Approximately 2 Million-Generation Wealth-Crafting Artificial Intelligence (AI) Shares
Artificial Intelligence (AI) has taken over the financial scene on Wall Street. It's been the talk of the town in the stock market since last year, and rightfully so.
Analysts at Statista estimate the AI sector will rake in approximately $184 billion this year, and it's set to skyrocket to over $826 billion by 2030, boasting a nearly 30% annual growth rate.
The very same experts identified machine learning as the chief driver of AI's growth. Machine learning imbues AI with a semblance of intelligence, enabling it to analyze colossal amounts of data for trends and patterns.
Some intriguing growth stocks hold the potential to create significant life-changing wealth for long-term investors. Don't dismiss AI just yet; chances are, it's still in its infancy stages.
Take a gander at these two coveted AI stocks primed for long-term investment:
1. CrowdStrike Holdings
Cybersecurity isn't a novel industry, but cyber threats have become more refined, costing businesses billions in damages. The elevated stakes have opened up opportunities for advanced security from trailblazers such as CrowdStrike Holdings (CRWD 3.36%). CrowdStrike's Falcon XDR platform operates in the cloud, employing machine learning to seek out potential threats.
If you're familiar with CrowdStrike, you may recall its mishap this past summer, releasing a faulty update that sparked a worldwide IT meltdown. There's a chance this cringeworthy episode may impact the company's growth in the short term, but so far, the damage appears minimal. Management projects $3.9 billion in revenue for the full fiscal year, signifying a robust 27% increase from the previous year.
This company specializes in endpoint security but has steadily broadened its horizons. Leadership believes its total addressable market will expand to $250 billion by 2029 – meaning, CrowdStrike only controls a paltry 1.5% of its long-term market share.
The company is already swimming in profits. It has generated $1.1 billion in free cash flow over the past four quarters, padding its finances with roughly $3.5 billion in cash (net of debt). These are the building blocks of a company destined to bolster shareholder returns via share repurchases.
The stock isn't a steal, with shares trading at a premium compared to its industry peers, as gauged by enterprise value to revenue. Consequently, consider buying at a slower pace, and get more assertive when the market takes a dip. CrowdStrike is a long-term triumph with a potentially expansive growth trajectory that could turn long-term investors into millionaires.
2. Snowflake
Data is arguably the cornerstone of machine learning, making Snowflake (SNOW 2.99%) a pivotal player in the AI sphere.
Maybe you've encounter the phrase "garbage in, garbage out"? Data must be properly structured for machine learning applications. Snowflake allows companies to store, categorize, and search their data through a cloud-based platform. They can also tap into third-party data sources through the company's marketplace.
Snowflake went public during a stock market frenzy in late 2020. Slowing revenue growth, a CEO switch, and competition from Databricks plagued the stock in the ensuing four years, causing it to plummet nearly 60% from its peak. Given its rocky few years, investors might be skeptical about my optimism regarding Snowflake. However, the good news is that things are starting to turn around.
The company employs a usage-based billing system, which works exceptionally well, considering data proliferates at an exponential rate. This means Snowflake gets more use and more revenue with each passing day.
Essentially, it builds in high net revenue retention (NRR) into its business model. Snowflake's NRR was 127% in the third quarter, signifying that existing customers increase their spending significantly once they start using the service. The customer count swelled by 20% during the third quarter and now collaborates with 754 of the Forbes Global 2000 companies. With these trends, total revenue growth might average or surpass 20% for an extended period.
So, yes, it stings that the stock hasn't performed well, but the focus should be on the future. Snowflake's price-to-sales multiple stood at a staggering 183 at its peak. Today, that's dropped to 16. It's still not the most wallet-friendly offer on Wall Street, but a fair valuation gives clients a plausible chance at gaining investment returns as the company develops. Snowflake's solid footing in the AI realm, where data is continuously generated, could make it a colossal force in years to come, leading to a compelling payday for investors.
In light of the impressive growth projected for the AI sector, savvy investors might consider allocating some of their money towards long-term investments in AI-focused companies. For instance, CrowdStrike Holdings, with its innovative Falcon XDR platform, is harnessing machine learning to combat cyber threats, potentially offering substantial returns to investors.
Moreover, investing in data-centric companies like Snowflake, which enables seamless data management for machine learning applications, could prove to be a wise decision in the long run. As data proliferates, Snowflake's usage-based billing system and high net revenue retention rate could bode well for its future growth.
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