Several trillion-dollar companies are knee-deep in the rapidly growing, highly promising artificial intelligence (AI) field. That includes Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) and Meta Platforms(NASDAQ: META).
However, these two were wildly successful corporations long before AI reached the kind of notoriety and prevalence it now has. This industry will provide a powerful long-term tailwind to these two tech leaders, but there are other great reasons to hold on to their shares forever. Here's the rundown on each of these market-beating companies.
1. Alphabet
Alphabet, Google's parent company, initially saw its shares drop as AI soared in popularity. Some investors and analysts thought ChatGPT would be a serious challenger to Google. It's not a far-fetched idea: The AI chatbot can perform many of the same functions as the famous search engine.
However, things haven't worked out that way. Google remains supreme, while Alphabet, which was no stranger to AI even before the advent of ChatGPT, is making significant moves in the field.
Google now features an AI section at the top of the page that offers a summary of findings for a query. Alphabet released Gemini, an AI-powered assistant. It also provides various AI tools through its cloud computing division, Google Cloud.
Alphabet's AI-related work is helping it deliver strong financial results. In the third quarter, the company's revenue of $88.3 billion increased by 15% year over year. Its net income was up 33.6% to $26.3 billion.
Management gushed about the impact AI is having across the range of Google's products and services. But the company's competitive advantage and culture of innovation is what really makes Alphabet a forever stock. Alphabet benefits from a moat from multiple sources, including its brand name and the network effect.
The word "Google" has become a verb attached to what the service offers. It will be extremely difficult for the company to lose out on search, especially considering the company uses the wealth of data on searches to fine-tune its algorithm -- meaning it gets more valuable with use.
This dynamic also applies to YouTube, a leader in streaming, another industry with long-term growth potential. Alphabet generates plenty of free cash flow, although it has decreased in the past year.
GOOGL Free Cash Flow data by YCharts
The tech giant has enough funds to pour into research and development. It is not an accident that Alphabet quickly developed a competitor to ChatGPT.
Lastly, Alphabet is now also a dividend stock. It's too early to call it a good income stock, since its dividend program isn't a year old yet. However, reinvesting the dividend on top of the kinds of returns Alphabet can offer over the long run will make the stock even more attractive.
2. Meta Platforms
Meta Platforms is the company behind Facebook, Instagram, and WhatsApp. The company is betting quite a bit on AI: Management expects significant capital expenditure growth to continue in 2025, largely due to investments in AI-related infrastructure.
Investors might not be too excited about Meta Platforms' increased spending, but the technology is having an impact on the company's results. Meta AI, its virtual assistant, is one of the leaders in this niche. Meta's AI-powered algorithms on Facebook and elsewhere are helping drive greater engagement. That's important for a company that generates most of its revenue from advertisement.
On the other side of that equation, it is helping businesses create ads through generative AI, a much faster and more efficient alternative.
Meta Platforms' financial results remain strong. Its third-quarter revenue grew 19% year over year to $40.6 billion. Its net income of $15.7 billion was 35% higher than the year-ago period. Meanwhile, Meta's daily active people grew 5% year over year to 3.29 billion.
Meta's heavy investments in AI might squeeze the bottom line in the short term, but the company's long-term prospects remain intact. Few businesses have an ecosystem of more than 3 billion people. That's a significant competitive advantage. It grants Meta Platforms endless monetization opportunities, be it through AI, e-commerce, short-form videos, or its paid messaging option on WhatsApp it has been ramping up.
Meta Platforms also benefit from the network effect. Facebook and Instagram become more valuable to users or advertisers (or influencers) from the outside looking in as they attract more people within their ecosystems.
So, with a massive user base, a strong moat, several growth avenues, and, yes, a dividend program that is also new, Meta Platforms is positioned to deliver more market-beating returns to patient investors.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Prosper Junior Bakiny has positions in Meta Platforms. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.
