Artificial intelligence (AI) is often used as a buzzword when companies are trying to sell their product. They often have some form of AI, but it really isn’t as much of a game-changer as it is hyped up to be. However, three businesses with real AI products making a difference in the industry are Nvidia ( NVDA -2.46% ), CrowdStrike ( CRWD -0.25% ), and C3.ai ( AI -9.82% ).
This trio of stocks is highly diversified and gives investors three different avenues to approach an investment in AI. Nvidia provides the hardware powering AI technology, CrowdStrike uses AI in cybersecurity, and C3.ai’s tools help enterprises predict the future across a massive organization. When deployed correctly, artificial intelligence can make a huge difference in a product, and each of these businesses achieves that.
Nvidia grew its business on the back of the graphics processing unit (GPU) invented by the company in 1999. At first, the GPU was used for computer graphics but found expanded uses in parallel computing and then AI. A key concept of AI is deep learning (the way computers gain knowledge), and GPUs process and compute the information fed into them to power these models. By investing in Nvidia, you are a direct beneficiary of AI implementation everywhere.
As one of the leading technology companies, Nvidia’s 2022 fiscal year (ending Jan. 30, 2022) results were strong. Revenue grew 61% to $26.9 billion over last year, but quarterly revenue growth slowed to 53% year over year. Its AI sales are wrapped into its data center division, which grew faster than overall revenue at a 71% year-over-year pace. In its fourth-quarter presentation, Nvidia highlighted its data center growth was led by strong demand for AI products.
Nvidia’s AI technology is being used by many firms, including Meta Platforms, which recently announced it was building its AI research SuperCluster with Nvidia’s products. A broad approach to AI investing can be taken by purchasing Nvidia’s stock. With it down around 30% from its all-time high, now could be a great time to buy.
Changing to a more application-based investment, CrowdStrike provides cybersecurity solutions with its cloud-based offering. Through its Falcon platform, customers are protected by software that sees more than 1 trillion events per day. CrowdStrike then uses AI to learn from these attacks and continuously evolves the program, so when a customer in France sees an attack, a different company is protected from a similar threat in the U.S.
With threats of cyber attacks from foreign powers like Russia in retaliation for sanctions against them, cybersecurity has never been more important. One of the weapons used against Ukraine was a wiper malware that destroys files from computers, something CrowdStrike protects against.
Some of the most important companies in the world utilize CrowdStrike, with 15 of the top 20 banks and 65 of the Fortune 100 companies deploying CrowdStrike’s software. CrowdStrike’s Q4 (ending Jan. 31, 2022) results were great, with quarterly revenue of $431 million growing 63% over the prior year. Additionally, it was free-cash-flow positive and converted 30% of revenue into $127 million of additional cash.
With customers growing 65% year over year to 16,325 and annual recurring revenue up 65% to $1.7 billion, CrowdStrike’s business is executing on all levels. The company represents a great way to invest in the application of AI, and the cybersecurity industry has never been more relevant.
Fully grasping the complexity of a multi-billion dollar business is nearly impossible. However, with the aid of computers, management can make well-informed decisions. C3.ai’s tools allow data scientists to deploy prebuilt and configurable AI applications to support a business in many ways, such as supply chain management, energy efficiency, and customer engagement.
The company’s tools are recognized as some of the best available. Omdia ranked C3.ai top on its list of machine-learning development platforms. It was also found to increase developer productivity by 26 times, by cutting the amount of code required by nearly 99% on Amazon Web Services (AWS) when deploying AI solutions.
C3.ai is a young company founded in 2009 and only has 218 customers as a result. Still, this is up 82% year over year and drove Q3 (ending Jan. 31, 2022) total revenue to $69.8 million, increasing by 42% over the prior year. It also landed a five-year, $500 million contract with the U.S. Department of Defense.
The company has a long way to go before turning a profit, as its operating margin was negative 22%, although this was an improvement from last year’s Q3 number of negative 24%. It will take C3.ai some time, but if its best-in-class solutions are adopted across the industry, it could be a fantastic investment.
These three companies are in different business stages. If investors are creating an AI basket, this trio seems like a great place to start, with each company well off its all-time high.
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Today could be a great time to enter a position in these businesses with a mindset of holding the stocks for three to five years. Artificial intelligence is making a difference in the world today, and investors should take notice.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.