Artificial Intelligence's Future Lie in Software: One NOTABLE AI Company to Invest in Before 2025, as Perceived by Wall Street's Analysts
Investors should consider artificial intelligence (AI) in three distinct stages. Stage one is centered around high-performance semiconductors and networking equipment essential for constructing supercomputing infrastructure. Nvidia has largely ruled this phase, but companies like Broadcom and Arista Networks have also gained from it.
The second phase revolves around cloud providers offering infrastructure and service platforms required to design conversational copilots, autonomous agents, and other AI applications. Cloud giants such as Microsoft, Amazon, and Alphabet have excelled in this phase, as have platform providers like Palantir.
The third phase involves software vendors integrating hardware and cloud services from the preceding phases with their exclusive data and technical expertise to create AI applications. Analysts at UBS believe this phase holds the most significant monetization potential. Although these phases don't exclude each other, they build upon one another.
Currently, we are moving into the third phase, but this does not mean the first two phases have concluded. However, the third phase would not be realistic without the fundamental hardware and cloud services. Wall Street favors Salesforce in the AI software sector. The stock has a consensus rating of buy, and the median price target is $415 per share, which represents a 24% increase from the current share price of $336.
Information that investors should be aware of:
Salesforce introduces new AI-driven software for agents
Salesforce has maintained its dominance in the customer relationship management (CRM) field for over a decade. In 2024, the company accounted for nearly 22% of the market revenue, surpassing its four main competitors combined, according to International Data Corp. (IDC). Salesforce also ranked first in several individual CRM software categories, including sales, customer service, and marketing.
Earlier this year, Salesforce launched Agentforce, a platform that employs digital labor powered by AI. The utility of Agentforce extends beyond that of conversational copilots by incorporating advanced reasoning abilities to make decisions and take action, such as resolving customer cases, qualifying sales leads, and optimizing marketing campaigns.
Since its inception, Salesforce has introduced two agentic AI products: Agentforce Service Agent and Agent Builder. The former is a customer-facing conversational interface capable of automating customer service workflows, while the latter allows businesses to build custom AI agents. Salesforce continues to innovate, as it recently announced new features and use cases collectively known as Agentforce 2.0, with most of them set to release by February 2025.
CEO Marc Benioff believes that Agentforce 2.0 positions Salesforce ahead of competitors like Microsoft in the competition to automate labor and increase worker productivity. "The demand for Agentforce has been remarkable," he stated in the press release. "No other company comes close to offering this comprehensive AI solution for enterprises."
Salesforce experienced early success with Agentforce in Q3
Salesforce released impressive financial results in Q3 of fiscal 2025, which concluded in October 2024. Despite falling short of earnings estimates, revenue increased 8% to $9.4 billion, primarily due to robust growth in sales and customer service software, with non-GAAP earnings rising 14% to $2.41 per diluted share.
During the Q3 earnings call, Brian Millham, Salesforce president and COO, highlighted strong demand for Data Cloud and Agentforce. Data Cloud is the fundamental layer that consolidates information from different clouds (i.e., sales, service, and marketing). This data then supports decisions made by autonomous agents.
Currently, 25% of Fortune 100 companies are Data Cloud customers, which paves the way for strong Agentforce adoption in subsequent quarters. In fact, Salesforce closed over 200 Agentforce deals in Q3, even though the platform was launched just before the quarter ended. Benioff also informed analysts that the pipeline is in the thousands.
Shareholders should be encouraged by this development. Spending on AI agents is projected to grow at a 45% annual rate through 2030, according to Grand View Research.
Salesforce stock appears expensive, but investors should still consider buying
Analysts forecast Salesforce's adjusted earnings to grow at 12% annually through fiscal 2026, which ends in January 2026. Although this consensus estimate makes the current valuation of 35 times adjusted earnings seem expensive, analysts may raise earnings estimates if Agentforce sees strong adoption.
Investors comfortable with volatility can purchase a small position today. However, better buying opportunities may arise in the future. Consequently, interested investors and current shareholders should be ready to buy the stock on a dip. Personally, I would be more interested in Salesforce if the share price fell by 15% to 20%.
In light of Salesforce's success with Agentforce, investors might consider allocating some of their investment funds towards purchasing Salesforce stocks. The company's robust growth in sales and customer service software, coupled with the strong demand for Data Cloud and Agentforce, indicates potential for further growth.
Furthermore, the increasing spending on AI agents, projected to grow at a 45% annual rate through 2030, according to Grand View Research, suggests that investors who believe in the potential of AI and Salesforce's position in this market might find the current valuation of the stock appealing, despite being considered expensive by some analysts.
