2 No-Brainer Artificial Intelligence (AI) Stocks to Buy Right Now

Key Points

• Palantir is emerging as the Microsoft of AI as its U.S. commercial business is exploding.

• Arm Holdings is well-positioned to gain share in the data center market with its energy-efficient chip architecture.

• 10 stocks we like better than Palantir Technologies ›

The demand for artificial intelligence (AI) shows no signs of slowing down. Leading data center operators and governments are pouring billions into this technology, driving tremendous growth for top AI software and semiconductor companies. This presents some potentially great opportunities for long-term investors.

Even better, investors don't need to overthink this. Holding shares of industry-leading businesses has always been the way to go. Here are two industry-leading AI stocks to buy and hold for the long term.

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Image source: Getty Images.

1. Palantir Technologies

Palantir Technologies (NASDAQ: PLTR) has been one of the top stocks riding the AI boom. This leading software company just reported its first quarter of $1 billion or more in revenue, and it's still gaining momentum. Because of its success, the stock trades at expensive valuation multiples, but supporting these lofty share prices is the company's accelerating revenue growth and expanding profit margin.

Its success is based on bringing together large language models, software, and its ontology-based approach to building software that helps organizations gain real-time insights from disorganized data. Enterprises that use Palantir's software are significantly improving their supply chain efficiency and successfully monitoring their business operations., Meanwhile, the U.S. military uses it for surveillance and intelligence gathering, among other things, and other government agencies are putting it to use as well to better execute their directives.

Palantir closed 157 deals valued at $1 million or more in the second quarter, with 42 deals valued at $10 million or higher. This shows that organizations are seeing real returns on their money by reducing the time it takes to understand what's going on in their businesses and make quicker decisions.

While the U.S. government still makes up most of Palantir's business, the momentum in the commercial segment reveals its potential to grow into one of the most valuable companies in the world. U.S. commercial revenue growth in the more recently reported quarter accelerated to 93% year over year, reaching $306 million, compared to $426 million in U.S. government revenue.

Management is showing it can provide cutting-edge AI software while posting a healthy profit margin. Its net income reached $327 million in the second quarter, representing a net margin of 33%.

It's a richly valued stock for a good reason. The acceleration in revenue, expanding margins, and long-term potential to be the Microsoft of AI spell a bright future for this innovative software company. Palantir offers incredible value to companies, and with only 849 customers, there are a lot of corporations out there that it has yet to bring on board.

AI adoption among enterprises is still relatively low, providing a long runway of growth for Palantir. While the shares could pull back after a monster run, this is a growth stock that could still deliver excellent returns over the next few decades.

Image source: Getty Images.

2. Arm Holdings

Building on the theme of AI companies that are seeing growing momentum in their respective markets, investors should take a close look at Arm Holdings (NASDAQ: ARM). The stock is up 178% since its initial public offering in September 2023, but the shares have been stuck in a trading range over the last several months. Meanwhile, the company continues to be well-positioned in the data center market, as more cloud providers invest in its processor designs.

Arm benefits from a profitable business model. Instead of manufacturing chips, it designs them and earns revenue from licensing and royalties. Its total revenue grew 12% year over year in the last quarter, but royalty revenue grew 25% year over year based on data center demand for the company's Armv9 chip architecture.

Over 70,000 businesses use Arm's Neoverse data center chips for AI, representing a 40% year-over-year increase. Neoverse central processing units (CPUs) are powering Nvidia's Grace data center chip, Amazon Web Services' Graviton, Google's Axion, and Microsoft Cobalt, among others.

The momentum in the data center space is based on the growing demand for greater energy efficiency to run advanced AI workloads. Power bottlenecks might be the only thing that can slow this tsunami from sweeping over the economy in the next decade. This is one reason leading cloud providers are using more Arm-based chip designs: They strike the right balance of optimal energy efficiency and performance.

The continued growth in Arm's business will eventually break the stock out of its slump. Analysts currently forecast earnings to grow 24% annually over the next several years. The company is serving an important role in the AI infrastructure market, which spells more upside for investors.

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John Ballard has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, Nvidia, and Palantir Technologies. 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.