Here's How Artificial Intelligence (AI) Is Driving Profit Growth for These 2 Tech Stocks

Here’s How Artificial Intelligence (AI) Is Driving Profit Growth for These 2 Tech Stocks

Everyone has been talking about artificial intelligence (AI) over the past couple of years — and it’s easy to understand why. AI has the potential to revolutionize everything from the way you plan your day, thanks to AI assistants, to the way companies run factories and develop products thanks to a wide range of AI tools. Over the past quarters, to help make this happen, companies aiming to benefit from the AI boom have invested billions of dollars in the technology.

Some are makers of AI products and services and will gain by selling these to customers. Others are users of AI and will win as the technology streamlines and improves operations, saving them money. And some companies will reap the rewards in both ways.

In fact, two in particular already are winning in AI. Let’s check out how, today, AI is driving profit growth for the following technology companies.

Image source: Getty Images.

Amazon (NASDAQ: AMZN) has established itself as a leader in two major growth areas: e-commerce and cloud computing. In e-commerce, it has more than 200 million members in its Prime subscription service, and it’s been using AI to better serve these and other customers. For example, Amazon harnesses the power of AI to design faster and cheaper delivery routes for packages and to streamline operations in fulfillment centers.

All of this is helping it reduce cost to serve, which in turn paves the way to higher profitability.

And through Amazon Web Services (AWS), its cloud computing unit, Amazon sells premium AI products from partners such as Nvidia, as well as its own in-house developed chips and platforms, to customers. These products and services help others easily apply AI to their own businesses, so as more and more companies decide to use AI, AWS, the world’s No. 1 cloud services provider, may see more and more demand.

Demand from AI customers already is driving growth at the company, with AWS reaching a $115 billion annual revenue run rate last year. So, as the AI boom continues, this momentum should too.

Amazon already is a highly profitable company, delivering nearly $60 billion in net income last year. Now, the company’s use of AI to improve efficiency and its sales of AI products in this high-demand market both could spur a new phase of growth in the years to come.

All this makes Amazon a fantastic buy right now for investors interested in betting on future AI winners.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is a lot like Amazon when it comes to AI, as this technology is making an already strong business even better — and Alphabet’s Google Cloud, like AWS, sells AI products and services to customers.

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Let’s talk about Alphabet’s use of AI first. The company has developed Gemini, its own large language model, to power its AI efforts. And you may know Gemini well, as it’s one of today’s popular AI assistants, popping up on your phone to help you with any of your daily tasks. Importantly, Alphabet also uses Gemini to improve its biggest profit driver: Google Search, the world’s most-used search engine.

Advertisers pay to reach their target audience — you and me — on the Google platform, and advertising revenue makes up most of the company’s total revenue. AI is helping Alphabet improve Google Search, and it’s also helping advertisers as they plan their campaigns on the platform.

Like AWS, Google Cloud offers AI to its customers, and thanks to AI infrastructure and generative AI solutions demand, cloud revenue in the most recent quarter jumped 30% to $12 billion. The company said AI offerings have been driving new client wins, and last year, the number of first-time deals doubled from the previous year. And the number of deals greater than $250 million also doubled year over year.

These strengths in AI use and AI development position Alphabet well as growth in this technology continues, making this stock another top AI buy to hang on to for the long term.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy.

Here’s How Artificial Intelligence (AI) Is Driving Profit Growth for These 2 Tech Stocks was originally published by The Motley Fool

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