Recent artificial intelligence (AI) developments caused an influx of interest in tech stocks lately, mainly as investors are looking for the next big thing in the industry.
But betting it all on small tech companies that may or may not live up to the hype is a major risk. That's why it's important to give leading tech stocks serious consideration.
The companies below have been dominating their respective segments for years and will likely continue to so for many more years to come. Here's why they're worth buying right now.
Image source: Getty Images.
1. Nvidia
Nvidia (NASDAQ: NVDA) is the undisputed AI semiconductor leader. Nvidia spent years gaining an increasingly large portion of the data center market with its graphics processing units (GPUs), as companies realized GPUs were better than central processing units (CPUs) for AI processing.
The release of OpenAI's ChatGPT was the starting gun for the AI race and now large tech companies can't buy Nvidia's GPUs fast enough as they try to secure hardware that will propel their tech over the next decade. The result is that Nvidia now has an estimated 70% to 95% of the artificial intelligence chip market.
That dominance sent Nvidia's stock into the stratosphere, with its share price rising 197% over the past year. Similar gains are unlikely if you buy in today, but continued growth is likely thanks to current enterprise spending habits.
Goldman Sachs estimates $1 trillion will be spent over the next four years as companies ramp up AI hardware, and Nvidia CEO Jensen Huang believes just $150 billion has been spent so far. Indeed, you don't have to dig far into Nvidia's finance to see the benefit from this. The company's data center sales soared 154% in the most recent quarter to $26.3 billion.
Buying Nvidia's stock right now means you'll pay a premium, with a forward price-to-earnings ratio of 35. But with its lead in the AI semiconductor market and companies falling over themselves to buy as many Nvidia chips as they can get, this tech leader is still a good long-term buy.
2. Apple
I know Apple (NASDAQ: AAPL) may not be at the forefront of some investors' minds, especially with so many more shiny new tech stocks out there. But there's something about a massively profitable tech giant that consistently moves into new markets and benefits (remember its move into services years ago?) that makes Apple deserving of a spot on this list.
And I think Apple is about to benefit from the pairing between AI software and the company's hardware through its Apple Intelligence features. The company's new AI will help users better keep track of their schedule, remember details from previous conversations, summarize and draft emails, and create images. Some features will also seamlessly work with ChatGPT.
Apple's AI will hit devices later this month and it could be a catalyst for the company's device sales. Estimates from research firm IDC say that generative AI smartphone shipments will spike 364% to 234 million this year -- and reach 912 million by 2028. With Apple's AI about to be released on its iPhones, it could end spurring an upgrade cycle for millions of iPhones users. Indeed, Counterpoint Research estimates 50 million iPhone 12 users could be champing at the bit for a new upgrade.
Skeptics will point to sluggish iPhone 16 demand since its release last month, but I suspect many potential customers are simply waiting to see Apple Intelligence out the wild before deciding to upgrade. With a forward P/E ratio of 30, Apple's stock isn't trading at a discount. But if you want a tech leader that's likely to continue benefiting from the billions of devices it has in people's hands for years to come, this tech juggernaut is still a buy.
3. Microsoft
Microsoft (NASDAQ: MSFT)has emerged as both a leading cloud computing player and AI first-mover. The company was one of the first established tech giants to see OpenAI's value and invested more than $13 billion to date in the AI start-up.
The early investment has proved to be a savvy move as ChatGPT became one of the most popular AI chatbots and Microsoft has implemented some of the software into its Microsoft 365 software products, its GitHub developer platform, and Azure cloud computing services.
Microsoft is already seeing the benefit from this, with the company's management saying on the fourth-quarterearnings callthat Azure now has 60,000 AI customers, up 60% from the year-ago quarter. Microsoft holds 25% of the cloud computing market and its early implementation could help give the company an advantage as cloud computing reaches a $2 trillion market by 2030.
Microsoft's ability to see the benefits of AI, put money into OpenAI, and quickly integrate the tech will likely help the company maintain its software dominance for years to come. Even more importantly, integrating AI into its already well-established cloud services has already supercharged its services and will likely continue to do so.
Microsoft's stock trades at a forward P/E of 32 right now, making it a little pricey. But with the company already knee-deep in AI and cloud computing, investors can rest assured that this tech giant is well positioned for the future.
Should you invest $1,000 in Nvidia right now?
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Chris Neiger has positions in Apple. The Motley Fool has positions in and recommends Apple, Goldman Sachs Group, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
