Top AI Stocks to Watch: Investors Eye Potential in Artificial Intelligence Market

Got $3,000? 3 Artificial Intelligence (AI) Stocks to Buy and Hold for the Long Term | The Motley Fool

Despite short-term market concerns, these companies stand a lot to gain long term from AI developments. There has been no shortage of artificial intelligence (AI) talk in the past two years. In fact, some would probably argue that there has been too much AI talk recently. Whether it's social media, company earnings reports, or financial media, there hasn't been a hotter topic in the tech and business world than AI. For companies, AI has the chance to improve efficiency and increase innovation. For investors, AI presents a unique opportunity to capitalize on the growth of the technology. If you're part of the latter group and have $3,000 available to invest, putting $1,000 into each of these three stocks is a choice that could pay off well in the long run. Microsoft (MSFT 0.20%) has taken a smart approach to AI, developing a strategic partnership with OpenAI, the developer of the ultra-popular ChatGPT. The partnership between the two involves a trade-off: OpenAI gets to use Microsoft's cloud platform, Azure, for its infrastructure and computing ability, and Microsoft gets to integrate OpenAI's AI models into its products and services. The outsourcing versus in-house approach is smart because it doesn't tie up a lot of Microsoft's resources (talent and money) in developing large language models and other relevant AI technology. OpenAI has solidified itself as a leader in AI research and development, and it took billions of dollars and years to get to that point. Sure, Microsoft has the talent and bank account to develop AI in-house, but this partnership looks to be a more efficient route. It also allows Microsoft to spend its time and resources on integrating these AI models into its products and services, which are already some of the best available. Countless companies and people use Microsoft's Office products (Excel, Teams, PowerPoint, etc.) and devices, and adding AI capabilities should boost up its competitive advantage and appeal and continue the great path its financials have been on for quite a while now. While many tech companies were seemingly racing to develop and showcase their new AI capabilities, Apple (AAPL 0.71%) took a much more patient stance. Some investors critiqued this approach, saying Apple was falling behind, but I'd argue it was on brand for a company known for being intentional with its plans. Apple recently unveiled its version of AI: Apple Intelligence. Like other AI tools, Apple Intelligence is designed to seamlessly integrate into Apple's state-of-the-art hardware products like iPhones, iPads, and Macs and enhance the user experience. Apple's bread and butter has always been hardware, accounting for close to 72% of its revenue in its latest quarter (ended June 29). However, a slowdown in the smartphone market has caused Apple's revenue growth to slow noticeably from past years. With the iPhone accounting for around 46% of Apple's revenue, it's easy to see the correlation. Apple Intelligence will only be available in Apple's next-gen products releasing this fall, so the hope is that the allure of the new AI-powered products will give Apple's financials a nice boost as consumers upgrade devices to have access to the features. Well, I think it's safe to say cybersecurity company CrowdStrike (CRWD -0.65%) has seen better days. After a faulty software update sparked the largest global IT outage in history, investors hopped off the CrowdStrike train and sent the stock plunging. Its stock is now down over 40% in the past month. Despite the biggest mishap in company history, the one silver lining is that the problem wasn't caused by CrowdStrike's product being ineffective. It's one thing for a software update to go left; it's a completely different story for a premier cybersecurity company to fall victim to a cyberattack. Luckily, the former only seems true. CrowdStrike is one of the pioneers of pure AI-based cybersecurity solutions, and it has attracted many big-name customers because of its effectiveness. It was placed highest for its ability to execute in endpoint protection (endpoint devices like smartphones, computers, smart devices, etc.), and this hasn't changed because of its software update incident. The short term has a lot of questions for CrowdStrike -- including how many customers choose to jump ship (I don't think many will) -- but it still seems to have great value for long-term investors. This is especially true considering the stock is the cheapest it has been since December 2023, giving investors a much more attractive entry point. The total addressable market for cybersecurity is huge, and CrowdStrike should be a pivotal player in the industry for quite a while.

