The three best artificial intelligence (AI) stocks to buy now include an internet retail titan, a revolutionary e-signature platform and a cutting-edge digital marketing startup.
AI is not a thing of the future, since the term “artificial intelligence” was coined back in 1956 and the technology already affects much of our day-to-day lives. The artificial intelligence space is filled with buzzwords such as machine learning and predictive analytics but centers on training machines to make decisions better and quicker than humans.
Google uses AI to improve users’ search results, and Tesla’s self-driving cars run on artificial intelligence. However, we have not even realized the tip of the AI iceberg as a society.
AI will likely be as revolutionary as the internet by advancing tasks such as drug development and providing digital tutors for students to improve stock selection. The artificial intelligence industry, worth $35.9 billion in 2020, is projected to reach $360.4 billion in market size by 2028 to achieve a compound annual growth rate (CAGR) of 33.6%.
The power and potential of artificial intelligence mean every major technology company is working on its development. AI is so prevalent across the technology sector that it can be challenging to find the best investments. Luckily, we have cut out most of the legwork for you. Here are the top three best artificial intelligence stocks to buy now.
3 Best Artificial Intelligence Stocks to Buy Now: #3
DocuSign Inc. (NASDAQ:DOCU)
DocuSign Inc. (NASDAQ:DOCU), founded in 2003 and headquartered in San Francisco, California, is the developer of Agreement Cloud, a cloud-based software platform that allows users to digitally sign legally binding documents from any device. The company has a market capitalization (market cap) of $53.8 billion.
Although it may seem strange that an investment in an e-signature platform is even remotely related to artificial intelligence, DocuSign is one of the best stocks available in the AI space.
In May 2020, DocuSign officially finalized its purchase of Seal Software, a company specializing in AI-driven contract analytics, for $188 million. The acquisition allows DocuSign to dramatically reduce legal legwork and contract processing times for its customers by providing better risk and opportunity analysis through Seal Software’s AI.
1 of the 3 Best Artificial Intelligence Stocks to Buy Now Aided by Acquisition
The company had already been repackaging and selling Seal’s services as DocuSign Intelligent Insights since 2018. The company currently offers purpose-built AI models for clause writing and AI-driven analyzers to identify risk points in a contract. The purchase allows DocuSign to provide considerably more resources to Seal’s AI development than the company had access to when it was independent. Combined with its 2017 deal to hire talent and technology from machine learning company Appuri, DocuSign aims to push AI-drive contract analytics to its furthest potential by automating and streamlining as much of the tedious contract negotiation and writing process as possible.
DocuSign has cornered approximately 70% of the e-signature market. The company provides services to 40 million users and 90% of Fortune 500 companies. Already the leading provider of e-signature services, Seal Software puts DocuSign well ahead of the competition.
DocuSign’s e-signature dominance has yielded incredible results. In the three years since DocuSign’s initial public offering (IPO) in 2018, the company has seen a 43.9% average annual jump in revenue and a 394.2% return for shareholders. Furthermore, the company is expected to see a sales growth of 43.6% this fiscal year, ending January 31, 2022, and a 29.2% increase next fiscal year. As a result, DOCU has seen a 34.8% jump in share price over the trailing 12 months. DOCU’s upward movement is charted below alongside a 50-day moving average.
Chart provided by Stock Rover.
Like many technology startups, DocuSign remains unprofitable. However, its rapid growth means it is projected to reach profitability by the end of 2024. DocuSign is already profitable on a non-Generally Accepted Accounting Principles (GAAP) basis, which mainly excludes shareholder compensation expenses. With more than $800 million in cash on its balance sheet, the company is here to stay.
A discounted cash flow (DCF) analysis, using Stock Rover, values the stock at $314.25 per share, 14.8% higher than its latest closing price of $273.65, earning DOCU a “STRONG BUY” recommendation from Stock Rover and a place among our three best artificial intelligence stocks to buy now.
3 Best Artificial Intelligence Stocks to Buy Now: #2
The Trade Desk Inc. (NASDAQ:TTD)
The Trade Desk Inc. (NASDAQ:TTD) is dedicated to making advertising easier and more effective by allowing marketers to create, manage, optimize and track digital advertising campaigns from its cloud-based platforms. The company, founded in 2009 and headquartered in Ventura, California, possesses a market cap of $33.9 billion
The rise of the internet has opened a brand new world of digital advertising to marketers. Despite the COVID-19 pandemic, more than $370 billion was spent on digital advertising globally in 2020. The industry is expected to rake in $645.8 billion by 2024. Digital advertising has allowed marketers to reach billions of individuals and tailor their ads to specific market segments in ways unavailable to traditional print and television marketers. However, the age-old question of where to market still perpetuates digital advertisers.
The Trade Desk seeks to solve this problem by using its Koa artificial intelligence platform to analyze data from the internet to help advertisers reach their target audience. Despite only being launched in 2018, Koa can already run over 600 billion search queries per day, more than 100x humans’ daily global search volume.
