Artificial intelligence (AI) has invaded Wall Street. It’s the hottest topic in the stock market since early last year, but the hype is justified.
Experts at Statista estimate that the AI industry will be worth around $184 billion this year and is expected to reach more than $826 billion by 2030, an annual growth rate of nearly 30%.
These same experts identified machine learning as the most important contributor to the growth of AI. Machine learning makes AI feel intelligent, allowing it to analyze large amounts of data for trends and patterns.
Some top growth stocks have the potential to create life-changing wealth for investors over the long term. Remember: AI is probably still in its early chapters, so don’t assume it’s too late.
Consider these two potential millionaires AI Actions buy and hold for the long term:
Cybersecurity is not a new industry, but cyberattacks have become increasingly sophisticated and cause millions of dollars in damage. The raised stakes have created opportunities for next-generation security from companies like CrowdStrike Titles(NASDAQ:CRWD). The company’s Falcon XDR platform runs in the cloud, using machine learning to scan for potential cyber threats.
If you’re familiar with CrowdStrike, you may know that it released a faulty update over the summer that caused a global computer outage. It may take a few quarters to confirm that this embarrassing incident won’t hinder the company’s growth, but so far, so good. Management is forecasting revenue of just over $3.9 billion for its entire fiscal year, representing growth of 27% from the previous year.
The company specializes in endpoint security, but has continued to expand its platform. Management estimates that its total addressable market will reach $250 billion by 2029. In other words, CrowdStrike still only has about 1.5% of its market in the long term.
And the business is already very profitable. It generated $1.1 billion in free cash flow over the last four quarters, swelling its balance sheet to about $3.5 billion in cash (net of debt). These are the ingredients of a company that will ultimately increase shareholder returns by gobbling up stock with stock buybacks.
The stock is not cheap; The stock trades significantly higher than its industry peers, as measured by company value relative to revenue. Therefore, consider buying slowly and becoming more aggressive when the market as a whole declines at any given point. CrowdStrike is a long-term winner with a potentially decades-long growth runway that could make long-term investors very rich.
Data is arguably the most crucial ingredient in machine learning, highlighting Snowflake(NYSE: SNOW) as a mission-critical company in the AI industry.
Have you ever heard the expression “garbage in, garbage out”? Data must be well structured for machine learning applications. Snowflake allows businesses to store, organize and search their data through a cloud platform. They can also pull data from third-party sources through the company’s marketplace.
Snowflake went public at a valuation that was way too high during a stock market bubble in late 2020. Slowing revenue growth, a CEO change, and competition from Databricks haven’t helped the stock over the past four years. , and it is still down almost 60%. of its peak. Given the rough few years the company has had, investors might be surprised by my optimism about Snowflake. The good news is that things are improving.
The company operates a usage-based billing model, which is great because the data grows exponentially. More data means more usage on Snowflake and more revenue.
This essentially creates high net revenue retention (NRR) in the business. Snowflake’s NRR was 127% in Q3, meaning existing customers are spending a lot more once they start using it. Customer numbers grew 20% year-over-year in the third quarter and the company now works with 754 of the Forbes Global 2000 companies. With these trends, total revenue growth could hover around 20% or above for a long time.
Sure, it stinks that the stock hasn’t performed, but it’s about looking to the future. Snowflake’s price/sales multiple was 183 at its peak! Today, there are only 16 left.
It’s still not the cheapest you’ll find on Wall Street, but a realistic valuation gives investors a reasonable chance of a return on their investment as the company grows. Snowflake’s strong foothold in the AI space, where data is created exponentially, could make it a massive company within a few years, an outcome that could make investors a lot of money.
Have you ever felt like you missed the boat by buying the best performing stocks? Then you will want to hear this.
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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Justin Pope has no position in any of the stocks mentioned. The Motley Fool posts and recommends CrowdStrike and Snowflake. The Motley Fool has a disclosure policy.
