Competition in the artificial intelligence (AI) space continues to intensify. We’ve all seen headlines around this trend, and how many companies who may have little to nothing to do with AI are looking to integrate this potentially revolutionary technology into their core business models. Such is the case with innovation – it tends to be the bandwagon most don’t want to be left off of.
I have no doubt artificial intelligence investment will continue to surge, and this wave of investment will create some real winners in this space. However, I also expect that some bifurcation will exist, in which a “winner-take-most” type of environment is most likely to ensue. In other words, I think we’re most likely going to ultimately end up with a market in which just a few big winners take most of the profits from this innovation, with the rest of the market scrapping it out for table scraps.
Maybe that’s far too pessimistic of a view, and gains from AI will be more evenly distributed. That’s another scenario that could play out. But if I were to place my bets on three AI stocks to buy in October, these would be the three I’d focus on right now.
Key Points About This Article:
- Interest around artificial intelligence (AI) technology remains high, with valuations soaring in this space.
- However, the question is which AI stocks could realize most of the benefits of this innovation over time – here are my three top picks for October.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
ASML Holdings (ASML)
ASML Holdings (NASDAQ:ASML) is among the top equipment suppliers to semiconductor makers around the world. The company was founded in 1984 through a partnership between Philips and ASMI, and has since become the global market leader in producing high-end lithography systems. Via a mix of innovation and strategic acquisitions, the company has brought forward extreme ultraviolet (UEV) machines to the market, which have enabled some of the smallest and most powerful chips to hit the market. Thus, one could argue that a significant percentage of the moves we’ve seen in AI stocks can be tied back to ASML’s success.
In fact, it’s worth noting that ASML remains the sole EUV manufacturer in most markets today. The company essentially sets the standard for semiconductor production, while competitors only offer less advanced deep ultraviolet (DUV) machines.
In other words, this is a company that’s got a stranglehold on an absolutely critical technological piece of the AI innovation puzzle. For investors looking to bet on a picks-and-shovels play in this space, ASML continues to look like one of the most obvious and lucrative bets over the coming decades.
Palantir Technologies (PLTR)
Palantir Technologies (NASDAQ:PLTR) was formerly known as a “big data” leader, with its operations aimed primarily at government entities. That’s still a big portion of Palantir’s overall business, and provides the sort of cash flow stability needed to invest in new and innovative technologies and products.
And innovate Palantir has.
The company has developed its Foundry and Gotham platforms, enabling businesses to integrate data and create machine learning models for better decision-making. This is the sort of big data meets insights meets AI technology so many in the market are after. And with the launch of the company’s Artificial Intelligence Platform (AIP), investors are growing increasingly bullish on Palantir’s ability to further enhance these tools with support for large language models and generative AI. Thus, there are growing bets on Palantir becoming the premier AI-enabled big data company in the market, and its valuation certainly reflects the market’s view.
At a price-sales multiple of more than 40-times, and a forward price-earnings ratio around 100-times, PLTR stock isn’t cheap. But this is clearly a company with plenty to gain from the rise of AI and a first mover advantage in integrating such solutions for government and commercial clients over the long-term.
Microsoft (MSFT)
This list of top AI stocks to buy in October really wouldn’t be complete without discussing Microsoft (NASDAQ:MSFT). Most readers will know I’ve been very bullish on Microsoft for a long time. The company’s dominant position in the world of essential work-related software products as well as cloud computing technology is one thing. But the company’s more recent investments in AI (via a massive stake in OpenAI and other controlling stakes in smaller AI companies) makes this mega-cap tech stock a formidable player in the overall tech sector.
The company’s recent fiscal 2024 results were incredible, with the software/cloud/AI giant bringing in more than $88 billion of net income for the year (up from $72.4 billion the year prior). Revenue also surged from $211.8 billion in 2023 to more than $245 billion in 2024. Those are the kind of growth metrics long-term investors want to see, particularly at the multiple that Microsoft currently trades at.
In AI-related news, Microsoft recently announced a 14.7 billion reais ($2.70 billion) investment in Brazil over three years to enhance cloud infrastructure and AI. This significant commitment is intended to focus on the expansion of AI facilities in São Paulo. The initiative also aims to train 5 million Brazilians in AI, creating a global market share position the company hopes won’t be able to be challenged by competitors over time. We’ll see, but the company’s lead in this space right now is certainly compelling, and I wouldn’t be surprised to see the market continue to reward Microsoft moving forward.
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