dividends are guaranteed income that investors can rely on quarterly (or monthly in some cases). Dividends can be an added plus when a stock is growing, as well as a buffer when a stock is falling.

If you’re looking for a high-quality dividend ETF to add to your portfolio, you should consider the Schwab U.S. Dividend Equity ETF (SCHD 1.01%). A $1,000 investment today could go a long way with time and patience.

Image source: Getty Images.

SCHD has a criteria fit for high-quality companies

The saying “Everything that glitters ain’t gold” also applies to dividend stocks. Just because a stock has a high dividend yield doesn’t mean it’s worth owning. In some cases, it could be a yield trap, where the dividend is only high because the stock price has dropped due to bad business performance.

Investing in SCHD removes much of the risk of a yield trap because of the criteria it takes to be included in the ETF. It tracks the Dow Jones U.S. Dividend 100 Index, and to be included, a company must have the following:

• A strong balance sheet
• Consistent cash flow
• At least 10 years of dividend payouts
• Strong profitability metrics (such as return on equity)

These criteria is a good vetting tool for investors, removing some of the need to do more in-depth research on the companies within the ETF. Some notable dividend kings (companies with at least 50 consecutive years of dividend increases) in the ETF are Coca-Cola, Altria, PepsiCo, Target, and Kimberly Clark.

A sustained high dividend yield

You shouldn’t solely focus on dividend yields because they fluctuate with stock price movements, but it’s still worth paying attention to the dividend yield a dividend-focused ETF is able to sustain. At the time of this writing, SCHD’s dividend yield is 3.7%. This is above its 3.1% average over the past decade, and around three times what the S&P 500 currently offers.

SCHD Dividend Yield data by YCharts

At its current dividend yield, a $1,000 investment would pay around $37 annually. This isn’t early retirement type money, but it can snowball into meaningful income, especially if you take advantage of your brokerage platform’s dividend reinvestment plan (DRIP). With a DRIP, your broker will take the dividends SCHD pays you and automatically reinvest them to buy more shares of the ETF.

Add in the fact that SCHD has increased its payout by over 160% in the past decade and should continue to increase its payout over time, and you have a chance for a $1,000 investment to go a long way.

Don’t expect explosive stock price growth

Since SCHD hit the market in October 2011, it has underperformed the S&P 500, averaging 12.4% annual total returns compared to the index’s 15%. Despite the underperformance, those are returns that most investors would still be happy to receive.

^SPX data by YCharts

Past results don’t guarantee future performance, but for the sake of illustration, let’s assume the ETF continues to average 12% annual total returns. A single $1,000 investment today could grow to over $9,600 in 20 years. If you were to add just $100 monthly to the ETF, it would grow to over $96,000. And with a low 0.06% expense ratio, you can keep more of these gains in your pocket.

One of the most common misconceptions about investing is that you need a significant sum of money to get started. Too often, would-be investors sit on the sidelines, waiting to accumulate what they perceive is “enough” capital before making their first move.

The reality is that even a modest investment can provide ownership in some of the world’s most influential businesses. With the right mindset and a commitment to long-term growth, a small stake today can become the foundation for meaningful wealth in the years ahead.

With that in mind, here are six artificial intelligence (AI) stocks you can begin building a position in with just $1,000.

Image source: Getty Images.

The hardware backbones

AI development is inseparable from infrastructure. As demand for compute and inference continues to accelerate, investors should focus on the companies supplying the hardware backbone that makes this growth possible.

At the top of this list is Nvidia (NVDA -1.55%), the undisputed leader in AI infrastructure. Its graphics processing units (GPUs) remain the gold standard for training AI workloads, while its CUDA software architecture helps form a deep competitive moat — making it both costly and complex for developers to switch providers.

In practice, rising capital expenditures (capex) from hyperscalers flow directly back to Nvidia. This creates a lucrative feedback loop: More investment in AI infrastructure drives ongoing demand for Nvidia’s chips, which in turn fuels the next wave of applications beyond today’s large language models (LLMs).

Nebius Group is emerging as a notable player in the evolving cloud infrastructure landscape. The company’s business model centers on renting GPUs through a specialized platform designed to help enterprises manage AI workloads with greater efficiency and flexibility.

Positioned as both cost-effective and technologically capable, Nebius is carving out a niche in infrastructure-as-a-service (IaaS) beyond incumbents like CoreWeave. Nebius benefits from strong ties to Nvidia and recently secured a $17.4 billion partnership with Microsoft.

The silent giant enabling the GPU ecosystem is Taiwan Semiconductor Manufacturing. While designers like Nvidia and Advanced Micro Devices capture outsize attention, it’s TSMC’s foundry that brings their chips to life — producing semiconductors at the most advanced nodes available.

As emerging AI applications in robotics and autonomous systems demand increasingly sophisticated fabrication processes, TSMC’s deep footprint in cutting-edge manufacturing is set to expand.

