2 "Magnificent Seven" AI Stocks to Buy on the Dip

Artificial intelligence (AI) might be the best investment opportunity in years, perhaps in decades. According to Amazon CEO Andy Jassy, "Generative AI may be the largest technology transformation since the cloud (which itself, is still in the early stages), and perhaps since the internet."

Wall Street has taken notice: Many AI, or AI-adjacent companies, have been on fire for the past two years, but they recently collectively took a bit of a dive due to industry-specific issues. Earlier this year, a China-based company called DeepSeek developed an AI chatbot with far less money and resources than some of the leaders in the field, which rocked the industry. Market wide headwinds have also played a key role in the recent dip. President Trump's trade wars could impact businesses across various sectors and harm economic activity.

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Though these headwinds are genuine, the recent drop represents a good opportunity to purchase shares of top AI stocks on a slight dip, at least for those with excellent prospects. That's the case with Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT). These two are part of the so-called "Magnificent Seven" and are still excellent buy-and-hold options even with market caps near $3 trillion.

1. Apple

Apple was a latecomer in AI. The tech company announced it would add a suite of AI features -- dubbed Apple Intelligence -- to some of its latest devices and operating systems. By the time it did, some companies were already earning meaningful revenue from their AI-related work. Further, Apple's grand entrance into the field didn't impress many investors and analysts. We are still waiting to see whether and to what extent it will lead to a renewal cycle for the company's iPhone and other gadgets. However, Apple often takes its time releasing tweaked versions of existing technologies -- the result is usually a hit.

The iPhone wasn't the first smartphone, nor were AirPods or the Apple Watch the first of their kind -- but all of these products became incredibly popular. Apple has several strengths that could allow it to make noise in AI. First, it boasts a massive ecosystem of 2.35 billion active devices that's just begging to be monetized in umpteen different ways. Second, and relatedly, Apple has one of the strongest brand names in the world.

Even if some of its AI-related initiatives aren't original, they could still attract significant attention because of the company's brand. Beyond AI, Apple will use its strengths to pursue many growth paths. It now supports more than a billion paid subscriptions within its services segment. Some of these are in industries with excellent long-term prospects, such as fintech. And as Apple's high-margin services unit grows in prominence, it will work wonders for its bottom line.

Lastly, Apple is a solid income stock. The company has increased its dividend by 92% in the past decade, and its cash payout ratio is a very conservative 14%. At the time of this writing, Apple's shares are down by 12% this year, but the stock remains attractive to long-term investors. And those who choose to reinvest the dividend should see significantly higher returns.

2. Microsoft

Microsoft invested in OpenAI, the company behind ChatGPT, years ago. The tech leader saw the lucrative AI opportunity coming from a mile away, and now it offers a suite of services through its cloud computing business. Microsoft Azure -- the tech giant's cloud unit -- has been one of its most significant growth drivers for a while, but AI is helping improve things. In the second quarter of its fiscal year 2025, ending on Dec. 31, Microsoft reported revenue of $69.6 billion, up 12% compared to the year-ago period. Azure's revenue increased by 31% versus the prior-year quarter, higher than any of Microsoft's other segments.

According to management, the company's AI business now has an annual run rate of more than $13 billion. That seems like a drop in the bucket even compared to Microsoft's quarterly top line, but its AI business run rate increased by an impressive 175% year over year in the period. Further, we are still in the early innings of this industry -- and for that matter, of the cloud revolution, as Amazon CEO Jassy noted. So, Microsoft's efforts in AI should help drive strong results for a while. But the company has other things going its way.

It remains the undisputed leader in computer operating systems. Its gaming segment is one of the world's leaders, and its suite of productivity tools is used across millions of businesses daily and benefits from high switching costs. Microsoft also has an incredibly strong name and a solid dividend. The company's payouts have increased by almost 168% in the past decade, while it boasts a cash payout ratio of just under 30%. Microsoft can offer growth and income to long-term investors who stay the course despite the company's 6% drop this year.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $284,402!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $41,312!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $503,617!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

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*Stock Advisor returns as of March 24, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Apple, and Microsoft. 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.