It is often said that artificial intelligence lies at the heart of all innovation and future leaps. In the present age, we are already beginning to see the sheer application and capability that this technology brings to us. Automation and robotics, self-driving vehicles, remote healthcare features, and high-power computing; are just a few domains that stand on the verge of being fully revolutionized with the developments in the AI world. After all these developments now investors have also started looking into AI stocks to buy and then earn profits from it.
Market participants have been proactive in betting on the success and growth of the AI phenomenon, which stands positioned to penetrate all areas of operational features. By investing in AI companies that are driving forward innovation in so many different areas, investors could stand exposed to the rocketing growth that this dynamic industry promises. However, with so many AI stocks inundating the stock markets, investors are faced with uncertainty as to which stocks to include within their portfolios. In this article, we present a list of the five top AI companies’ stocks to buy and hold for the long term.
Up first is the Denver-based software provider, Palantir Technologies Inc. (NYSE: PLTR). Established in 2003, and holding a market capitalization of over $20 billion, Palantir is most well-known for its services to intelligence agencies around the globe. Through its deep learning AI tools, its software platforms are capable of identifying dataset patterns which greatly contributes to the resolution of national security issues.
What we find far more promising about this big-name AI stock than its intelligence and security offerings is its contributions to organizational operations, by the offering of a central operating system that enables deep analysis of diverse data streams. Palantir holds a significant competitive advantage in this realm, given its innovative use of both deep and machine learning in this crucial domain. This service is increasingly becoming far more essential for Palantir’s clients which also include government departments.
This feature makes the stock highly resilient and recession-proof. This is due to its essential nature which its clients do not compromise upon even during economic difficulties. This explains why the stock outperformed the wider market during the economic crash of 2008, as well as the subsequent liquidity crisis. PLTR is a stock with a highly robust balance sheet, that shows all the promises of growth, especially in the present climate of a looming recession. which makes it one of the best AI stocks to buy.
The second stock on our list is DocuSign Inc. (NASDAQ: DOCU). The company has long occupied a leadership position in the once fledgling electronic signature market. DocuSign has seen immense growth since its inception in 2003, given how it has essentially perfected the process of preparing, signing, executing, and managing digital contracts.
Given the bearish market conditions experienced this year, DOCU has fallen pretty hard, with the stock trading 80% below its price from a year ago. However, we believe that a rebound is imminent given the promise that DOCU’s AI-focused vision holds. The company is poised to transform beyond being an e-signature specialist, and one that uses artificial intelligence to develop and refine the “agreement cloud” ecosystem. The company’s AI-based solution, CLM aims to achieve exactly this. CLM stands for Contract Lifecycle Management, is set to be a game changer in a world that continues to drift towards full digital mode.
DOCU FY22Q1 Recap
This AI-driven concept of a smart agreement heavily boosts DOCU’s growth prospects. The system would essentially optimize contract amendment, renewal, as well as record tracking. This is ideal for large corporations that typically have to keep track of hundreds of thousands of contracts on a centralized system, and are looking at AI stocks to buy.
At present, DOCU reports almost 900 customers with an average contract value of $300,000. Through feature and service enhancement, the company enjoys a net retention rate of 115%. This makes it ideal to market its AI-driven CLM to clients, which would ensure long-term growth for the stock.
International Business Machines Corporation
Up next, we present the IT sector’s solution-providing giant International Business Machines Corporation (NASDAQ: IBM). IBM has not had the most successful stories among the tech giants. It achieved its all-time high in 2013 and has been on a decline since. This has in large part been due to its failure for adapting to the cloud revolution.
Recently, however, IBM seems poised for a turnaround of epic proportions, and it seems to be aiming for spectacular growth in the coming decade. The core driver of this growth is IBM’s AI and hybrid cloud strategy, which has been made possible by its acquisition of Red Hat. Red Hat is a company that is on the verge of fully revolutionizing cloud computing through AI processes. IBM paid a whopping 60% premium on the acquisition, which the CEO had to come out to publicly defend. This makes sense given that the hybrid cloud opportunity has been reported to exceed over a trillion dollars. Moreover, the synergistic benefits of the acquisition are immense. IBM’s mammoth sales and marketing team could heavily expand the reach Red Hat already enjoys.
Growth Potential in Financial Markets
One area where IBM could boom in particular is in financial markets. Shifting to the cloud has been something banks and financial institutions has been slow at, partly due to strict government regulation, which is why they have been unable to effectively compete against fintech. Red Hat allows a smooth transition to a hybrid cloud through the use of AI, which eliminates the need to rewrite the code. This could prove revolutionary.
IBM is no stranger to the financial markets, as its hallmark AI technology, Watson, is used by 70% of global banking institutions to provide secure and encrypted financial services in a streamlined manner. IBM is poised for a massive boom, one that is likely to take financial markets by storm. This upscale potential is not one anyone would want to miss, if they are looking at AI stocks to buy.
The fourth stock on our list is the microcap voice AI company, SoundHound AI Inc. (NASDAQ: SOUN). Although SoundHound is a relatively unknown name in the world of dynamic AI, it leads in its niche market. Few companies are as good as SoundHound when it comes to high-quality conversational experiences, as well as automatic speech recognition, natural language analysis, and other embedded voice solutions.
Recently, the company completed its merger with Archimedes Tech SPAC Partners, where its valuation was set at over $2 billion. This is an extremely positive sign for investors, as it indicates the strategic vision of the company. Moreover, its operational trajectory in recent years further points to where this company is headed in the future. In 2021 alone, SoundHound had doubled its query traffic from 50 million to 100 million, in a mere 12-month period.
SoundHound taps into a rapidly growing niche. This becomes ever more relevant as the digital realm strives to deliver a human touch to its interactions with consumers. AI-based voice solutions are poised to revolutionize both the world of marketing and customer support. Given the immense upside potential SoundHound holds, it is an ideal AI stock to buy and hold for the long term.
The last stock on our list, but certainly not the least is Lemonade Inc, which trades under the ticker, LMND. There is an old saying which goes, “when life gives you lemons, make lemonade”. Instead, we suggest when life offers you a chance to invest in Lemonade, you do not miss the opportunity.
Few stocks offer as exploding a growth potential as Lemonade Inc. The company is an insurance provider which takes an innovative approach through the use of AI. With artificial intelligence, Lemonade is capable of granting insurance claims in just a few minutes. Insurance approvals come even more impressively in mere seconds. This approach is one that has immense potential. In 2020 the company had a total customer base of 700,000. At present, this figure has grown to one and a half million. This improvement allows the company’s AI systems to optimize their processes, as it improves through learning. The result is a far more efficient insurance underwriting. With this trend continuing, traditional insurance firms are in no match to even compete in the same race as Lemonade.
If this growth trend continues, Lemonade stands highly likely to disrupt the multi-trillion dollar industry. Moreover, the nature of investment is such that it hardly sees a business slowdown, even during times of recession.
Many investors have been increasingly looking to get aboard the dynamic world of AI. Through this, their hope to see their portfolios fly with all the promise it offers. Unfortunately, actually identifying such stocks is difficult, because they are a dime a dozen. Locating the real gems of artificial intelligence is something many have attempted to undertake.
Each of the AI stocks presented in this article holds unique strengths and has stellar growth potential. Of course, it goes without saying that where investors anticipate gains of such colossal proportions, there is the likelihood of loss. However, for those willing to see exposure to a certain degree of risk, the AI stocks presented here are some great options for inclusion within one’s portfolio.