Major companies benefiting from surging demand for artificial intelligence (AI) services include: S&P 500 and Nasdaq Composite Index The stock is set to hit new highs this year, and investors who find the right stocks could make a killing in this fast-growing new industry over the next decade.
Here are two promising stocks that could deliver wealth-building gains for shareholders.
1. C3.ai
C3.ai (NYSE: AI) C3.ai is a leading AI enterprise software developer. Some of the world's largest companies use C3.ai, including the Federal Government. The U.S. Air Force uses C3.ai to predict points of failure during operations and identify spare parts needed for repairs. shell The company uses C3's advanced software to monitor and maintain more than 10,000 pieces of equipment across its energy assets. While the company's stock price has not kept pace with the broader market this year, these relationships with larger companies point to big opportunities in the near future.
The company partners with leading cloud providers, including: Amazon Web Services and alphabetC3.ai's partnerships with Google Cloud have been a boon for the company. These partnerships have been a key driver of growth for the company and have helped reduce friction when acquiring new customers.
C3.ai recently switched to a consumption-based pricing model, where customers pay for the resources they use, which is standard for how cloud service providers price their products. This lowered costs for customers, but revenue growth slowed more than a year ago, but is now starting to recover. Management guidance calls for full-year revenue growth of 19% to 27%, which is helping drive the stock higher.
C3 reports that it continues to see strong interest from many organizations. In its most recent earnings call, the company said it has received nearly 50,000 inquiries from businesses about its generative AI applications, indicating that its shift to a consumption-based model has lowered costs, making the service more attractive to new customers.
The recent acceleration in growth has pushed its price-to-sales multiple to a more reasonable 12 times, down from 16 a year ago. If the company meets sales guidance, the lower valuation could attract more investors, helping propel the stock to new highs later this year.
2. Meta Platform
The revitalization of the digital advertising market Meta Platform (Nasdaq: META) Though the stock has fallen over the past year, it is still trading at a reasonable valuation and could justify further higher prices. Meta is integrating AI services across its social media platforms, which is helping drive revenue growth.
Meta AI has been deployed across Instagram, Facebook, WhatsApp and Messenger and is already helping to increase user engagement, with a bonus increase in advertising revenue, helping Meta Platforms monetize billions of users across their platforms.
Meta's revenue grew 27% year over year in the first quarter, with its AI-driven recommendation system and advertising tools helping drive the company's sales growth.
Investors have worried about growing competition from other social media apps such as TikTok, but Meta's AI infrastructure is becoming a competitive advantage: More than half of the content recommended on Instagram is AI-driven, and short-form videos on Instagram Reels are a big driver of engagement.
Meta has plenty of cash to continue investing heavily in AI. The company generated $49 billion in free cash flow over the past 12 months, and its growth prospects look strong. Analysts expect earnings per share to grow 18% annually over the next few years, and shareholders should see a similar return, given that the stock trades at a market-average forward price-to-earnings multiple of 25.
Should you invest $1,000 in C3.ai right now?
Before you buy C3.ai shares, consider the following:
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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool's board of directors. Randi Zuckerberg, former market development director and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Ballard has invested in Meta Platforms. The Motley Fool has invested in and recommends Alphabet, Amazon, and Meta Platforms. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.
2 Top Artificial Intelligence (AI) Stocks Poised for a Bull Market was originally published by The Motley Fool.
