Artificial intelligence (AI) has become a buzzword for almost every business when it comes to promoting their products and services. What was once the domain of a few tech companies is now ubiquitous in automobiles, drug development and customer service. But not all AIs are created equal.
That’s why I decided to pick the best tech-applying stocks right now. Reached Holdings (NASDAQ: UPST), The To exchange Office (NASDAQ: TTD), and CrowdStrike (NASDAQ: CRWD) were obvious choices. These companies don’t just use technology, they’ve built their businesses around it. And it creates differentiated solutions that fuel tremendous growth and great returns for shareholders. Here’s how they did it and what to expect.
1. Holdings upstart
Upstart is fast becoming a Wall Street darling. This will happen when a stock rises 974% in the first nine months after its IPO. It uses AI and machine learning to make better lending decisions. Don’t take management’s word for it. The Consumer Financial Protection Bureau issued the agency’s first no-action letter to the company in 2017. It doubled with another late last year. It’s a one-of-a-kind green light for its AI-powered lending product. The agency cited 27% more borrowers with access to credit and 16% lower interest rates.
It’s a win-win for borrowers and lenders. The company now has 150 financial institutions using its AI-based product. That said, two of them represent 83% of its trading volume. It is a trend towards more diversification. But it’s a number that investors will want to see decrease as the business matures.
Growth has been off the charts. Since its IPO last December, it has seen revenue growth of 90% and 1,018% year-over-year. This second quarter comparison was at the depths of the pandemic. But don’t think that easy comparison denies accomplishment. Management is forecasting $ 750 million for the full year, 221% more than last year.
To top it off, the business is profitable. It has already posted $ 0.63 per share in earnings this year. This profitable growth is expected to continue for the foreseeable future. The company is diversifying from its personal loan business to car loans. Management estimates that this is six times more important than personal loans and possibly even more ineffective. It is a recipe for continued growth and profits. And that should be good for shareholders with a long term horizon.
2. The trading post
When someone says AI in advertising, it is natural to think of promotions in Facebookthe news feed from where Amazon determine what to serve you next. The industry has advanced far beyond that, and The Trade Desk is leading the charge. Its cloud-based self-service platform helps advertisers manage their ad campaigns from creative to analytics across virtually any digital platform and device.
The platform integrates AI – where it makes sense and transparently – to decide how to set goals and optimize a campaign. It helps use the data to link marketing goals and business results – something notoriously difficult in advertising.
The turnover for the past 12 months has exceeded $ 1 billion. That’s up 56% from 2019. And like Upstart, it’s making a profit. The company generated a net profit of $ 263 million in the past year. That number has jumped 144% from the year before the pandemic. The stock followed suit. It has risen 500% since the start of 2019, despite falling more than 45% from its peak on two occasions during that time. It is down almost 30% from its current high.
Much of the volatility is due to the uncertainty surrounding cookies – small chunks of data that a website places on a user’s computer to track and remember in order to personalize content. AlphabetGoogle announced in January 2020 that it would block third-party cookies. It looked like it would cause upheaval in the industry, especially for The Trade Desk. Google has since announced that it will delay implementation until the end of 2023.
Still, The Trade Desk has a solution. It already has an approach called Unified iD 2.0. It is an open source framework using encrypted email addresses. For its part, Google said it has no plans to support email identification. However, with sufficient support, it may not matter.
Many major advertisers and brands have announced they will adopt UID 2.0 and the cloud data platform Snowflake even said it would support it within its data market. With growing adoption, The Trade Desk may find itself more entrenched in the world of digital advertising – a place long-term shareholders should love.
3. Crowd strike
Moravec’s paradox is that it’s easy for computers to do things that are very difficult for humans, but difficult for them to do things that we find easy. This is why a computer can do calculations infinitely faster than a person, but can have difficulty recognizing a face. The same goes for cybersecurity.
CrowdStrike uses machine learning models and behavioral analytics to proactively detect and research threats to its customers’ networks. Its Falcon platform monitors one trillion signals per day in real time across the lifecycle, from desktops and servers to cloud networks, mobile devices and the Internet of Things. This is what we find difficult. It does all of this while an in-house team of experts use human judgment to monitor, verify, evaluate and respond to incidents.
The result is ever smarter threat protection. It constantly integrates the data of each of its customers to strengthen its AI and detect threats to all of its customers. Naturally, this led to rapid adoption by customers.
For the first six months of this year, the company increased revenue 72% year-over-year to $ 641 million. For the year as a whole, he forecasts sales of $ 1.4 billion. Although it is losing money under generally accepted accounting principles (GAAP), it has generated over $ 459 million in operating cash in the past 12 months.
An important factor is the fact that customers spend more and more over time. An impressive 66% of its customers pay for four or more modules. This has led to a retention of net income – what customers spend compared to the previous year – of more than 120% for the first three quarters of 2021.
CrowdStrike is a leader in a critical function that is quickly becoming a top priority in many corporate meeting rooms. With hypergrowth, deep penetration into client operations, and a financial profile that heralds future profitability, this is one of the best artificial intelligence stocks to add to a portfolio right now.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.