Many sectors will grow in 2023, but few industries can keep up with artificial intelligence (AI). Many top AI stocks to buy have doubled over the past year, and some of them have even tripled.
However, the hype for artificial intelligence creates some risks and can lead to companies rushing to claim AI is a big component of their business. Many companies took advantage of the situation when blockchain was a big deal after Bitcoin’s (USD-BTC) incredible 2017 rally.
Eastman Kodak (NYSE:KODK) is a primary example of a company taking advantage of a trend. The company became a quick pump-and-dump stock during the crypto frenzy in 2018 after announcing a partnership to launch a new cryptocurrency.
In an even more confusing move, Kodak shares more than tripled in one day after being selected to help with pharmaceutical ingredients during the pandemic. You don’t want to get stuck with a company like Kodak that plays to a trend. These three top AI stocks to buy have more staying power and can reward long-term investors.
Alphabet (GOOG,GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has invested in artificial intelligence for several years. AI helps the company deliver more relevant search results and allows advertisers to get better results from their ad campaigns. Alphabet’s Bard AI serves as a competitor to ChatGPT.
Alphabet is at the forefront of machine learning and generative AI, which have tremendous potential. These innovations have improved Google Cloud, a popular choice for many businesses that want to establish an online presence.
Alphabet has been a reliable stock and is a core pick in many funds. Shares have gained 49% year-to-date and are up 173% over the past five years. The stock trades at a reasonable 25 P/E ratio relative to its market position and financials.
Revenue and earnings have accelerated in 2023 after a disappointing 2022. In the third quarter, revenue increased by 11% year-over-year. Net income surged by 41.5% year-over-year. Advertising growth was slow but reliable, while Google Cloud was a big winner with 22.5% year-over-year revenue growth.
Alphabet also has many other business segments under “Other Bets.” It represents a small portion of total revenue, but the segment grew by 42% year-over-year.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is a semiconductor giant that produces AI chips and partners with many corporations, including Alphabet. The chipmaker receives steady revenue from its client base and has high profit margins that regularly exceed 35%.
The stock has more than doubled year-over-year after more fanfare due to the VMware acquisition. Cloud computing and cybersecurity can lead to accelerated revenue growth for the tech conglomerate.
The recent surge helped Broadcom join the Top 10 U.S. Companies based on market cap. Broadcom looks poised to become a trillion-dollar company in a few years as artificial intelligence continues to increase the demand for chips. Shares would have to double to reach that milestone roughly.
Shares trade at a forward-P/E ratio of 24. The dividend yield is close to 2%, and Broadcom regularly hikes its dividend payouts by over 10% per year. Leadership cares about rewarding shareholders through high dividends and share buybacks.
Arista Networks (ANET)
Arista Networks (NYSE:ANET) is a cloud computing company that makes it easier for companies to store vast amounts of data and access key documents quickly. Cloud computing saves businesses money while staying more organized and increasing productivity.
Arista Networks has over 8,000 customers and continues to grow its revenue and earnings. The company reported a 28% year-over-year revenue increase in the third quarter and a 54% year-over-year rise in net income.
Shares trade at a 32-forward P/E ratio and have greatly rewarded long-term investors. The stock has almost doubled year-to-date and has gained 388% over the past five years. ANET stock only lost roughly 15% of its value in 2022, while other cloud computing stocks got hit much harder during that tough year.
Arista Networks’ primary role in the artificial intelligence landscape is providing the network and computing resources necessary to power advanced AI tools, video games, and other uses. Aritsa Networks provides the backbone for many AI innovations. During third-quarter remarks, Jayshree Ullal, CEO of Arista Networks, indicated that the demand has remained strong in the enterprise and cloud/AI sectors.
On this date of publication, Marc Guberti held long positions in AVGO and ANET. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.