The software superstar

Once dismissed as a niche government contractor, Palantir Technologies (PLTR -0.58%) has transformed into one of the most formidable players in the software arena. Throughout the AI revolution, the company has gone toe to toe with enterprise incumbents like Salesforce and SAP, carving out market share across the private sector and proving its platform is indispensable.

What truly differentiates Palantir is the trust it commands at the highest level. While smaller rivals such as C3.ai and BigBear.ai are left chasing deals that are narrow in scope, Palantir is securing $10 billion contracts with the U.S. Army and forging strategic alliances with NATO.

Even more telling is how tech titans like Amazon, Microsoft, and Oracle have opted to partner with Palantir rather than compete head-on. This alignment opened new doors in healthcare, energy, and financial services — where Palantir is winning sticky, long-term contracts that provide durable revenue visibility and expanding unit economics.

In short, Palantir has evolved into a cornerstone of the AI software landscape — positioned to scale alongside the public and private sectors as AI investments continue to move downstream.

A magnificent duo

While infrastructure and software tend to dominate the headlines, two consumer-facing giants — Alphabet (GOOG -0.09%) (GOOGL -0.13%) and Meta Platforms (META 1.93%) — remain underappreciated relative to their “Magnificent Seven” peers.

Alphabet’s strength lies in the breadth and integration of its ecosystem. Advertising remains a cash cow fueled by dominance in search (Google) and engagement (YouTube). Yet beneath the surface, Alphabet has quietly built a vertically integrated AI empire: Custom Tensor Processing units (TPU) that rival with Nvidia’s GPUs, a rapidly expanding cloud computing platform, and DeepMind — Alphabet’s internal research lab driving breakthroughs that flow right into commercially available products.

Meanwhile, Meta commands arguably the most valuable social media network on the planet. With billions of users across Facebook, Instagram, and WhatsApp, the company is not only monetizing attention through advertising, but also unlocking new avenues of growth through AI-powered personalization. Few companies can deploy new features so broadly and effectively at scale — positioning Meta as a winner in the next phase of AI’s digital transformation.

You could do a lot of things with $2,000. Spend it. Bury it in jars in your yard. Buy lottery tickets. However, I think a smarter approach is to use the money to buy stocks that pay attractive dividends.

The obvious question that arises is: Which dividend stocks should you buy? There are thousands of alternatives, some of them good and some not so good. Here are my picks for the smartest dividend stocks to buy with $2,000 right now.

Image source: Getty Images.

1. Enbridge

Enbridge (ENB 0.60%) is a Dividend Champion with 30 consecutive years of dividend increases. Its forward dividend yield currently stands at 5.63%. The company should be able to continue increasing its dividend, with expected distributable cash flow (DCF) of around 3% through next year, which should jump to 5% after 2026.

A strong underlying business supports those dividend payouts. Roughly 30% of the crude oil produced in North America and 20% of natural gas consumed in the U.S. flow through Enbridge’s pipelines. The company ranks as the largest natural gas utility in North America based on volume. And it has expanded beyond fossil fuels, with over $8 billion committed to renewable energy projects that are either currently in operation or under construction.

The stability of Enbridge’s relatively low-risk business model should be especially appealing now, considering the uncertainty surrounding a potential U.S. government shutdown, tariffs, and weak jobs reports. I like that the company has been able to consistently deliver solid earnings per share and DCF per share during turbulent times, including the financial crisis of 2007 through 2009 and the COVID-19 pandemic.

But Enbridge isn’t just a dividend stock to buy as a defensive move. The energy infrastructure leader has around $50 billion of growth opportunities through 2030, with nearly half of the total related to expanding its gas transmission business.

2. Realty Income

Realty Income‘s (O 0.50%) track record of 30 consecutive years of dividend increases matches Enbridge’s. Its forward dividend yield of 5.43% is nearly as high as Enbridge’s. Realty Income offers one nice advantage compared to the energy company, though: It pays a monthly rather than quarterly dividend.

This real estate investment trust (REIT) owns over 15,600 properties. Its tenant base represents 91 industries, including convenience, grocery, and home improvement stores, as well as restaurants. None of Realty Income’s tenants generate more than 3.5% of its total annualized contractual rent.

Realty Income shares another similarity with Enbridge: remarkably stable cash flows. The REIT has generated positive cash flow in every year since 2004 except for 2020, when the COVID-19 pandemic disrupted the global economy. Even then, though, its total operational return remained positive.

What about growth? Realty Income checks off that box, too. It’s targeting a total addressable market of roughly $14 trillion. Around 60% of that market is in Europe, where the REIT faces only one major rival.

3. Verizon Communications

Verizon Communications (VZ -0.35%) has increased its dividend for 19 consecutive years. While that isn’t as impressive as Enbridge’s and Realty Income’s streaks of dividend hikes, Verizon beats them in another way, with its ultra-high dividend yield of 6.35%.

