Two Straightforward Artificial Intelligence (AI) Shares to Purchase with $260 in February

Two Straightforward Artificial Intelligence (AI) Shares to Purchase with $260 in February

In the modern investing world, artificial intelligence (AI) has been a standout segment for the past two years. Many investors are captivated by companies revolutionizing the field, such as chip supplier Nvidia and cloud computing titan Microsoft. However, the industry is expanding rapidly, and new opportunities are arising.

Two such companies are Palo Alto Networks and Upstart. Both are leveraging AI to deliver innovative products and enhance customer service. In February, both companies will report their latest quarterly results, which could ignite further growth in their stocks.

1. Palo Alto Networks: Pioneering AI-driven cybersecurity

With a market cap of $126 billion, Palo Alto is the world's leading cybersecurity company specializing in three platforms for enterprise customers: cloud security, network security, and security operations. The company embeds AI into these platforms to automate various tasks, from threat hunting to incident response.

The average enterprise is swamped by more than a thousand cybersecurity alerts daily, according to SentinelOne. Traditional human-led incident response systems are overwhelmed, creating unacceptable vulnerabilities. Palo Alto launched its Cortex XSIAM security operations platform, which employs AI algorithms to streamline these processes and ease administrative burdens.

One oil and gas company saw a 75% reduction in incidents requiring manual investigation with XSIAM. Another customer solved incidents 270 times faster, underscoring the power of Palo Alto's AI-powered solutions.

During Q1 of its 2025 fiscal year (October 2024), Palo Alto generated $2.1 billion in revenue, a 14% increase from the previous period. Its annual recurring revenue from next-generation security (NGS)-which includes AI products and services-soared by 40% to a record $4.5 billion.

Palo Alto's upcoming Q2 2025 results (reported mid-February) offer an opportunity for investors to gauge the company's progress. A potentially significant indicator will be whether the company raises its forward NGS revenue guidance, sending positive signals for its stock.

Long-term, Palo Alto aims to triple its NGS ARR to $15 billion by FY2030-a target that could drive substantial stock growth.

2. Upstart: Transforming lending with AI

Upstart developed an AI-powered loan origination platform that processes applications on behalf of partner banks. Leveraging AI, Upstart approves and denies loans more efficiently than traditional methods.

Upstart argues that traditional methods rely too heavily on outdated metrics like Fair Isaac's FICO score system-which has been in use for decades. Upstart's AI algorithm analyzes over 1,600 metrics, providing a more accurate assessment than traditional methods.

Upstart currently originates unsecured personal loans, car loans, and home equity lines of credit. Although demand for credit has been weak since 2022 due to rising interest rates, signs indicate improvement.

During Q3 2024, Upstart originated 186,786 unsecured personal loans, marking a 65% increase compared to the year prior. Upstart will report its Q4 2024 results on February 11, offering investors an opportunity to analyze its recent performance.

In 2025, analysts expect Upstart's revenue to surge by 37% to $820 million-a promising outlook considering the stock's current value is down 83% from its 2021 high.

The Federal Reserve has already lowered interest rates three times since September, with potential for two more reductions in 2025, leading to even better conditions for Upstart.

Additionally, Upstart has a massive potential market, with $3 trillion in annual loan originations. Having originated just $40 billion since 2012, it remains untapped by most of this opportunity.

1. Investors interested in AI-driven cybersecurity may want to pay close attention to Palo Alto Networks' upcoming Q2 2025 financial results, as strong revenue growth and potential guidance increases could indicate a promising outlook for the company's stock.
2. Upstart's Q4 2024 financial report, set to be released on February 11, will provide insight into the company's performance in the transformative lending space. With analysts predicting a significant revenue increase for 2025, investors can consider whether this AI-focused lender presents an attractive opportunity for investing in the finance sector.

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