Back in the 2010s, the talk of the town was “the cloud.” Projections turned out to be correct, with spending on public cloud usage soaring from $31 billion in 2015 to nearly $200 billion in 2023. Both Microsoft’s Intelligent Cloud and Amazon’s Amazon Web Services have generated hefty revenues, propelling their stocks to total returns of over 900% since 2015.
But now, all eyes are on artificial intelligence (AI). Experts claim it will be as transformative as the internet. The International Monetary Fund predicts it will impact nearly 40% of global jobs, while data from Statista forecasts the AI market will increase sixfold from $300 billion this year to over $1.8 trillion by 2030.
Today, we’ll take a closer look at four companies harnessing the growth in AI with the potential to reward investors handsomely over the next several years.
Palantir’s AI Innovations
The buzz around Palantir is well-deserved. The company’s focus on managing, analyzing, and utilizing data to optimize decision-making has solidified its position in the AI industry. Its latest product, Artificial Intelligence Platform (AIP), targets both the defense and private sectors, deploying on the customer’s network and leveraging large language models (LLMs).
Historically a strong performer in defense revenue, Palantir has been profitable on a generally accepted accounting principles (GAAP) basis for the fifth consecutive quarter. While its stock currently trades at 25 times sales, the company’s AI credentials are top-notch, making it a promising long-term investment.
UiPath: Automating Tasks with RPA
UiPath specializes in robotic process automation (RPA), automating tedious and non-value-adding tasks. With over 10,800 customers providing $1.4 billion in annual recurring revenue (ARR), the company has showcased impressive sales growth and maintains a strong balance sheet.
Although facing stiff competition in a fragmented industry, UiPath’s potential to save companies significant sums of money through task automation positions it as a substantial long-term beneficiary of this trend. Its stock, trading at 11 times sales, represents a reasonable value in the industry.
Evolv Technologies’ Security Innovation
With a market cap of less than $1 billion, Evolv Technologies introduces technology that could potentially be a lifesaver and a lucrative investment opportunity. The company’s AI-powered detectors offer a more efficient and effective security experience for venues, with multiple people able to walk through simultaneously while the detectors identify potential threats.
Schools, hospitals, and stadiums stand to benefit from Evolv’s technology, evident in the company’s strong financial performance with a reasonable market cap of $676 million trading at 10 times ARR.
Amazon: Incorporating AI into its Business
It’s no surprise that Amazon is in the AI game. Known for its online marketplace, the company will undoubtedly leverage AI to further enhance its offerings, with AWS leading the way as the world’s leading cloud platform.
Amazon’s AI Advancements Propel Stock Gains
Cloud-Based Artificial Intelligence
Amazon, a leading cloud service provider, has announced a major push in artificial intelligence (AI) capabilities. The company will be leveraging its cloud infrastructure to support AI software that demands extensive data inputs. Moreover, Amazon has expanded its suite of AI solutions, including offering foundational models for users to customize their AI applications.
Financial Performance and Stock Analysis
Amazon’s Q4 2023 earnings report has astounded investors with impressive results. The company witnessed a staggering 14% surge in total revenue, reaching $170 billion. Additionally, there were notable increases in cash flow and operating income. Despite the positive financial performance, the stock continues to trade below its five-year average, based on sales and cash flow metrics.
AMZN PS Ratio data by YCharts
Investment Insights
The advances in AI are positioned to drive Amazon’s future growth, offering promising prospects that are likely to resonate with investors for years to come.
Considerations for Investors
Investors eyeing Palantir Technologies might be prompted with a purported investment opportunity. However, it is important to note that the recent selections by the Motley Fool Stock Advisor analyst team didn’t include Palantir Technologies among its top picks. The service espouses comprehensive guidance on constructing an investment portfolio, regular updates from analysts, and bi-monthly stock recommendations. Intriguingly, the Stock Advisor service has remarkably outperformed the S&P 500 since 2002.
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