2 growth stocks to consider buying for the ‘second phase’ of AI

To date, the artificial intelligence (AI) story has largely been about the infrastructure buildout. That’s why companies such as Nvidia and Broadcom – which make AI chips for data centres – have done so well. We’re now rapidly moving into the ‘second phase’ of the technology however, where tech companies are rolling out innovative AI solutions designed to help other businesses improve productivity.

With that in mind, here are two growth stocks to consider buying now.

An AI powerhouse

First up is Amazon (NASDAQ: AMZN). The owner of Amazon Web Services (AWS), it’s one of the world’s leading cloud computing providers.

I think a lot of investors underestimate how big a player Amazon’s going to be in AI. Because, make no mistake, it’s going to be a powerhouse. Last year, CEO Andy Jassy said that he sees the technology as one of the company’s four pillars (alongside retail, Prime subscriptions, and cloud computing). And already, the company’s offering customers a broad range of AI applications.

We’re optimistic that much of this world-changing AI will be built on top of AWS.
Amazon CEO Andy Jassy

For example, in December, the company announced the launch of Amazon Nova. This is a suite of cost-efficient foundation models (large machine learning models that serve as a base upon which specialised applications can be built) designed to help customers build innovative applications and solve complex problems.

Other applications on offer from the tech giant include Amazon Q, a generative AI assistant that can be tailored to individual businesses, and Amazon Translate, a high-powered translation service.

Now, one risk with Amazon is that it’s still spending a lot of cash on the AI buildout (this year it expects to spend around $100bn). Further costs could hit profits.

Taking a long-term view however, I think this company will do very well as AI’s adopted by businesses globally.

A data specialist

The other stock I want to highlight is Snowflake (NYSE: SNOW). It specialises in data storage and analytics and serves a lot of well-known large-scale businesses today (think Sony, Sainsbury’s, and Deliveroo).

In recent years, Snowflake’s been incorporating AI solutions into its offer. As a result, customers can get access to AI (and apply it to their own data) without having to invest substantial sums in the technology themselves.

An example here is Snowflake Cortex AI. This enables customers to build bespoke generative AI applications using fully managed large language models (LLMs).

It’s worth noting that these AI products are already having a positive impact on Snowflake’s revenues. In November, the company raised its annual product revenue forecast.

A risk here is that the company’s facing competition from several other tech companies such as Amazon, Google, and Databricks. So it’s going to have to work hard to retain market share.

Profits are also still quite small at this stage. And company stocks with minimal profits can be very volatile at times.

Taking a five-to-10-year view however, I think the company will do well. That’s why I believe it’s worth considering for a portfolio today.

The post 2 growth stocks to consider buying for the ‘second phase’ of AI appeared first on The Motley Fool UK.

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Edward Sheldon has positions in Amazon, Nvidia, and Snowflake. The Motley Fool UK has recommended Amazon, Deliveroo Plc, J Sainsbury Plc, Nvidia, and Snowflake. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.