I think Verizon’s dividend program is on solid footing. The telecommunications giant recently increased its free cash flow guidance for 2025 to a range of $19.5 billion to $20.5 billion, up from its previous forecast of $17.5 billion to $18.5 billion. Over the last 12 months, Verizon has paid out dividends of $11.4 billion. This reflects plenty of free cash flow cushion to continue growing the dividend.

Although the telecom market is highly competitive, Verizon more than holds its own. The company generated the highest wireless services revenue in the industry in the second quarter of 2025. Its broadband market share continued to grow. Verizon was also recently recognized by J.D. Power as having the best wireless network quality for the 35th time.

The company’s pending acquisition of Frontier Communications should boost growth over the near term, with the transaction expected to close in early 2026. Verizon could have strong long-term growth prospects as well as a 6G wireless networks launch in a few years.

Artificial intelligence (AI) has taken the world by storm in what seems like the blink of an eye. It’s also played a huge role in pushing the stock market to new record highs.

While there has recently been some data that’s raised questions about the level of profitability that businesses are getting from AI integration, the technology is still just starting to change the world — and long-term investors who back the right players could score huge wins.

With that in mind, read on for a look at two stocks identified by Fool.com contributing analysts as standout buys even among other top artificial intelligence investment opportunities.

Image source: Getty Images.

The largest cloud provider, the most to gain

Jennifer Saibil (Amazon): Amazon (AMZN -1.16%) disappointed investors with its second-quarter report released two weeks ago, but if you can focus on the future, you can take Amazon stock’s dip as a buying opportunity. There are many reasons to imagine it can keep growing over the next few years and become one of the top players in AI.

It’s already the biggest cloud services provider in the world, with 30% of the market, according to Statista. One of the updates that alarmed the market after the report was growth in Amazon Web Services (AWS), Amazon’s cloud segment. Sales increased 17% in the quarter, only half the growth of its closest competitor, Microsoft‘s Azure. It may be somewhat of an overreaction, since AWS sales are much higher than Azure’s, at nearly $120 billion over the trailing 12 months, while Azure’s were $75 billion, and Amazon’s dollar share gain was still higher.

There were other things that bothered the market, such as tariff uncertainty and an outlook that didn’t quite match expectations. But these are short-term bumps along the road, and investors should be able to look past them and see the long-term opportunity, especially in AI.

As the largest cloud company, Amazon has incredible potential in building its generative AI business, which is primarily on the cloud. It’s investing more money than competitors, which CEO Andy Jassy upped to more than $100 billion this year in the second-quarter release. It offers a slew of services to meet demand at every level, from the small player who needs plug-in solutions to some of the biggest companies in the world, which employ a full staff of developers to create custom large language models (LLM).

Amazon’s trademark service is called Bedrock, and it offers a large array of LLMs and tools for developers to create AI apps that fit their needs. These include the gamut of LLMs, from high-cost to free, as well as Amazon’s own Nova LLMs. Amazon acquired a stake in AI company Anthropic last year, which has some of the best LLMs available. It’s even creating its own hardware, with budget chips for smaller needs, but it also has a robust partnership with chip powerhouse Nvidia.

CEO Andy Jassy keeps reminding investors that 85% to 90% of information technology (IT) spend is still on the premises, but that’s going to flip to the cloud over the next 10 to 15 years. As the largest cloud provider, with the most competitive set of options in place, Amazon is well-positioned to benefit from a windfall when that happens.

Up more than 140% over the last year, this stock is still flying under the radar

Keith Noonan (Unity Software): When most people think of hot AI stocks, Unity Software (U -1.95%) is probably a name that doesn’t come up much. The company specializes in video game development tools and digital marketing services, and it’s generally had a rough go of things since going public nearly five years ago. The company’s share price is down 41% from market close on the day of its initial public offering (IPO) and 80% from its all-time high.

Some poorly conceptualized and executed growth bets and monetization strategies caused the company to lose ground in its key markets, but the company has switched up its leadership team and is moving forward with renewed focus on profitability and strategic innovation. The turnaround initiative has helped the company’s share price surge more than 140% over the last year, and the comeback rally could still be in its early innings.

Sales increased 1.4% on a sequential quarterly basis in Q2, and management is guiding for mid-single-digit sequential growth in the current quarter. Compared to other companies with substantial exposure to AI trends, that may not look like much — but the relatively modest top-line expansion is obscuring the bigger comeback picture. Along those lines, the company’s new AI-driven ad network powered 15% sequential sales growth in Q2 and is likely still in the very early stages of making an impact.

Unity’s AI digital marketing platform looks poised to reenergize the business, and that’s far from the company’s only AI-related opportunity. Software and data that’s used to help nonplayable game characters navigate virtual worlds could wind up proving very useful when it comes to training robots to navigate real-life space.

Unity also provides the leading development platform for creating augmented reality (AR) and virtual reality (VR) applications, and its data and software tools could prove very valuable as tech giants look for the next big hardware platform after mobile.