3 Must-Own AI, Cloud, and Data Stocks to Buy for the Long Haul


  • Invest in these three AI, cloud, and data stocks that offer long-term growth potential with promising prospects.
  • Automatic Data Processing (ADP): A leading provider of human capital management solutions.
  • SPS Commerce (SPSC): Its cloud-based supply chain solutions are driving strong partnerships and consistent revenue growth.
  • Data Storage Corporation (DTST): A scalable cloud storage and IT management services company securing major contracts and expanding margins.
AI, Cloud, and Data Stocks - 3 Must-Own AI, Cloud, and Data Stocks to Buy for the Long Haul

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AI, cloud, and data stocks have been exploding over the past few quarters. The rally many of these companies have seen so far is more than just hype. Indeed, many such companies are seeing their data segments balloon. In fact, cloud and data are becoming the driving factors behind the growth many companies see today.

That said, you should avoid certain AI, cloud, and data stocks that are trading at stretched valuations. These stocks could tumble significantly (and many already have), as AI startups seek to improve on their cash burn and the market no longer finds big AI breakthroughs as exciting.

This is why I think it is better to invest in more long-term players that already have a big and well-established customer bases, but also have lots of future growth to offer. Here are three to look into right now.

Automatic Data Processing (ADP)

Robot hand touching fingertips with human hand through a screen. represents ai and machine learning stocks
Source: Shutterstock

Automatic Data Processing (NASDAQ:ADP) is a well-known provider of human capital management (HCM) solutions that help organizations streamline HR work. Companies are still hiring en masse, and the jobs market remains strong. Even tech companies started to hire more after the slump seen over the past two years.

All of these factors explain why ADP delivered impressive revenue growth of 6.6% and adjusted earnings per share growth of 14.3% in Q3 FY2024. The margins here are also remarkably solid.

ADP margins
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Source: Chart courtesy of GuruFocus.com

ADP’s ongoing investments in their core technology platforms are clearly paying off, with client retention reaching new highs. I believe ADP’s ability to incorporate artificial intelligence capabilities like ADP Assist will be a key advantage going forward.

The company is the go-to in HCM, so I think ADP is well-positioned to thrive in this AI-driven era of business transformation. It’s not the fastest-growing AI and cloud company, but its performance so far has been more than satisfactory.

SPS Commerce (SPSC)

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SPS Commerce (NASDAQ:SPSC) provides cloud-based solutions to assist companies in coordinating their supply chains. The company posted revenue growth of 19% year-over-year, reaching $149.6 million.

The company is collaborating with software providers like Acumatica, and has recently enhanced its integration with a SAP product. The company’s partnerships usually have very long runways. This is evidenced by the SPS’ two decades of work with Canadian Tire. Thus, the company’s top line is very sticky and consistent, and so is the stock’s performance.

SPS seems to be set up well for continued momentum going forward, especially as large retail chains without AI or software expertise are starting to make an effort to automate big portions of their supply chains.

All things considered, SPS’ strong initial performance this year sets the stage for solid performance throughout 2024. Analysts expect revenue growth to remain around 15% annually, with similar growth rates seen on the company’s bottom line. This should drive the stock higher at a similar pace.

SPSC price and EPS
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Source: Chart courtesy of GuruFocus.com

Data Storage Corporation (DTST)

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Source: solarseven/Shutterstock

Data Storage Corporation (NASDAQ:DTST) provides cloud storage and IT management services to a range of corporate clients. The company also has a data recovery segment. I’ve been covering this business for a long time, and the stock has definitely delivered so far. My conviction has only gotten stronger as Data Storage lands more contracts.

In Q1, revenue grew 19.7% year-over-year to $8.2 million. The company’s gross profit margin also expanded significantly, growing from 30% to 36%. Data Storage has a very scalable business model, with the ability to handle increased workloads in a cost-effective manner.

The management team at Data Storage seems to be making smart strategic moves. They consolidated their flagship cloud division, CloudFirst, to streamline operations and better cross-promote related services to customers. This strategy appears to be paying off, as Data Storage secured some major new clients recently. For example, the company expanded a long-term relationship with a “large international telecommunications provider.”

I’m especially optimistic about Data Storage’s new deal with a top U.S.-based insurance corporation. This Fortune 500 company selected the company to migrate their entire internal IT infrastructure to the cloud using Data Storage’s managed IT services and security solutions.

With profitability already achieved in the first quarter and a demonstrated growth trajectory, I believe DTST stock is well positioned for continued upside going forward as the company’s management team executes on their long-term strategic plan.

On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

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