If you ever wondered what it would feel like to invest in Amazon (AMZN -0.17%) 20 years ago, investing in companies focused on artificial intelligence today has the potential to reproduce that feeling. Research firm International Data Corporation, which is owned by The Blackstone Group (NYSE: BX), expects that global AI spending will jump from $328 billion in 2021 to more than $554 billion in 2024, a compound annual growth rate (CAGR) of 17.5%.

AI is quickly modernizing dozens of industries, making them more efficient. Two industries in particular, insurance and business automation, are being disrupted by two companies focusing on using AI and machine learning to optimize efficiency: Lemonade (LMND 1.43%) and UiPath (PATH -0.32%). And if investors hold these companies for the next decade and longer, they could see incredible returns.

AI button on a circuit board.

Image source: Getty Images

1. Lemonade

Some of Lemonade's insurance competitors like Aflac (AFL 1.05%) or Progressive (PRG -0.23%) were founded over 65 years ago, so they were not built for the massive volume or type of data that has been extracted from modern technology. Lemonade, on the other hand, was built surrounded by data and modern technology, and it decided to make those elements a cornerstone of its business.

With AI, Lemonade has reinvented many parts of the insurance process, including how consumers are approved and file claims. Its AI "Maya" can approve or deny consumers in two minutes. AI "Jim" can pay out consumers in as little as three seconds. They do this by analyzing data from past customers and other data sources to properly quantify risk and accuracy. 

The company's use of AI has done two things. First, it has made customers very happy: Lemonade's net promoter score (a measure of customer satisfaction on a scale from -100 to +100, with anything above 70 recognized as "world class") is 70. This is much higher than some of its legacy competitors, whose scores are often in the single digits or negative.

Second, its AI has allowed the business to dramatically lower claims payments. Its gross loss ratio (claims paid out as a percentage of earned premiums) has slowly decreased over the years, reaching 74% in the most recent quarter.

These two benefits from AI have allowed the business to see immense growth. Its customer count reached 1.2 million in the second quarter of 2021, growing 48% from the year-ago quarter, and the premium per customer increased 29% to $246 over the same period. These two factors combined for a staggering increase in its in-force premium of 91% to $297 million in the second quarter compared to the year-ago quarter.

The company faces intense competition from legacy companies and young start-ups, and its valuation is sky-high: nearing 40 times sales. Lemonade's potential, however, with cross-selling and product expansion is immense and growing fast, which could make it worthwhile for investors at this price. In the second quarter of 2020, the company only had homeowners and renters insurance, but now it has also tacked on life and pet insurance. What is even more impressive is that within just a year, those two products now make up 14% of the company's total revenue.

Lemonade's use of AI and data has been an important factor in its success. With a continued effort to increase its product offerings and its cross-selling -- shown through its premium per customer -- the company could see strong, sustained growth for many years to come.

2. UiPath

UiPath uses artificial intelligence for something very different, but it leads to the same results: increased speed, efficiency, and customer satisfaction. The company creates robots that use AI to automate repetitive tasks within companies, freeing up real employees to work on other, non-automatable tasks. This deep use of AI and automation has been very successful. UiPath has 9,100 customers and counts 80% of the Fortune 10 and 61% of the Fortune 500 among them.

The company's use of AI in its robots and in tasks that can be automated has been amazingly successful: Revenue for the second quarter of 2021 reached $196 million, which grew 40% from the year-ago quarter. Its second-quarter 2021 annualized renewal run rate (ARR) revenue reached $726 million, which grew 60% over one year ago. The second-quarter 2021 net retention rate was 145%, meaning that its customers were willing to pay 45% more this year for more of its services. 

The company thinks it is facing a $60 billion opportunity, representing growth of 252% from today. And as the market leader, UiPath could take advantage of the transformation of automation within the workplace. It will face heavy competition as the market grows, but right now its success is unmatched. Investors are paying up for its success (35 times sales), but if UiPath can continue growing sales at a rapid rate while keeping its retention rate high, it could become much bigger and grow into that valuation.