3 Artificial Intelligence Stocks I'm Buying on the Dip | The Motley Fool

These three stocks can prove to be compelling picks for astute investors. Since the launch of OpenAI's famous chatbot, ChatGPT, the artificial intelligence (AI) revolution has taken the investment world by storm. While the initial euphoria seems to have died down somewhat, the power of this investment trend is far from over. A few prominent AI stocks seem to be witnessing a pullback on investor concerns about the monetization potential of their AI capabilities and ongoing investments in AI infrastructure. However, considering the companies' robust fundamentals and healthy financials, this dip can prove to be an attractive entry point for astute investors. Here's why these three AI stocks are smart picks after the current dip. The first AI stock that could be a smart pick on a dip is technology giant Microsoft (MSFT 0.20%). Although the company beat revenue and earnings estimates in the fourth quarter of its fiscal 2024 (ended June 30), the stock is currently down by almost 5.7% since it released its earnings results on July 30. Investors seem worried about several risks including the company's capacity constraints for AI services, which are impacting Azure's growth in the short run; heavy investments in building AI infrastructure; some softness in European markets; and increasing competition. However, the weak investor sentiment does not seem justified in the long run. Azure and other cloud services revenue soared 29% year over year in the fourth quarter, while AI services accounted for a healthy 8 percentage points of this growth. Microsoft expects Azure growth to accelerate in the second half of fiscal 2025, as the company's investments will help increase AI capacity to match demand. Azure AI ended the fourth quarter with 60,000 Azure AI customers, up 60% year over year, and with a rising average spend per customer. Microsoft has integrated the AI Copilot assistant in several product offerings, including the Microsoft 365 productivity suite, GitHub developer tools, Dynamics 365 business application, the low code/no-code Power platform, and cybersecurity services. The company has also integrated advanced AI capabilities into the Windows operating system and its devices to launch Copilot+ PCs, considered the fastest and most intelligent PCs today. The ongoing AI revolution is expected to drive productivity and efficiency for the company's customers, while boosting Microsoft's revenue in the long run. Microsoft's revenue was up 16% to $245 billion, while operating income soared 24% year over year to $109.4 billion. Hence, considering its multiple AI-driven catalysts and strong financial management, the stock seems like an interesting opportunity in the current environment. The second AI stock to buy on a pullback is software-as-a-service (SaaS) workflow and project management software player Monday.com (MNDY 14.78%). The company helps businesses organize and manage workflows collaboratively. Even after dipping by almost 9% in the last month, the stock is still up by 15% in 2024. Monday.com enjoys significant pricing power, which is evident from the stable net dollar retention rate of 110% and low customer churn rates in the first quarter, despite implementing pricing changes. These pricing revisions are expected to contribute $25 million to 2024 revenue. Monday.com has also launched new products, such as the Monday Sales CRM and Monday Dev, further helping expand its customer base. The company has also introduced features such as AI automation, smart columns, and AI-powered templates. These features will enable clients to integrate AI capabilities in their daily workflows, and further encourage adoption of the company's platform. The financial prospects of Monday.com also continue to be strong. The company is guiding for revenue of $942 million to $948 million (implying year-over-year growth of 29% to 30%) and non-GAAP (adjusted) operating income of $77 million to $83 million (implying an operating margin of 8% to 9%) in 2024. Monday.com is also expected to generate free cash flow of $238 million to $244 million in 2024, translating into a very healthy free-cash-flow margin of 25% to 26%. Finally, the company had nearly $1.2 billion in cash and negligible debt on its balance sheet at the end of the first quarter of 2024. Considering its strong operational performance and robust financials, Monday.com may prove to be a smart buy now. The third AI stock to purchase on the dip is database management technology specialist Oracle (ORCL 0.39%). The company has rapidly risen to prominence in the current era of cloud computing and AI and is now competing with the likes of Amazon, Microsoft, and Alphabet. Oracle Cloud Infrastructure (OCI) has emerged as the most prominent growth driver, driven by increasing demand for data centers designed for complex AI and machine learning workloads. OCI is considered faster and more cost-effective in training large language models than competitors. Oracle has made its cloud software, operating system, and database fully autonomous --implying that chances of human error are nil, thereby enhancing the security of its cloud infrastructure. The robust demand for OCI is apparent, considering the company entered into 30 AI contracts, worth over $12 billion in the fourth quarter of fiscal 2024 (ended May 31). Oracle's partnerships with Microsoft Azure and Alphabet's Google Cloud enable it to benefit from customers' multi-cloud strategies. This allows enterprises to use Oracle technology to migrate on-premise databases to the cloud, either to OCI or databases hosted on Azure or Google Cloud. Revenue for the company's cloud database services grew 26% year over year in the fourth quarter, and they now have an annual run rate of $2 billion. The company expects cloud database services to be another major growth catalyst in the coming years. Oracle reported a solid 44% jump in remaining performance obligations (order backlog) to $98 billion at the end of the fourth quarter. This implies that the company's financial performance can be impressive in the coming quarters. Despite these pros, the stock is trading at a very reasonable 17.8 times forward earnings. Hence, investors should pick up at least a small stake in this solid AI stock now.

