The age of artificial intelligence (AI) is upon us and this new technology promises to unleash a new wave of creativity and convenience like we’ve never seen before. AI offers a tantalizing promise to help automate tasks and achieve feats never achieved by humans. Investors who are excited about the prospects of AI and want to ride this long-term wave can look for growth stocks that use AI in their businesses.
By riding this trend you can slowly but surely increase the value of your investment portfolio. The development of AI is still in its infancy, as so much more can be done with this groundbreaking technology. Many companies are only beginning to discover the potential of AI for a wide range of tasks, from defense and chatbots to assisting with queries and enabling deeper analysis and insights.
If you’re looking for solid AI-related stocks to park your money in, consider the trio below.
1. Palantir
Palantir (NYSE:PLTR) develops software platforms to enable extensive data analysis. Engineers are sent into the field to work closely with customers to help integrate their data and optimize workflows, resulting in increased efficiency and better awareness of how the organization’s data can be leveraged for useful insights.
The company released its AI platform (AIP), developed for industrial and military partners, and applied it to customers in the commercial and government sectors. CEO Alex Karp is working with his management team to make Palantir’s platform available to a broader range of organizations, including foreign companies, research scientists and academic institutions.
The company’s growth progress is evident from its recent financial figures. For 2023, revenues rose 17% year-over-year to $2.2 billion, while US commercial revenues rose 36% year-over-year to $457 million. Palantir’s free cash flow generation also more than tripled year over year to $697 million. In the first quarter of 2024, revenue continued to rise, rising 21% year over year to $634 million. The company generated net income of $106 million for the sixth consecutive quarter and continued to generate positive free cash flow of $127 million.
In particular, U.S. commercial revenue grew 40% year-over-year to $150 million, with Palantir’s U.S. commercial customer base increasing 69% year-over-year to 262. Karp believes commercial revenue in the US will be one of Palantir’s key growth drivers in the near term.
The company’s steady profitability, consistent free cash flow and healthy traction in winning both commercial and government customers are a testament to its growing influence. Palantir announced during its 2020 IPO that its total addressable market across the commercial and government sectors was approximately $119 billion. With revenues expected to hit just $2.2 billion in 2023, this market estimate represents a significant growth opportunity for the company.
2. Metaplatforms
Metaplatforms (NASDAQ: META) is a social media company that owns the popular instant messaging program WhatsApp, the photo and video sharing app Instagram, and the social media site Facebook. In late April, the company introduced Meta AI, the latest version of its AI assistant, which was built on its large language model (LLM), Llama 3. This AI tool is built into the search boxes for WhatsApp, Facebook, Instagram, and Messenger so that users can ask questions in natural language that can be easily answered.
There’s more from Meta, as the company plans to gradually introduce new capabilities such as longer context windows and improved performance. Meta AI’s LLM model is trained on a huge amount of data and CEO Mark Zuckerberg said last October that AI will be Meta’s biggest area of ​​investment by 2024, with the company spending billions of dollars to strengthen its AI capabilities.
Meta reported a robust 2023 result, with revenue up 16% year over year to $134.9 billion. Net income rose 69% year over year to $39.1 billion and the company generated positive free cash flow of $43.8 billion, more than double the $19 billion generated last year. The board also initiated the social media giant’s first-ever dividend with a quarterly payout per share of $0.50.
The strong momentum continued into the first quarter of 2024 (Q1 2024), with revenue increasing 27% year over year to $36.5 billion. Net income for the quarter rose 117% year over year to $12.4 billion. Meta’s number of daily active people increased 7.3% year over year to 3.24 billion, demonstrating the social media company’s ability to continue attracting new users.
With the inclusion of Meta AI in its apps and the promise of continued improvements, investors can look forward to better numbers as more users flock to Meta’s apps and platform.
3.Adobe
Adobe (NASDAQ: ADBE) has integrated its own generative AI application Firefly into its Experience and Creative Cloud platforms. By doing this, the company hopes to offer more personalization and allow users to automate tasks while reducing search time and effort. Recent innovations include the new Generative Fill for Adobe’s Photoshop product, which is designed to allow customers to create stunning images.
Firefly allows customers to generate realistic photos using natural language, a strong plus for non-technical users that helps shorten the learning curve. This generative AI tool is also integrated into the core Acrobat product. Customers can ask questions and gain insights from PDFs and other types of documents. This expanded use of Firefly allows Adobe to deliver greater personalization and convenience.
Adobe reported strong earnings for the first half of its 2024 fiscal year ended May 31. Revenue rose 10.8% year over year to $10.5 billion, a record high. The digital media company saw both operating income and net income decline 13% and 13.7% year-over-year, respectively, due to a $1 billion termination fee related to its aborted attempt to acquire Figma. Excluding this one-off item, operating profit and net profit would have increased by 18% and 25.6% respectively year-on-year.
CEO Shantanu Narayen said the company’s AI approach has delivered greater value and resulted in a larger customer base. Adobe increased its annual target for net new annual recurring revenue, digital experience subscription revenue and earnings per share. Investors should view this upgrade as a vote of confidence for the company’s prospects as it leverages the power of AI to expand its customer base and drive further profit growth.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Royston Yang holds positions in Adobe and Meta Platforms. The Motley Fool holds positions in and recommends Adobe, Meta Platforms, and Palantir Technologies. The Motley Fool has a disclosure policy.
3 Artificial Intelligence Stocks to Buy and Hold for Great Long-Term Potential was originally published by The Motley Fool
