The economic downturn in the past year has showcased the importance of dedicating a significant portion of your portfolio to quality growth stocks. Companies equipped with strong fundamentals and part of high-growth markets can help investors derive outsized gains over the long term and help safeguard their equity portfolio from massive declines.
In 2023, Wall Street is extremely bullish on the artificial intelligence (AI) megatrend. In fact, according to research reports, this disruptive sector is forecast to expand by 37% annually through 2030, surpassing US$1 trillion in the process.
The AI hype has been primarily focused on early movers such as Nvidia and Microsoft, which have delivered significant gains to shareholders in 2023. Here are three other stocks AI-focused investors can buy today.
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Snowflake stock
A cloud-based data warehousing company, Snowflake (NYSE: SNOW) allows enterprises to mobilize data at scale. Despite a sluggish macro environment, Snowflake increased product sales by 37% year over year in the fiscal second quarter (Q2) of 2023 (ended in July). Its net revenue retention rate stood at 142% in Q2, which suggests existing customers increased spending by 42% in the last 12 months.
Over 402 customers spend at least US$1 million annually on the Snowflake platform, enabling Snowflake to report sales of US$674 million in Q2, up from US$497 million in the year-ago period. In Q2 of 2023, the number of customers spending US$1 million annually on Snowflake was just about 250.
Unlike several other growth stocks, Snowflake reports a positive cash flow, which increased to US$375 million in the last two quarters, up from US$150 million in fiscal 2022.
CrowdStrike stock
A major cybersecurity player, CrowdStrike (NASDAQ: CRWD) offers a wide array of solutions built on its AI-powered Falcone cloud platform. Its solutions include threat intelligence, security ops, and endpoint. Basically, an endpoint connects devices to a computer network, and the rapid expansion of connected devices will act as a tailwind for CrowdStrike in the upcoming decade.
CRWD ended the last quarter with US$2.7 billion in annual recurring revenue or ARR, an increase of 42% year over year. It also reported a free cash flow of US$677 million in fiscal 2023, while it increased by 44% to US$227 million in Q1 of 2024 (ended in April).
CrowdStrike’s customer retention rate has stood at 97% since 2019, and existing customers have increased spending by 20% in the last four years.
Docebo stock
The final AI stock on my list is Docebo (TSX: DCBO), which is down 47% from all-time highs. Valued at a market cap of $2 billion, Docebo provides an AI-powered e-learning platform for enterprises.
Analysts expect sales to rise from $191 million in 2022 to $300 million in 2024. Its adjusted earnings are forecast to more than double from $0.28 per share to $0.67 per share in this period. The work-from-home trend should drive demand for Docebo’s portfolio of solutions higher in the upcoming demand.
Docebo recently announced it has partnered with Alphabet’s Google Cloud, which will enhance the former’s ability to train enterprise workforces with generative AI technologies.
Moreover, Docebo is also poised to commercialize its solutions to transform the delivery of personalized learning at scale via this partnership.
