Three Up-and-Coming Artificial Intelligence (AI) Developments and Strategies for Capitalizing On Them

Three Up-and-Coming Artificial Intelligence (AI) Developments and Strategies for Capitalizing On Them

If you're optimistic about artificial intelligence (AI), there are numerous ways to capitalize on the opportunities in the tech sector; it's not solely about chipmakers. To capitalize on long-term trends in AI, there are other types of stocks that offer exposure to some potentially lucrative growth opportunities in the near future.

Research firm Gartner has pinpointed several AI trends that will dominate the next few years. Three stocks that could potentially benefit from these trends are Workday (WDAY -1.17%), CrowdStrike (CRWD -2.76%), and SAP (SAP -1.32%). Here's why these could be fantastic AI stocks to invest in and hold onto.

1. Workday

There's widespread concern that AI could lead to job losses. Gartner anticipates that by 2026, roughly one-fifth of companies will restructure their organizations, partially thanks to AI. Companies that do this will streamline their operations, reducing costs and complexity, making automation even more appealing.

One company that stands to gain significantly from this trend is Workday, which provides companies with cloud-based enterprise applications for HR and finance functions. Workday is leveraging AI to enhance processes and claims it can help minimize errors and modernize finance, contributing to more efficient operations and built-in checks and balances, reducing the need for manual review and oversight to an extent.

There are numerous growth opportunities for Workday, which has already become a go-to software solution for many businesses looking to automate and improve their operations. With strong profit margins around 20%, its earnings are likely to soar along with its revenue as demand intensifies.

The tech stock currently trades at a reasonable forward P/E multiple of 29 (based on analyst expectations) and could be a terrific buy for AI investors.

2. CrowdStrike

AI is a double-edged sword for businesses. While it offers numerous advantages, hackers and scammers will also have better tools at their disposal. The need for a top-notch cybersecurity stock is essential, and Gartner predicts that by 2028, one-quarter of enterprise breaches will be the result of "AI agent abuse."

CrowdStrike uses AI to detect threats and alert companies of breaches more quickly. It claims to have "the industry's most comprehensive AI-native defense."

CrowdStrike faced some negative publicity earlier this year due to an outage involving its software that affected businesses worldwide. However, the company attributes the issue to a problematic update rather than a breach or hack.

With CrowdStrike a leading name in cybersecurity and continuously investing in cutting-edge technologies to safeguard its clients, this is another promising stock to buy and hold. It isn't a cheap stock, trading at a forward P/E of more than 70, but its bottom line has been improving. As the business continues to scale, this multiple should decrease as its margins improve. If you're patient with the stock, CrowdStrike has significant potential for growth in AI over the long haul.

3. SAP

Trust issues in AI are becoming increasingly prevalent. It's crucial to have robust safeguards in place for governance to protect a company's trade secrets, financial data, and other sensitive information. Gartner forecasts that by 2028, 40% of companies will be using "Guardian Agents" to monitor and manage AI agents.

CrowdStrike can play a role in this, but software company SAP could potentially take a more significant role, as it can help define what these Guardian Agents should be looking for and how they should evaluate data to uphold financial controls. SAP is a well-established name in accounting and finance, and it can help businesses maintain data integrity and comply with necessary protocols while still benefiting from AI's efficiency.

SAP's enterprise resource planning solutions can automate tasks and provide rules to ensure tight controls are in place, regardless of whether it's a human user or an AI agent. The company trades at a forward P/E of 34, which may seem expensive for a company that grew sales by only 6% last year. However, it could be justified considering the stock's potential for future growth.

1. When considering investments in the tech sector, understanding the role of AI in finance is crucial. With SAP's enterprise resource planning solutions leveraging AI, they can help businesses automate tasks while maintaining tight financial controls, making it an attractive investment for those focusing on finance and technology.
2. For individuals who are interested in investing in the cybersecurity sector, CrowdStrike's use of AI to detect threats and alert companies of breaches is a significant advantage. This double-edged use of AI in cybersecurity makes CrowdStrike a strong candidate for long-term investment in the field of finance and technology.

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