It’s not too late to start investing in artificial intelligence (AI) stocks. While interest in new generative AI developments has caused many tech stocks to soar higher, there are still plenty of opportunities to invest in this space.
According to Bloomberg Intelligence estimates, spending on generative AI hardware, software and development will increase from $67 billion last year to $1.3 trillion by 2032. That leaves a lot of room for companies to continue growing.
While the early winners may not be able to keep up, there are several companies building unique AI capabilities that look attractive in today’s market. And you can invest in it from €500.
Here are three no-brainer AI stocks to buy right now.
1.Adobe
Adobe (NASDAQ: ADBE) is the leading provider of professional design and document management software. It also has a growing suite of tools for digital marketers, including tools like Photoshop or the Acrobat PDF reader.
The company introduced Firefly AI to its creative cloud software suite, making taking and editing photos and videos easier than ever. Adobe’s unique access to proprietary data and growing catalog of stock images allows Adobe to deliver excellent training materials so its AI can perform more accurately than the competition.
Adobe is using Firefly to attract more users to the free version of its creative software suite. And once they start using the software, it improves conversions to paid users. Meanwhile, paid users are spending more to gain greater access to advanced AI features.
Adobe is copying the playbook across its other software packages, integrating generative AI into virtually every application and solution it offers.
Adobe has a strong competitive advantage thanks to the network effect. It’s the industry standard, which means sharing files with others often requires access to Adobe’s software. There is also a lock-in effect, where creatives and managers are reluctant to switch to another tool, which may be inferior.
The stock currently trades around $500, or 25x analyst estimates for fiscal 2025 earnings. That’s a fair price for a company that’s growing quickly, benefits from steady cash flow from subscriptions and could see strong revenue growth due to advances in AI.
2. Salesforce
Sales team (NYSE: CRM) provides the leading customer relationship management software service. It helps companies manage their sales leads and opportunities with the core software. It expands that with software suites for customer service, marketing teams and others. It connects all its products to its new Data Cloud, which provides a “single source of truth,” as management calls it, bringing together all the data generated by its services into a single platform.
Data Cloud supports Salesforce’s efforts in artificial intelligence. CEO Marc Benioff says the biggest differentiator in generative AI isn’t the models you work with, but the data you train them with. Salesforce has access to a vast amount of proprietary data thanks to its position as the leading enterprise CRM (Customer Relationship Management) software.
Salesforce’s Einstein Copilot can help employees complete tasks like closing sales and submitting customer support tickets faster and easier, with more and more features being added every quarter. That could drive revenue growth for greater access to AI features or Data Cloud.
In the meantime, Salesforce should see strong free cash flow as it benefits from similar competitive advantages as Adobe. It has a solid network of users building applications on the Salesforce platform, locking customers into the ecosystem. Furthermore, it is unlikely that a manager will leave the market-leading software.
Shares were sold after disappointing first-quarter earnings and weak prospects. They are currently trading around $240, which is good for a price-to-earnings ratio of 24.4x. With strong free cash flow supporting a significant share buyback program and a new dividend, it’s worth a small premium to the market. After the recent sell-off, your $500 allowed you to afford two shares.
3. Metaplatforms
Metaplatforms (NASDAQ: META) spends enormous amounts of money developing and training advanced generative AI. It’s for a good reason. It uses AI in virtually everything it does, with a long history of algorithmically ranked and recommended content. AI powers its massive advertising business, and CEO Mark Zuckerberg sees big opportunities in AI for the 3.2 billion people who use at least one of his apps (Facebook, Instagram, WhatsApp or Messenger) every day.
In addition to announcing first-quarter earnings, management raised its outlook for capital expenditures, which will mainly go toward building AI data centers and purchasing the expensive chips needed to train large language models. The company now expects to spend between $35 billion and $40 billion this year. Investors were initially wary of those prospects and sold shares, but they have since rebounded and traded near Meta’s all-time high.
While Zuckerberg warned that direct revenue from his AI efforts is still years away, Meta is uniquely positioned to incorporate its AI efforts into its existing products to make them more valuable. Meta already uses AI to increase engagement with its apps; generative AI can produce even more features to engage users, such as advanced photo editing and making it easier for influencers to communicate with fans. It also makes it easier for marketers to create and test new ad campaigns on the platform.
Meta stock is currently trading around $500, giving it a forward price-to-earnings ratio of around 25.3x. That price could be a bargain, as analysts expect earnings per share to grow at a compound annual rate of 30% over the next five years. This is supported by a large-scale share buyback program and the continued dominance of the digital advertising market. At this price it’s a no-brainer.
Should you invest €1,000 in Adobe now?
Before you buy shares in Adobe, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Adobe wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $775,568!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
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. Adam Levy holds positions at Adobe, Meta Platforms and Salesforce. The Motley Fool holds positions in and recommends Adobe, Meta Platforms, and Salesforce. The Motley Fool has a disclosure policy.
3 No-Brainer Artificial Intelligence (AI) Stocks You Can Buy Right Now With $500 was originally published by The Motley Fool
