Warren Buffett’s conglomerate Berkshire Hathaway is famous for its long-term performance. Since he took over the company almost six decades ago, shares have produced annualized gains of more than 20%. Few investment vehicles in history have been able to provide this level of returns for such a long stretch of time.
While it won’t be easy for investors to achieve similar returns, the artificial intelligence (AI) revolution should provide some compelling opportunities. According to forecasts by Grand View Research, the AI market could grow by 30% or more per year over the next decade and beyond. By investing in the right AI stocks today, you could generate Buffett-style returns over time — and the two look like your best bets right now.
Nvidia remains the king of artificial intelligence
While it has gotten a ton of press and attention already, Nvidia (NVDA 1.26%) remains a must-own stock for every investor looking to capitalize on the rise of AI.
The story here is simple. AI spending has been skyrocketing in recent years, with most forecasts calling for double-digit percentage growth throughout the next decade and beyond. Nearly all of this growth will depend on GPUs and other specialized AI accelerator chips: high-powered parallel processors that provide the specific types of computational muscle to make training and running complex AI models possible. Because it already held the leading position in the GPU space when the AI revolution took off, Nvidia now controls roughly 90% of the market for GPUs destined to support AI applications. So at least right now, if AI innovation and spending continue to rise, Nvidia will directly benefit due to rising demand for its GPUs.
Nvidia’s dominance in GPUs is no joke. When it unveiled its latest GPU architecture, dubbed Blackwell, last year, the next-gen chips quickly sold out for the next 12 months. According to one report from October, “Customers who have not yet placed an order with the company won’t receive any Blackwell products until late 2025.”
Just to make it clear, Nvidia is by no means competing on price. In fact, it has the highest gross margin by far in the industry, reflecting both its superior offerings and its strong pricing power.
There are some long-term concerns. Nvidia may not be able to maintain its high market share, technological superiority, or high gross margins forever. But even if it does cede some market share and profitability, there’s a good chance the company can continue to grow at double-digit percentage rates for far longer than its current valuation of 44 times earnings suggests.
Image source: Getty Images.
Go for maximum gains with this AI stock
Nvidia is now worth more than $3.4 trillion — in the past week, it has been neck and neck with Microsoft for the title of world’s largest company. As such, its long-term growth from here may be limited to a degree by its sheer size. If you’re looking to maximize your upside potential in exchange for a little more risk, take a look at SoundHound AI (SOUN 6.71%).
Most investors haven’t heard of this company. Even many AI investors aren’t aware of it. That’s because SoundHound’s market cap is just $4 billion. But if you’re looking for big gains, relatively small players like this can deliver, even if the investments carry more risk.
As its name suggests, SoundHound AI’s business involves AI technologies within the audio arena. Think drive-thru windows where your order is taken by an AI agent, customer support lines operated by AI agents, or even in-vehicle AI assistants that can chat with you about the weather or your car’s upcoming maintenance needs. SoundHound already has customers piloting its technology in all of these areas. And similar to the rest of the AI industry, the voice AI segment of the market is expected to grow by 30% to 40% per year over the long term.
SoundHound faces heavy long-term competition from big tech competitors that have much deeper pockets from which to fund their research and development budgets. But the potential is there. You’ll have to get comfortable with the stock’s premium valuation though: Shares trade at nearly 40 times sales. And you’ll have to monitor customer growth and competitive pressures. But if you’re looking for a company that can deliver 20% annual returns over the next decade and beyond, SoundHound certainly has all the right pieces in place. Just know that shares are for risk-tolerant, long-term investors only.
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Nvidia. The Motley Fool has a disclosure policy.