Please ensure Javascript is enabled for purposes of website accessibility

This Is the Tech Investing Trend I'm Most Excited About Right Now

By Leo Sun - Mar 25, 2021 at 11:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Every long-term investor should own a few AI stocks.

The tech sector is filled with many promising secular growth stories, including driverless cars, automated factories, wearables, chatbots, and cloud services. However, one common theme links most of these next-gen markets together: artificial intelligence (AI).

Investors might associate AI services with intelligent robots, but the term generally refers to the ability to gather, process, analyze, and leverage large amounts of data to make informed decisions.

The global AI market could grow at a compound annual growth rate (CAGR) of 42.2% between 2020 and 2027, according to Grand View Research, as a growing number of industries deploy those services. Let's take a closer look at the AI market, spot the best ways to profit from its expansion, and see why it's the tech investing trend I'm the most excited about right now.

A drawing overlays a group of people using their smartphones, illustrating AI's role in different tools and actions.

Image source: Getty Images.

Automated efficiency experts

AI services help companies reduce their dependence on human employees, make decisions based on accumulated information, and streamline their operations. Companies like (CRM -2.40%), Palantir Technologies (PLTR -6.37%), and (AI -6.41%) all represent different variations of that secular theme.

Salesforce provides cloud-based CRM (customer relationship management), marketing, e-commerce, and analytics services to companies. Palantir's tools, which serve government and enterprise clients, gather and mine data on individuals and business processes to make quick decisions.'s AI-driven services help companies streamline their maintenance routines, optimize their inventories, and modernize their infrastructure.

Demand for all these services should increase as companies seek out fresh ways to cut costs and improve operating efficiency. That's why analysts expect all three companies to generate double-digit annual sales growth for the foreseeable future.

Estimated Revenue Growth (YOY)

Current Fiscal Year

Next Fiscal Year









Data source: Yahoo! Finance. YOY = Year over year.

Disrupting legacy markets

In addition to streamlining existing industries, AI tools can disrupt older markets.

Zillow Group (Z -11.69%) disrupted the traditional real estate listing market with AI services for price estimates and other features, while Lemonade (LMND -4.53%) deploys AI algorithms and chatbots to provide online insurance plans and process claims.  

That's why both companies have consistently generated robust revenue growth in the past, and why that momentum should continue in the future.

Estimated Revenue Growth (YOY)

Current Fiscal Year

Next Fiscal Year







Data source: Yahoo! Finance. YOY = Year over year.

AI algorithms are also disrupting older advertising and media markets. Targeted ads on Facebook and Alphabet's Google have displaced many traditional ad formats, while algorithm-driven streaming media platforms are replacing older ways of consuming content on radio and cable TV.

Data centers and driverless cars

Another way to profit from the expansion of the AI market is to invest in chipmakers. Data centers need high-end chips, especially GPUs, to process demanding machine learning and AI tasks.

NVIDIA (NVDA -4.90%), the world's largest producer of discrete GPUs for gaming, sells high-end GPUs to those data center customers. Its Tegra CPUs also power its Drive system for autonomous cars, which is already used by more than 370 auto and tech companies worldwide.

Companies that specialize in computer vision chips, such as Ambarella and Intel's Mobileye, will also benefit from the growth of the autonomous driving market over the next few years.

Other promising auto plays include Baidu, which develops the Apollo software platform for driverless cars, and Alphabet's driverless subsidiary Waymo.

None of these companies are "pure plays" on the AI market, but they'll all likely benefit from its secular growth over the next few years.

Plenty of choices between value and growth

The AI market offers plenty of opportunities for both value and growth investors. More conservative investors might stick with tech stalwarts like Salesforce and Alphabet, while more aggressive growth investors might prefer Palantir and Lemonade.

Simply put, there's no reason for investors to avoid the AI market, which will support many of the tech sector's hottest secular growth stories over the next few decades.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lemonade, Inc. Stock Quote
Lemonade, Inc.
$19.79 (-4.53%) $0.94, inc. Stock Quote, inc.
$156.47 (-2.40%) $-3.85
NVIDIA Corporation Stock Quote
NVIDIA Corporation
$160.70 (-4.90%) $-8.28
Zillow Group, Inc. Stock Quote
Zillow Group, Inc.
$36.52 (-11.69%) $-4.83
Palantir Technologies Inc. Stock Quote
Palantir Technologies Inc.
$7.50 (-6.37%) $0.51, Inc. Stock Quote, Inc.
$16.64 (-6.41%) $-1.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.