Three Sizzling Growth Stocks Leveraging AI Technology

Three Sizzling Growth Stocks Leveraging AI Technology

Artificial intelligence (AI) has been the dominant growth theme in the market since ChatGPT reached 100 million monthly active users in January 2023. There has been a lot of discussion about companies supporting AI, but less is said about companies that are successfully investing in AI. And by monetizing it.

here’s why Metaplatforms (NASDAQ:META), UiPath (NYSE:PATH)And Trimble (NASDAQ:TRMB) are three AI Actions It’s worth thinking about now.

Three Sizzling Growth Stocks Leveraging AI Technology

Image source: Getty Images.

Meta Takes to the Next Level with AI

Daniel Foelber (Metaplatforms): Chip giants like Nvidia provide the backbone of treatment needed to run complex AI models. While the semiconductor industry has been at the center of the AI ​​growth narrative, the whole story falls apart if companies don’t monetize AI.

It’s one thing to invest in AI and another to profit from it. Meta-platforms are one of the best and most easily understood examples of what successful investment in AI looks like.

Social media apps make money from advertising, and advertisers want to see high user engagement and targeted messages. An advertisement is useless if it reaches the wrong audience and if people do not visit the platform regularly.

Instagram Reels is a great example of how Meta has leveraged AI in a short period of time. Not long ago, Meta stock hit its lowest level in several years as TikTok posed an existential threat. Meta released its short Reels video counter to combat TikTok. Reels was announced in August 2020 but was not a big success from the start.

For Reels to complement TikTok, Meta needed to keep users engaged with the content they loved. This algorithm was much more complex than classic Instagram, which consisted more of a user choosing who they wanted to follow and then viewing recently posted content simply based on who they followed. Reels focused on preferences rather than a linear timeline.

Meta is investing heavily to make its platforms more attractive to users. However, the other side of the equation is just as important: giving advertisers and content creators the tools they need to supercharge their messages. To quote CEO Mark Zuckerberg during Meta’s Q4 2023 earnings call:

In the future, major goal, we will create the most popular and advanced AI products and services. And if we succeed, everyone who uses our services will have a world-class AI assistant to help them get things done, every creator will have an AI for their community to interact with, every business will have an AI for their customers to interact with will be able to interact to buy goods and get help, and each developer will have a cutting-edge open source model to build with.

These investments come at a high price. Meta spends by far the most on research and development (R&D), relative to its revenue, than the major tech stocks. Based on data from the last 12 months, Meta allocates more than $0.28 of every dollar of sales to R&D. But so far, it has more than justified those expenses.

With a forward price-to-earnings ratio of 24.3, Meta is surprisingly affordable for a stock up 150% over the last year and crushing the market year-to-date.

UiPath helps other businesses work smarter with artificial intelligence

Scott Levine (UiPath): Up nearly 43% over the past year, UiPath stock has given investors plenty of reasons to celebrate. The company, a leader in enterprise automation solutions, may not have the same name recognition as other AI specialists, but that doesn’t mean investors haven’t celebrated the company’s achievements. the company. UiPath recently announced strong financial results for the fourth quarter of 2024 and provided an encouraging outlook for fiscal year 2025.

From healthcare to manufacturing to insurance, UiPath helps customers across various industries increase productivity and efficiency by providing automation solutions. For software companies like UiPath, measuring annual recurring revenue (ARR) is a valuable way to evaluate a company’s performance.

UiPath defines this as its ability “to acquire new subscriber customers and maintain and expand our relationships with existing subscriber customers.” Looking at the company’s financial results for Q4 2024, it appears that UiPath is excelling, ending FY 2024 with $1.46 ARR, a 22% year-over-year increase. Management expects further growth in 2025, forecasting ARR of $1.725 billion to $1.730 billion.

Another auspicious sign for UiPath is its growing cash flow. While revenue growth is important, it doesn’t mean much if the company isn’t able to translate sales into cash — something it has been doing consistently for over a year.

PATH CFO per share (TTM) chartPATH CFO per share (TTM) chart

Management also expects its cash flow to improve in fiscal 2025. It forecasts adjusted free cash flow to increase from $309 million in fiscal 2024 to $350 million. dollars in fiscal year 2025.

Trimble’s growth is just beginning

Lee Samaha (Trimble): At the heart of AI revolutions is the idea that massive amounts of data can generate continuous actionable insights to improve real-time decision-making. This argument clearly defines the case for buying Trimble stock.

The industrial technology company’s origins date back to high-precision positioning hardware used in navigation systems. Nonetheless, its future lies in combining this hardware with software and services that analyze and model data and help improve its customers’ daily workflows.

For example, construction/infrastructure projects can be precisely managed to help reduce waste and cost/time overruns that the industry is known for. Architects and planners can improve building/project design and planning. Additionally, projects can be better maintained using AI data analysis to more accurately predict potential issues.

Truck fleet routes can be optimized for transportation to help reduce fuel costs and improve schedules. Farmers can make more informed decisions and accurately plan planting, maintenance and harvesting in agriculture. In the geospatial domain, Trimble solutions can facilitate urban and infrastructure planning.

The move to relatively higher software and services revenues improves Trimble’s profit margins and cash flow generation and will likely create significant value for shareholders. Even though some of its end markets continue to face challenges in 2024, Trimble continues to grow its underlying recurring revenue at a double-digit rate, and the future remains bright for the company.

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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool posts and recommends Meta Platforms and UiPath. The Motley Fool recommends Trimble. The Motley Fool has a disclosure policy.

3 Scorching Growth Stocks That Capitalize on AI was originally published by The Motley Fool

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