3 Artificial Intelligence Stocks That Could Be Millionaires

By | December 19, 2023

robotic hand pushes buttons on the laptop keyboard

robotic hand pushes buttons on the laptop keyboard

When it comes to artificial intelligence (AI), much of the attention has been on larger companies such as Nvidia or Microsoft. That is understandable, given their technical capabilities and financial resources.

Nevertheless, some smaller AI stocks also have significant potential for long-term growth. To that end, investors should consider three smaller companies that are driving transformation through AI.

1. Super microcomputer

In addition to AI, Super microcomputer (NASDAQ: SMCI) innovates in the cloud, enterprise, metaverse and 5G worlds. The company describes itself as a “rack-scale total IT solutions provider” and offers combined hardware and software solutions, creating AI-enabled servers, switches, storage systems and other products. Super Micro also places an emphasis on energy efficiency and reducing environmental impact, manufacturing its products primarily in the US

Despite a relative lack of brand recognition, the company operates in more than 100 countries, and its rapid growth has attracted increasing attention from investors.

While revenue of $2.2 billion grew 14% in the first quarter of fiscal 2024 (ended September 30), fiscal 2023 revenue rose 37%. Supply constraints and capital expenditures weighed on the company in the first fiscal year.

These challenges led to net income declining to $157 million, compared to $184 million in the prior year quarter. Still, that temporary setback hasn’t deterred investors, who have bid the share price up more than 200% over the past year.

That puts its price-to-earnings ratio at just 27. Furthermore, its $16 billion market cap recently moved to large-cap status. That market cap may not guarantee it will create millionaires, but it does leave Super Micro at a size where investors can take advantage of its massive growth potential.

2. UiPath

UiPath (NYSE: PAD) is a company specialized in robotic process automation (RPA). RPA applies robotics and software to perform repetitive tasks. Admittedly, performing repetitive tasks has long been a goal of programming.

However, UiPath has held its own with its end-to-end platform, which connects the company’s software to enterprise products and applications. That has companies like Nielsen to help drive digital transformation or a retailer that used the company’s RPA to process almost all of its invoices.

It has also earned sales over competitors by fostering a UiPath community. In this community, millions of professionals in the development space create and share applications within the company’s ecosystem.

Growth continues as UiPath earned $903 million in revenue in the first nine months of 2023, up 20% from 12 months ago. The company has also slowed cost growth despite reporting operating losses. Still, operating losses fell to $124 million in the first three quarters of the year, compared with $301 million in the same period a year ago.

With that growth, UiPath stock is up 90% over the past twelve months, and its price-to-sales ratio (P/S) of 12 is still near an all-time low. With a market cap of just $15 billion, it’s small enough to potentially make investors millionaires as more customers turn to RPA technology.

3. Upstart

Start-up holding companies (NASDAQ: UPST) has leveraged AI to develop a loan evaluation tool. If successful, it could take away market share Honest Isaacof which the FICO score has been the standard for credit ratings since 1989.

But without a major update to FICO, Fair Isaac has left the industry ripe for disruption. According to Upstart, the AI-driven solution can approve 44% more loans without increasing risk, meaning it could serve as an agent for change.

The stock fell as much as 97% from 2021 highs as rising interest rates wiped out Upstart’s massive revenue growth. But now Chairman Jerome Powell indicated that the Federal Reserve would cut rates three times in 2024, which could lead to a recovery.

Yet that recovery has not yet occurred, as revenue of $408 million fell 46% in the first nine months of 2023 compared to the same period in 2022. While Upstart ramped up spending on engineering and product development, net losses rose to $198 million in In recent years. first three quarters, well above the $53 million lost in the same period a year ago.

With a recent rise in the share price, the price-to-earnings ratio is now 7, which is well below 2021 highs. Still, a market cap of around $4 billion makes it a mid-cap stock, and assuming lower interest rates will come back down. translate into increased demand for loans, this could bode well for Upstart as banks look for ways to safely approve more loans.

Should You Invest $1,000 in Super Micro Computer Now?

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Will Healy has positions at Upstart. The Motley Fool holds positions in and recommends Microsoft, Nvidia, UiPath, and Upstart. The Motley Fool recommends Fair Isaac and Super Micro Computer. The Motley Fool has a disclosure policy.

3 Artificial Intelligence Stocks That Could Be Millionaire Makers was originally published by The Motley Fool

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