The artificial intelligence (AI) market is rapidly growing in North America and the world. The novel coronavirus pandemic has only exacerbated the need for AI leading to explosive growth rates. That makes AI stocks excellent prospects for any portfolio.
With the industry projected to exceed $200 billion by 2026, you would want to gain exposure to the sector sooner rather than later.
Several companies are working in the field of natural language processing, machine learning, and analytical tools. Some are pure-play AI stocks. At the same time, there are others like Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), who already have several established business lines, with artificial intelligence serving as an additional business area.
What you choose depends on your risk appetite. Here are four names that you can ponder over if you are looking to power your portfolio with some great AI stocks:
AI Stocks to Buy: Salesforce (CRM)
The cloud-based software company Salesforce.com provides customer relationship management service. It also sells a complementary suite of enterprise applications that involve marketing automation, analytics, customer service, and application development.
Basically, its business model is Software as a service (SaaS). It’s done quite well, judging from the fact that the annual revenue of Salesforce reached $17.1 billion in its 2020 fiscal year, a record high. The good times are expected to continue, with revenue estimates of $20.80 billion and $24.49 billion for 2021 and 2022, respectively.
Now, where does AI fit in? Well, the Salesforce AI team has come up with Einstein, a ready-made tool that can help you immensely in your marketing efforts. At the heart of it, Salesforce is a CRM (customer relationship management) product that salespeople use to manage their leads. Hence, it makes sense that users will want some way to sift through that data and come up with something valuable in short order.
Einstein does that through a little add-on column at the far right of the basic Salesforce screen. It will tell you what lead is most likely to close out of the choices that you have. Thereafter, you will know which leads to pursue, based on the predictive models.
CRM stock has a 12-month price target of $278 a pop and an 8.5% upside to its current price. Find a better price point to enter this one, but there’s no doubt that the company is doing exceptionally well.
San Francisco-headquartered DocuSign allows organizations to manage electronic agreements. That is the simplest way to put it, but there is so much more to this company. Founded in 2003, DocuSign is basically a stock tailor-made for the post-pandemic world.
As businesses increasingly adopt work from home protocols, they still need to get the essential office assignments done. That involves signing and reading through agreements. You might look at an agreement and notice something wrong. That will prompt you to make changes and print a fresh copy. All of that takes time, effort and money.
That is where DocuSign will help you. The AI models that it has built can analyze your document and make sure nothing needs editing. Once it’s satisfied, you can review, sign, store, and retrieve these agreements from cloud-based servers.
As you can imagine, this is one of the best AI stocks you can buy. It’s up more than 182% this year. I spoke about the many merits of investing in this one back in June. My investment thesis remains intact. Despite its robust trajectory over the last three months, there is still room for DOCU stock to grow more. The stock has a 12-month price target of $251 per share, an 18.4% upside to the current price.
Slack Technologies (WORK)
Chances are pretty high that if you’ve worked in an office setting, you’ve probably heard of Slack, if not used it. The software is ubiquitous these days, with more than 50,000 companies paying to use it for workplace collaboration. Launched publicly in 2014, it has over 12 million daily active users.
Understandably, the company is not alone in that Facebook, Google, and Microsoft, with their large existing user bases, have all released office collaboration tools as well. However, none of them manages to get the kind of user activity that Slack does. It’s estimated that Slack has an average user sends 70 messages per day. Revenue is expected to top $1 billion in fiscal 2022. Not bad, considering the company is still relatively new.
Now, let’s talk about AI and how it’s revolutionizing how we will use Slack. As you can imagine, a lot of users interact with Slack products every day. That means there is a lot of data available from each interaction. Data that can be manipulated to create better services. For instance, Slack is working on prioritizing the messages you receive. Its software runs predictive models to sift through your messages and then make its best bet on what will interest you.
There is also one other thing that the company is working on. Management can use Slack to understand what employees are focusing on, what interests them and break that down in terms of geographies and demographics.
WORK stock is trading under $27; shares have a 52-week high of $40.07 a pop.
Facebook has been quite controversial in its use of AI. It has always intended to use more AI to moderate its platforms. Anything you see on your feed is increasingly curated to make sure you interact with the information you find interesting. Machine learning is at the heart of this move since it wants to become completely objective in administering the feeds.
Posts that violate the company’s rules are flagged, either by users or machine learning filters. They are then either dealt with automatically, removing a post or blocking an account, or going into a queue for review by human moderators, about 15,000 employed worldwide.
I won’t talk valuation here because FB stock is pretty much always going to trade at premium multiples. But AI is definitely increasingly used by Facebook in their products and services. So, it would help if you kept that in mind when investing in this FAANG stock.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. He has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.