Artificial intelligence (AI) has taken over Wall Street. It’s been the hottest topic in the stock market since early last year, but the hype is justified.
Experts at Statista estimate that the AI industry will be worth approximately $184 billion this year, and should grow to over $826 billion by 2030, an annual growth rate of almost 30%.
Those same experts cited machine learning as the top contributor to the growth of AI. Machine learning gives AI a sense of intelligence, allowing it to analyze large amounts of data for trends and patterns.
Some prominent growth stocks have the ability to create significant life-changing wealth for long-term investors. Remember: AI is probably still in its early stages, so don’t assume you’re too late.
Consider these two potential AI stocks that could make millionaires to buy and hold for the long term:
Cybersecurity is not a new industry, but cyberattacks have become increasingly sophisticated and cause millions of dollars in damage. The increased stakes have created opportunities for next-generation security for companies like CrowdStrike Holdings(NASDAQ: CRWD). The company’s Falcon XDR platform runs in the cloud and uses machine learning to detect potential cyber threats.
If you’re familiar with CrowdStrike, you may know that a buggy update was released this summer that caused a global IT outage. It may take several quarters to confirm that this embarrassing incident won’t hinder the company’s growth, but so far so good. Management expects full-year revenue of just over $3.9 billion, representing 27% year-over-year growth.
The company specializes in endpoint security but has been steadily expanding its platform. Management believes the total addressable market will increase to $250 billion by 2029. In other words, CrowdStrike still only owns about 1.5% of its long-term market.
And the company is already very profitable. It has generated $1.1 billion in free cash flow over the past four quarters, growing its balance sheet to about $3.5 billion in cash (net of debt). Those are the ingredients for a company that will ultimately increase shareholder returns by gobbling up shares through share buybacks.
The shares are not cheap; shares trade at a clear premium to peers, as measured by enterprise value versus revenue. Therefore, consider buying slowly and becoming more aggressive if the broader market falls at some point. CrowdStrike is a long-term winner with a potentially decades-long growth trajectory that could make long-term investors very wealthy.
Data is perhaps the most crucial ingredient for machine learning, he emphasizes Snowflake(NYSE: SNOW) as a mission-critical company in the AI industry.
Have you ever heard the expression ‘garbage in, garbage out’? Data must be well structured for machine learning applications. Snowflake allows companies to store, organize and search their data through a cloud-based platform. They can also pull data from external sources through the company’s marketplace.
Snowflake went public at the end of 2020 at an overly high valuation during a stock market bubble. Slowing revenue growth, a CEO change and competition from Databricks haven’t helped the stock over the past four years, and it’s still down nearly 60%. from its peak. Given the company’s rough years, investors might be surprised by my optimism about Snowflake. The good news is that things are looking up.
The company has a usage-based billing model, which is brilliant because data is growing exponentially. More data means more Snowflake usage and more revenue.
It essentially builds high net revenue retention (NRR) in the business. Snowflake’s NRR was 127% in Q3, meaning existing customers are spending significantly more once they start using it. Customer numbers grew 20% year over year in the third quarter and the company now works with 754 of the companies in the Forbes Global 2000. With these trends, overall revenue growth could remain at or above 20% for a long time.
Sure, it stinks that the stock hasn’t performed, but this is about looking ahead. Snowflake’s price-to-sales ratio was a mind-numbing 183 at its peak! Today that has dropped to 16.
That’s still not the cheapest you’ll find on Wall Street, but a realistic valuation gives investors a reasonable chance at investment returns as the company grows. Snowflake’s strong foundation in AI, where data is being created exponentially, could make it a huge company in a few years, an outcome that could make investors a lot of money.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that 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 had invested $1,000 when we doubled in 2009,you would have $348,112!*
Apple: If you had invested $1,000 when we doubled in 2008, you would have $46,992!*
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $495,539!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns December 16, 2024
Justin Pope has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in CrowdStrike and Snowflake. The Motley Fool has a disclosure policy.
2 Millionaire-Maker Artificial Intelligence (AI) Stocks was originally published by The Motley Fool
