SPECIAL REPORT The Top 7 Stocks for 2024

Catch the AI Boom: 3 Stocks to Watch Now

Advertisement

  • Artificial intelligence is a booming industry, and these growth stocks stand to benefit.
  • Microsoft (MSFT): A $13 billion investment in OpenAI and the company’s cloud computing solutions benefit from AI.
  • Arista Networks (ANET): The company helps power many artificial intelligence tools and has its own suite of cloud computing and cybersecurity services.
  • ServiceNow (NOW): The company is growing and raising guidance at a time when other firms are worried about a slowing economy.
ai stocks - Catch the AI Boom: 3 Stocks to Watch Now

Source: shutterstock.com/Nadya C

Artificial intelligence (AI) is revolutionizing workplaces and productivity. This technology is giving consumers and businesses more possibilities.

The artificial intelligence boom is in its early innings, and companies are rushing to capitalize on the technology. The winners in this industry can reward shareholders with generational gains. 

While Nvidia (NASDAQ:NVDA) has become the center of the AI boom, there are many other companies that benefit. These corporations can offer better solutions for their customers and increase revenue with AI-powered resources.

Investors looking to get exposure to the AI boom may benefit from adding these three stocks to their portfolios. 

Microsoft (MSFT)

Microsoft logo close up. Microsoft (MSFT) Flagship Store Fifth Avenue, Manhattan, NYC.
Source: The Art of Pics / Shutterstock.com

Microsoft (NASDAQ:MSFT) is a tech conglomerate that gives investors exposure to various verticals. The company got started with computers, but it has expanded into other innovative technologies like AI.

Microsoft made a $13 billion investment in OpenAI and uses artificial intelligence to enhance its cloud computing services. The investments in artificial intelligence combined with the strong demand for Azure helped Microsoft generate 24% year-over-year revenue growth from its cloud segment

The entire business achieved 13% year-over-year revenue growth with net income jumping by 27% year-over-year. Microsoft continues to grow at a fast pace while other big tech companies like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) are slowing down or warning about future slowdowns. 

Microsoft’s investments in AI can lead to more gains. Shareholders have enjoyed many gains over the years to the tune of a 210% stock price jump in five years. Shares are also up by 37% year-to-date and have a dividend yield closing in on 1%.

Arista Networks (ANET)

Image of Arista Networks (ANET) logo on the side of a building
Source: Sundry Photography / Shutterstock.com

Arista Networks (NYSE:ANET) has outperformed Microsoft year-to-date, bringing in a 45% gain. Shares are also up by 173% over the past five years and trade at a 32 P/E ratio. 

Arista Networks offers solutions for graphic processing units. These GPUs help form the backbone of artificial intelligence. Arista switches help artificial intelligence tools achieve higher performance and scale out to serve more users.

Arista’s AI Spine supports the complex bandwidth requirements of artificial intelligence tools. However, there’s more to Arista than artificial intelligence. The company also has cloud computing and cybersecurity solutions. This setup allows companies to easily access data points and optimize workflows while protecting themselves from hackers.

Arista uses its Zero Trust Networking service to give clients more protection. The company has many large clients which include Microsoft, Dell (NYSE:DELL) and VMware (NYSE:VMW).

Arista has been maintaining strong double-digit year-over-year revenue and earnings growth. The company has posted a 30% net profit margin or higher over the past several quarters.

ServiceNow (NOW)

ServiceNow office building in Silicon Valley;
Source: Sundry Photography / Shutterstock.com

ServiceNow (NYSE:NOW) has been another winner for long-term investors. The company has gained 43% year-to-date and has more than tripled over the past five years. Shares currently trade at a 72 P/E ratio.

Artificial intelligence has been a boon for the cloud computing company. AI has led to an increase in multimillion-dollar deals and helped the company hire an additional 2,000 workers. While most companies have been slowing down, ServiceNow has been speeding up, increasing their workforce, and gaining market share.

Just like Microsoft and Arista, ServiceNow is profitable and features enticing growth rates on the top and bottom lines. The company exceeded third-quarter guidance and raised its guidance for the rest of the year.

The optimism comes on the back of 25% year-over-year revenue growth. Net income more than tripled year-over-year and helped the company achieve a double-digit net profit margin. 

ServiceNow looks to have a bright future. The company has many high-paying clients and raised its guidance when other companies are warning about economic uncertainty. ServiceNow has a good history, and the recent earnings report suggests there’s more upside for this stock.

On this date of publication, Marc Guberti held a long position in ANET. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.


Article printed from InvestorPlace Media, https://investorplace.com/2023/11/catch-the-ai-boom-3-stocks-to-watch-now/.

©2024 InvestorPlace Media, LLC