The current economic landscape is shrouded in uncertainty, but investing in top artificial intelligence (AI) companies remains a promising strategy. The productivity gains from adopting AI technology will continue to attract investment from leading companies and drive returns for investors over the next decade. Two tech giants well-positioned to benefit from AI are Amazon and Meta Platforms.
Amazon: Leveraging AI for Cost Reduction and Growth
Amazon’s shares have plummeted 31% from their recent highs, primarily due to concerns over tariffs and their impact on consumer demand. However, the near-term pressure on retail sales may be overshadowed by the opportunities AI presents for reducing costs and growing profits. Last year, Amazon’s revenue grew 11% to $638 billion, driven largely by double-digit growth in non-retail services such as Amazon Web Services and advertising. Its net income nearly doubled to $59 billion.
AI is helping Amazon optimize inventory placement and delivery routes, reducing costs and boosting profits. The company is also using robotics to streamline order processing in its warehouses. These long-term investments could lead to significant cost savings and earnings growth. Amazon has been pushing for same-day delivery and is already offering drone deliveries in select areas, with plans to expand to more cities. Faster delivery speeds can lead to higher purchase frequency, resulting in increased inventory turnover and improved cash flow.
Despite potential recessionary pressures, Amazon’s stock is trading at an attractive valuation. Analysts expect the company’s earnings to grow at an average annual rate of 20% in the coming years, suggesting solid gains for investors from current share prices.
Meta Platforms: AI-Driven Advertising Growth
Fears of a recession have also impacted the stocks of leading advertising companies, including Meta Platforms, the owner of Instagram. Its share price has fallen 15% this year. However, Meta operates in a $700 billion digital ad market and has demonstrated impressive growth, with revenue and earnings up 21% and 60% last year, respectively. This strong performance coincided with the launch of Meta AI, a highly intelligent assistant used by over 700 million people.
Meta is leveraging AI to optimize ad placement on its platforms. Its Andromeda machine learning system, developed in partnership with Nvidia, can analyze millions of ads to find the right one to show users. The past year has shown how AI can boost engagement across Meta’s family of apps while helping advertisers increase their return on investment. With a massive user base and solid financials, including $62 billion in net income last year, Meta is a top tech stock for long-term investment. Analysts expect the company’s earnings to grow at an average annual rate of 14% in the coming years, and the stock trades at just 21 times earnings.
Investing in Amazon and Meta Platforms offers a promising opportunity for long-term growth, driven by their strategic adoption of AI technology.