Koa, Magagon Help Trade Desk Join 3 Best Artificial Intelligence Stocks to Buy Now
In conjunction with Koa, The Trade Desk also launched Megagon in 2018. Megagon is a software platform that uses data and results from the Koa AI to provide marketing recommendations and insights. In the three years since the launch of Koa and Megagon, The Trade Desk has seen an average sales growth of 39.6% and a return rate of 396.8%.
Seeking to push Koa’s abilities further, The Trade Desk unveiled its new Solimar marketing platform in July 2021. Solimar is designed to pair with Koa and allow marketers to onboard their first-party data and real-time ad performance tracking.
Koa generates and analyzes data from previous marketing campaigns, Megagon compiles the data to create recommendations for advertisers and Solimar tracks the progress and results of the advertising campaign.
Technology Trifecta Boosts 1 of 3 Best Artificial Intelligence Stocks to Buy Now
The trifecta of Koa, Megagon and Solimar will catapult The Trade Desk to the top of the AI-marketing world. The company is projected to continue the strong growth with a 39.9% jump in revenue in 2021 and a 28.2% increase in 2022. Investors have already taken notice of TTD’s historical solid performance and future potential. The stock has seen its price surge by 62.9% over the past 12 months. TTD’s one-year performance is displayed below alongside a 50-day moving average.
Chart provided by Stock Rover.
It is undeniable that The Trade Desk is a pricey stock. TTD currently possesses a (share) price-to-earnings (P/E) ratio of 136.4. However, it is a small price to pay for a company with as much potential as The Trade Desk.
Despite being founded only 12 years ago, The Trade Desk has been profitable ever since its IPO in 2016. The company’s net income has grown exponentially since then, from $20 million in the year of its IPO to $242 million in 2020, a CAGR of 86.51%. Profitability is only expected to trend further upward for TTD, with earnings-per-share (EPS) forecast to grow by another 15.7% over the next four quarters. The S&P 500 and software application industry are projected to average 11.4% and 9.4% growth over the next year, respectively. As a result, TTD has achieved a near-perfect Stock Rover profitability quality score of 99/100.
A discounted cash flow (DCF) analysis, using Stock Rover, values the stock at $91.02, 25.1% higher than its latest closing price of $72.74, earning TTD a “BUY” recommendation from Stock Rover and a place among our three best artificial intelligence stocks to buy now.
3 Best Artificial Intelligence Stocks to Buy Now: #1
Amazon.com, Inc. (NASDAQ:AMZN)
Amazon.com, Inc. (NASDAQ:AMZN) is a multinational conglomerate founded in 1994 and headquartered in Seattle, Washington. The company has several business segments, from e-commerce to cloud computing to artificial intelligence. Amazon possesses a market cap of $1.77 trillion and is the largest internet retailer in the world. Amazon has slowly been incorporating artificial intelligence into its business model, from Alexa to Amazon Web Services (AWS).
Although Amazon is best known for its e-commerce business, Amazon Web Services is one of its most profitable business segments. AWS is a cloud solutions platform that offers services, from server hosting to data analytics. Created in 2002, Amazon Web Services boasts clients such as Netflix, Verizon, Intel and even the U.S. government. AWS generated $14.8 billion in revenue during the first quarter of 2021, a 32% growth from Q1 2020.
Amazon Web Services provides a host of AI services, from simple text-to-speech machine learning programs to software platforms SageMaker and Rekognition. SageMaker allows users to design and build custom AI-driven models to their liking, while Rekognition machine learning-based image and video analysis detects inappropriate content, conducts user verification and performs people counting. SageMaker has been proven to increase team productivity 10x and reduce costs by up to 90%, while Rekognition has seen action with companies like PBS, Pinterest and Aella Credit. SageMaker has become one of Amazon Web Service’s fastest-growing products in history.
Machine Learning Helps Leader of 3 Best Artificial Intelligence Stocks to Buy Now
Amazon has also invested in Databricks, a data and AI company that uses machine learning to provide forecasting and consultation services to companies. Beyond AWS and Databricks, Amazon also uses artificial intelligence to improve its users’ Alexa and website search results. Amazon may seem like a scaled-up online retailer to most consumers. In reality, it is a highly sophisticated technology company.
Amazon has seen a jump in the stock price as consumers flock to online retailers during the COVID-19 pandemic, including a 13.3% increase over the past year. However, analysts are confident that AMZN is worth a lot more. The company is forecasted to experience a 23.4% increase in sales in 2021 and an 18.4% increase in 2022 as the global economy recovers from the pandemic. AMZN’s performance over the past year is shown below alongside a 50-day moving average.
Chart provided by Stock Rover.
Although most blue-chip companies have seen their days of rapid growth come and go, Amazon is the exception. The company has a 352.0% five-year rate of return and possesses a perfect 100/100 Stock Rover growth score. The industry average growth score for internet retailers is 53. Amazon is also expected to see its EPS grow by an additional 26.1%, well above the rest of the S&P 500. Sometimes the best investments are also the most obvious investments.
A discounted cash flow (DCF) analysis, using Stock Rover, values the stock at $4,176.59, 20.0% higher than its latest closing price of $3,479.03, earning AMZN a “STRONG BUY” recommendation from Stock Rover and a place among our three best artificial intelligence stocks to buy now.