3 Top Artificial Intelligence Stocks to Buy in May

Everyone is talking about artificial intelligence (AI) these days, and for good reason. This hot technology that’s driven some stocks to triple-digit gains has the potential to transform everything from our daily lives to how a company operates. AI’s powers range from the simple, like helping us save time on a routine task, to the complex, like helping scientists more quickly discover a game-changing drug.

Companies are pouring investment into AI, and the market is forecast to grow in the double digits to reach more than $1 trillion by the end of the decade. So now, in the early days of this high-growth story, is the perfect time to get in on the action.

And three top AI stocks in particular look like great buys right now in May. Let’s check them out.

Image source: Getty Images.

1. Nvidia

Nvidia (NVDA -1.99%) is set to report quarterly earnings later this month, and there’s reason to be optimistic about the AI chip giant’s performance. Over the past several quarters, revenue and profit have climbed in the triple and even quadruple digits year over year. And the company has delivered better-than-expected earnings per share for at least the past four quarters.

Why is this recent past performance a good indicator of what’s happening now? Because, as mentioned, we’re still in the early days of the AI growth story. And Nvidia is the leading AI chip provider, with 80% market share. Though rivals may carve out a position in the market, the company still is likely to maintain a significant lead thanks to its constant innovation — making it the go-to provider for those looking for premium chips.

Speaking of innovation, Nvidia aims to launch its Blackwell architecture and the most powerful chip ever later this year. That alone should drive a whole new wave of growth for the company.

So, with Nvidia shares trading for 36x forward earnings estimates, now looks like the perfect time to hit the buy button.

2. Oracle

Oracle (ORCL 1.10%) has reached a key turning point as it ramps up its cloud infrastructure to potentially become an AI leader. Once most known for database software, Oracle today has expanded to grow in the cloud — and efforts are bearing fruit. In the most recent quarter, the technology giant reported a 49% increase in cloud infrastructure revenue to $1.8 billion.

Importantly, Oracle says demand for cloud infrastructure capacity continues to exceed supply, even though the company is quickly expanding current data centers and building new ones. So Oracle expects its Gen 2 Cloud infrastructure business to operate in a “hypergrowth phase” for quite some time.

Many cloud providers exist — and Oracle isn’t the biggest — but the good news is the company doesn’t have to be No. 1 to generate significant growth and top-notch earnings. There’s room in this market for more than one player to succeed, and Oracle is showing it can carve out market share. It’s winning over customers with advantages such as the flexibility if offers them on the cloud — like the ability to use Oracle services on another public cloud — and on pricing.

And that means, trading at 21x forward earnings estimates, Oracle looks like a steal right now.

3. Amazon

Speaking of cloud providers, Amazon (AMZN 0.58%) is the leader in that space through Amazon Web Services (AWS). And thanks to its AI products and services, AWS’ sales and operating income both climbed in the double digits in the recent quarter, helping the business generate a $100 billion annualized revenue run rate.

This shouldn’t be too much of a surprise, as AWS, as the world’s No. 1 cloud provider, is well positioned to benefit from customers’ interest in AI. And Amazon has made an enormous effort to offer customers everything they need: from a variety of chips to a fully managed service that gives customers access to top large language models.

So it’s clear AWS has what it takes to deliver an AI win over time. On top of this, Amazon itself also is benefiting from AI throughout its e-commerce business — with tools that help it to lower costs and better serve customers.

Amazon shares trade for 41x forward earnings estimates, which may seem expensive compared to other tech companies. But this actually is a deal considering the full package: the company’s dominance in the two high-growth areas of e-commerce and cloud, its solid earnings growth track record, and prospects in the AI market.

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 and Oracle. The Motley Fool has positions in and recommends Amazon, Nvidia, and Oracle. The Motley Fool has a disclosure policy.