Did you miss Nvidia? 3 AI stocks to buy now
World-renowned semiconductor producer Nvidia is widely considered a pioneering force behind artificial intelligence (AI), and it remains a leader in the field today. But AI is a rapidly growing industry with plenty of room for other contributors, and in fact some experts predict the majority of businesses will be using AI by 2030, adding $13 trillion in value to the world economy.
Therefore, while Nvidia is a $413 billion behemoth today, three Motley Fool contributors think C3ai (IA -0.70%), Risk (RSKD 0.69%)and CrowdStrike (CRWD 0.83%) are driving the artificial intelligence of the future. Here’s why.
Make AI more accessible
Anthony Di Pizio (C3ai): One thing the AI industry lacks is accessibility. Typically, only large tech companies with the financial resources and ability to attract talented developers have been able to use AI in a meaningful way. But thanks to C3ai, some of that burden is eased. The company provides thousands of ready-to-use, customizable AI applications to 11 different (and growing) industries.
C3ai’s customers are incredibly diverse, ranging from fossil fuel giants to financial services companies. The oil and gas industry isn’t one that investors might associate with cutting-edge technology like AI, but it accounts for the majority of C3ai’s revenue. Companies like Shell use predictive capabilities to help prevent catastrophic failures and reduce greenhouse gas emissions. This company deployed C3ai’s applications to monitor 10,692 devices.
But C3ai’s advancements in the field are also recognized by some of the world’s biggest tech giants, including Microsoft and Alphabetit’s Google. These companies collaborate with C3ai to create better cloud services for their customers, and Microsoft has already created $200 million in value through this partnership.
C3ai generated $252 million in revenue in fiscal 2022 (ended April 30), but lost $192 million for the year. However, it has a very high gross profit margin of 81% and over $950 million of cash and short-term investments on its balance sheet, so it has plenty of room to continue investing in growth before reducing its expenses to generate positive profits. . The company predicts its opportunity could be worth $596 billion by 2025, so it’s only unlocked a fraction of its growth potential so far.
C3ai stock is down 89% from its all-time high, which could be a great opportunity to take a long-term position.
An Overlooked AI Choice
Jamie Louko (risky): Riskified has been shot – like many other companies in the e-commerce space – by 84% since its IPO in late 2021. However, there are reasons to believe that this artificial intelligence (AI) company could be a good one. bargain at these prices. The company helps e-commerce businesses detect and prevent fraudulent transactions, with artificial intelligence and machine learning driving its determinations.
Riskified’s solutions have been invaluable to customers. In a study conducted by the company, its 10 largest customers saw their operating expenses decrease by an average of 39% due to a decrease in the number of goods lost during fraudulent transactions. Additionally, customers also saw an 8% increase in revenue from transactions that were thought to be fake but were in fact genuine. With this incredible value proposition, it should come as no surprise that Riskified has seen 2% or less annual customer churn since 2019.
The company facilitated gross merchandise volume of $22.7 billion in the first quarter, which helped the company generate more than $58.8 million in revenue during the same period. The company burned $10 million in free cash flow in the first quarter, which is concerning given that business could potentially slow in the coming year as consumers make fewer online purchases online. due to a possible recession. However, Riskified’s balance sheet is strong: it has more than $500 million in cash and debt-free securities.
Assuming the company’s cash burn rate remains stable, it can subsidize 50 quarters of free cash flow burn with the cash it has. Therefore, Riskified could still be operational after a recession and continue to grow.
That said, investors don’t value it that way: the company’s current market cap is $693 million, but its enterprise value is just $173 million. At this price, investors hardly anticipate any success from Riskified, which could be too pessimistic. Given its value proposition to its customers, the company could be much better than Wall Street thinks right now, and in the long term, Riskified has the potential to see stellar results on the other side of a recession.
When artificial intelligence meets cybersecurity
Trevor Jennewine (CrowdStrike): Businesses are becoming increasingly digital as they strive to improve customer experience and increase operational efficiency. Trends such as cloud computing and the proliferation of software are fueling this digital transformation, but these same trends have also created new attack surfaces for hackers. This made cybersecurity a top priority and CrowdStrike became the gold standard for endpoint (device) security.
CrowdStrike offers 22 different software modules, all delivered through a single lightweight agent that can be installed without rebooting. This sets CrowdStrike apart from other vendors and simplifies adoption for customers. But that’s not the only unique thing about this cybersecurity company. Its platform can also stream security signals to the cloud in real time, where powerful AI models analyze data to predict and prevent cyberattacks.
Even better, management believes its AI models are uniquely effective. As the market leader in endpoint security, CrowdStrike has a data advantage: its platform collects approximately 1 trillion security signals every day, and data is the backbone of good AI. This network effect means CrowdStrike’s AI models are constantly improving, helping the company stay on the cutting edge of threat intelligence.
To that end, CrowdStrike has seen its number of customers increase by 57% over the past year, and spend per customer has increased by more than 20%. In turn, revenue soared 64% to $1.6 billion and free cash flow increased 49% to $481 million.
Looking ahead, shareholders have good reason to be excited. CrowdStrike has a sustainable competitive advantage in a market valued at $58 billion. Even better, CrowdStrike’s product pipeline could grow that figure to $126 billion by 2025. Suffice it to say, there’s plenty of room for future growth, and the company should continue to benefit as companies invest in digital transformation. That’s why this growth stock is worth buying.
Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Antoine Di Pizio has no position in the stocks mentioned. Jamie Louko holds positions at CrowdStrike Holdings, Inc., Nvidia, and Riskified Ltd. Trevor Jennewin has positions in CrowdStrike Holdings, Inc. and Nvidia. The Motley Fool holds positions and recommends Alphabet (A shares), Alphabet (C shares), CrowdStrike Holdings, Inc., Microsoft, Nvidia and Riskified Ltd. The Motley Fool recommends C3.ai, Inc. The Motley Fool has a Disclosure Policy.