Buy and Hold: 2 Artificial Intelligence (AI) Stocks Built for the Long Haul

The artificial intelligence (AI) revolution is not just a fleeting trend; it represents a fundamental technological shift that is reshaping industries and driving significant economic growth. As companies worldwide accelerate their adoption of AI, the demand for the underlying infrastructure and components powering these advancements is skyrocketing. Consulting firm McKinsey estimates that spending on data centers for AI workloads alone could reach an astonishing $5.2 trillion by 2030. This burgeoning market presents a compelling opportunity for investors, particularly those looking for stable, long-term investments in established, profitable companies that are at the forefront of this technological wave.

Oracle: A Cloud Infrastructure Powerhouse

While Oracle has long been a trusted name in database and enterprise software, its recent performance has been significantly bolstered by a surge in its cloud infrastructure services. For years, Oracle has consistently generated substantial profits, with its latest annual figures showing $12 billion in net profit on $59 billion in revenue. Although its traditional software business has seen steady, albeit modest, single-digit revenue growth over the past decade, the company's cloud infrastructure segment is now experiencing explosive growth. This expansion is driven by businesses seeking robust and versatile cloud solutions to support their AI initiatives. Oracle's cloud offering is particularly attractive because it enables clients to utilize leading large language models, such as Google's Gemini or xAI's Grok, with data stored across various top cloud platforms, including Amazon Web Services and Microsoft Azure. This multicloud compatibility is a significant differentiator.

The impact of this strategy is evident in Oracle's financial results. The company reported a remarkable 1,529% increase in its multicloud database revenue in the most recent quarter. Looking ahead, Oracle's management anticipates securing several more significant deals in the coming months. These agreements are expected to drive its remaining performance obligations—a measure of future revenue from existing contracts—to exceed $500 billion. This substantial backlog underscores the immense demand for Oracle's cloud services and its strong position to capitalize on the ongoing AI buildout. The company's ability to offer flexible and powerful cloud infrastructure makes it an indispensable partner for businesses navigating the complexities of AI adoption.

Broadcom: Fueling the AI Chip Demand

Broadcom stands as another critical player in the AI ecosystem, specializing in the design and manufacturing of advanced semiconductors, particularly custom AI accelerators. These chips are the workhorses powering the sophisticated computations required for AI. The demand for Broadcom's AI products has been exceptionally strong, leading to a 63% year-over-year increase in revenue from this segment in the last quarter. AI-related products now account for a significant 33% of Broadcom's total revenue, highlighting the increasing importance of this market to the company's overall performance.

Management at Broadcom indicates that this robust demand is unlikely to abate in the near future. Projections for the next quarter suggest that AI chip revenue will continue its upward trajectory, with an expected year-over-year increase of 66%. This sustained growth is underpinned by the fundamental requirements of advancing AI technologies, which necessitate greater networking bandwidth and processing power within data centers. Broadcom is strategically positioned to meet these needs with its cutting-edge semiconductor solutions. The company's consolidated backlog of orders has reached a record $110 billion, a testament to the overwhelming demand for its networking and semiconductor products essential for AI infrastructure development.

Beyond its technological prowess, Broadcom is recognized for its strong financial performance and profitability. This success stems from its strategic focus on high-margin markets. The company demonstrates its financial health and commitment to returning value to shareholders through its dividend payments. Last quarter, Broadcom paid a quarterly dividend of $0.59 per share, supported by adjusted earnings of $1.69 per share. This combination of technological leadership, robust demand, and financial discipline makes Broadcom a compelling investment for those seeking to capitalize on the long-term growth potential of the AI sector.

In conclusion, the AI revolution is creating immense opportunities for companies that provide the foundational technology. Oracle, with its rapidly expanding cloud infrastructure, and Broadcom, with its indispensable AI chips, are two such companies. Their strong market positions, consistent innovation, and robust financial health position them as attractive "buy and hold" investments for investors aiming to benefit from the sustained growth of artificial intelligence over the coming years.