3 Artificial Intelligence (AI) Stocks That Could Go Parabolic | The Motley Fool

These innovative companies are embracing the power of AI in a significant way. Most investors are familiar with the artificial intelligence (AI) usual suspects. Semiconductor powerhouses like Nvidia and software companies like Microsoft have soared recently thanks to the market's enthusiasm for AI stocks, and they can very well continue to fly higher. However, there are other AI stocks that have the potential for exponential growth in the coming years. Growth investors with their eyes on AI stocks, therefore, will want to pay particular attention to Nano-X Imaging (NNOX -2.89%), Riskified (RSKD), and Rubrik (RBRK -1.45%). It doesn't happen often, but when innovations in radiology emerge, they often represent a seismic shift. And that's exactly what Nano-X Imaging, or Nanox, is attempting to accomplish. The company's Nanox.ARC is a revolutionary X-ray imaging device that is smaller, simpler, and more affordable than traditional X-ray machines. Deployment of the Nanox.ARC system has proceeded slower than management initially expected, but the company is making progress, deploying systems in five states in 2023. With respect to AI, Nanox provides AI solutions for interpreting patients' scans. Dubbed Nanox.AI, the company's FDA-cleared AI solutions help to identify patients at risk of several ailments, including coronary artery disease, musculoskeletal disease, and fatty liver. AI superpower Nvidia, itself, is an investor in Nanox, which gives it some street cred, but there are still risks inherent with an investment in Nanox as there's no certainty that the company will gain widespread adoption among healthcare providers. Investors should gain better insights when it reports second quarter financial results on Aug. 20. Should it report greater deployment of its Nanox.ARC systems, the market will certainly take notice. While many companies have jumped on the AI bandwagon only recently, Riskified has been employing AI solutions for more than a decade. Debuting on the markets with its initial public offering (IPO) in July 2021, Riskified characterizes itself as the "only publicly held AI fraud and risk intelligence company." In other words, Riskified helps e-commerce companies -- with its AI tools -- reduce operating expenses and improve customer experiences. The companies that Riskified counts as its customers represent a veritable who's who of industry leaders -- from electronics leaders like Acer to footwear leaders like Steve Madden to furniture retailers like Wayfair. Although founded back in 2012, Riskified still has a massive market opportunity. In 2023, for example, Riskified reviewed more than $123 billion in gross merchandise volume (the gross total dollar value of orders reviewed through its risk intelligence platform). This is a fraction of the estimated $5.8 trillion in global e-commerce sales in 2023 and projected $7.9 trillion in global e-commerce in 2027. Reporting free cash flow of $3.7 million for the first time in the third quarter of 2023, Riskified generated free cash flow of $7.1 million in Q4 2023 and $10.5 million in Q1 2024. With no debt and rising free cash flow, Riskified represents a massive growth opportunity that offers a lower degree of risk. Celebrating a little more than three months on the public market, Rubrik is a cybersecurity specialist that held its IPO in April. The company offers a comprehensive solution for organizations looking to protect their data through Rubrik Security Cloud. Built on a zero-trust architecture, Rubrik Security Cloud protects data at whatever level it exists: across the enterprise, in the cloud, and in software-as-a-service (SaaS) applications. Because its architecture combines data and metadata, Rubrik is able to better recognize data security threats and provide sophisticated data recovery with the assistance of AI and machine learning. A reliable green flag for Rubrik is growth in its annual recurring revenue (ARR), a sign that customers are embracing Rubrik's subscription model. And Rubrik has this in spades. In the first quarter of 2025, Rubrik reported ARR of $856 million, representing year-over-year growth of 46%. Should Rubrik extend its ARR growth through fiscal 2025 and make progress toward generating positive free cash flow, shares of the cybersecurity specialist should rise. Semiconductor manufacturers are certainly a valid way to invest in AI, but there's more than one way to skin the AI cat. Nanox, Riskified, and Rubrik are all embracing AI in various ways to enhance their offerings to customers. For investors with the greatest tolerance for risk, Nanox represents a tremendous growth opportunity. Those who are more conservative, on the other hand, will want to consider Riskified as it is already generating free cash flow. And investors with an interest in cybersecurity will certainly want to investigate Rubrik further.