The world of artificial intelligence (AI) is abuzz with growth opportunities in 2023, but for retirees, it can appear as a high-risk venture akin to a tech bubble. While some AI investments may be speculative and lack a clear strategy for profitability, there are safe and promising options within the AI landscape.
Microsoft: A steady giant
Microsoft, a stalwart in the tech industry, is a favorite among retirement portfolios. The company’s stable business operations are complemented by a modest dividend yield of 0.9%, providing retirees with consistent quarterly income. Notably, Microsoft has a history of increasing dividend payments, with a recent 10% hike.
Moreover, the company boasts strong free cash flow and profits, attributes highly coveted by both retirees and risk-averse dividend investors. Microsoft’s robust financial position enables it to reinvest in growth initiatives. The acquisition of video game company Activision Blizzard for $69 billion and a $13 billion investment in OpenAI underline Microsoft’s commitment to AI. Additionally, the company has introduced AI-enhanced features in its Microsoft Office suite, priced at $30 per month, signaling potential revenue growth.
Microsoft’s dedication to AI extends to its search engine, Bing, which incorporates AI and offers AI-generated images. With such investments and initiatives, Microsoft is poised for substantial growth in the AI sector, offering retirees a safe investment opportunity with significant potential.
Alphabet: Profitability and AI innovation
Alphabet, another financial heavyweight, presents an attractive avenue for AI investment. Similar to Microsoft, Alphabet has demonstrated consistent growth in earnings and free cash flow over the past decade.
In the realm of AI, Alphabet has been developing its chatbot, Bard, to rival ChatGPT, although it may not be as popular. The company has also integrated AI into core office applications, including Gmail, which will be available for a subscription fee of $30 per month. While Alphabet’s search engine, Google, enjoys an advantage over Bing, the company faces an ongoing antitrust case, which may not be resolved until next year. In the worst-case scenario, if Alphabet were to break up, investors could end up with multiple strong businesses, minimizing risks.
Moreover, any outcome from Alphabet’s situation could potentially benefit Microsoft, further bolstering the case for investing in both these tech giants.
Safety and stability for retirees
For retirees, Microsoft and Alphabet offer a blend of safety and growth in the AI investment landscape. These companies are established industry leaders with proven track records of profitability and financial stability. Here’s why they are safe bets:
Stable dividends: Microsoft’s modest dividend yield and history of increasing payouts provide retirees with a reliable income source.
Strong financials: Both Microsoft and Alphabet boast strong profits and free cash flow, ensuring they can weather economic downturns and invest in future growth.
AI expansion: Both companies are deeply involved in AI, with substantial investments and initiatives in place. This positions them to benefit from the growing demand for AI technologies.
Diversification: In the event of any unforeseen challenges, the diversification of their business operations minimizes risks for investors.
Market dominance: Microsoft and Alphabet’s dominance in their respective areas of expertise ensures they are well-positioned to capitalize on AI trends.
Retirees seeking AI investments need not shy away from the technology sector entirely. Microsoft and Alphabet stand out as safe options in the AI landscape, combining stability and growth potential. Their strong financials, commitment to AI innovation, and established market positions make them solid choices for retirees looking to navigate the ever-evolving world of technology and artificial intelligence.
