Two Long-Term Investment Worthy Artificial Intelligence (AI) Companies to Persistently Own

Two Long-Term Investment Worthy Artificial Intelligence (AI) Companies to Persistently Own

The AI revolution is revolutionizing our world in a manner unparalleled in human history, influencing the way society operates and generating value across various sectors of the economy. A study by PwC Global projects that the overall economic impact of AI will reach a staggering $15.7 trillion by 2030, with $6.6 trillion coming from productivity gains and $9.1 trillion from consumer effects.

Investors looking to capitalize on this trend can consider two tech titans leading the AI transformation, each holding near-monopolistic positions in vital segments of the AI value chain. Let's delve into how these industry titans have established robust competitive advantages in AI development and manufacturing, making their stocks enticing long-term investments.

The AI powerhouse

Nvidia (NVDA -1.14%) dominates the AI computing market through its high-end graphics processing units (GPUs) and the proprietary CUDA software platform. Nvidia's extensive ecosystem claimed an estimated 70% to 95% market share in AI accelerators, setting the standard for AI development.

Nvidia's success is built on its early entry into the AI hardware market and its exclusive CUDA platform, creating substantial switching costs for its customers, both financially and in terms of time. Although Nvidia shares trade at a high price-to-earnings multiple of 30.5 times forward earnings, the market's expectations may underestimate its long-term potential.

The worldwide race to construct AI data centers is just getting started. With cloud providers and enterprises worldwide ramping up their AI implementations, Nvidia is well-positioned to power the upcoming decade of innovation. Consequently, Nvidia shares emerge as an attractive buy-and-hold investment.

Manufacturing miracle

ASML Holding (ASML -2.14%) is the sole producer of extreme ultraviolet (EUV) lithography machines, which are crucial components for manufacturing advanced semiconductors. ASML's advanced machines boast over 100,000 intricate parts and require multiple 747 cargo planes for transportation, underscoring the complex technology involved in their production.

ASML's technological leadership is rooted in decades of innovation and partnerships with research institutions and suppliers. Building a single EUV machine takes 12 to 18 months, costs up to $380 million, and requires such elaborate engineering that no single individual can fully grasp its entire operation.

Similar to Nvidia, ASML commands a premium due to its wide-reaching technological moat, with shares trading at 28.7 times forward earnings. This price premium compared to the S&P 500's 24.1 times forward multiple is justified, given ASML's unique competitive stance and essential function in the AI value chain.

Recent company forecasts suggest robust growth driven by AI data center expansion, with management anticipating AI server markets reaching $350 billion by 2030. As a result, Morningstar analyst Javier Correonero predicts EUV expenditure will grow at an annual rate of 16% throughout the decade, making ASML stock an outstanding choice for investors seeking long-term value creation focused on AI.

The long perspective

AI has the potential to reshape the global economy on a scale that surpasses current forecasts. While the timing remains uncertain, experts speculate that achieving artificial general intelligence (AGI) could swiftly condense 100 years of technological progress into just five years.

Both Nvidia and ASML have established formidable competitive advantages in critical segments of the AI hardware chain. Their near-monopolistic positions and continuous technical innovation position them as ideal candidates to benefit from AI's exponential growth trajectory. In a world potentially accelerating towards AGI, these industry leaders appear perfectly positioned to propagate what could become the most transformative era in human history.

Investors interested in capitalizing on the potential of AI in finance might consider buying shares of Nvidia or ASML. The tech giant Nvidia, with a market share of 70% to 95% in AI accelerators, is well-positioned to benefit from the ongoing construction of AI data centers. On the other hand, ASML Holding, the sole producer of EUV lithography machines, is essential for manufacturing advanced semiconductors used in AI development. Both companies' competitive advantages and high price-to-earnings ratios suggest that they could provide attractive long-term investment opportunities.

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