Artificial intelligence (AI) capabilities have been advancing at a dizzying pace lately. In response to incredible leaps forward that are happening seemingly overnight, Tesla CEO Elon Musk has called for a temporary pause on AI development.
While it's possible that some restrictions may be put on artificial intelligence, it's unlikely that companies will forego the potential competitive advantages offered by this revolutionary tech. The genie is out of the bottle, and attempting to fight it could mean getting left behind. If you're looking to invest in stocks that are going to play key roles in pushing the artificial intelligence revolution forward, read on for a look at three companies that are poised to facilitate and benefit from AI's unstoppable momentum.
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1. CrowdStrike
Even in the unlikely event that major companies agree to take a pause on developing AI technologies, you can be absolutely certain that cybercriminals won't abide by such a treaty. Artificial intelligence has the potential to give rise to new types of cyberattacks and make launching large-scale, highly effective breach attempts much simpler. Accordingly, AI-powered cybersecurity technologies will need to continue evolving to meet these new threats.
CrowdStrike (CRWD -0.68%) has been a pioneer in applying artificial intelligence to the cybersecurity space. The company's Falcon platform for endpoint hardware protection uses AI to continually improve its identification and protection capabilities and becomes stronger with each new threat it encounters.
As the current market leader in endpoint-hardware protections and a first-mover in AI-powered cybersecurity, CrowdStrike is on track to benefit from a powerful network effect. The company's Falcon platform continues to improve as it encounters new threat data. It seems unlikely that the business will be unseated anytime soon.
With a price-to-sales ratio of 14.2, Crowdstrike stock is slightly more expensive than its top competitors. But with the stock trading down more than 53% off its high, CrowdStrike presents an attractive risk-reward profile for investors looking to benefit from the evolution of AI and the growing demand for cybersecurity services.
2. Alphabet
Thanks to its leadership in search, mobile OS, and other categories, Alphabet (GOOGL 0.55%) (GOOG 0.74%) is positioned to be one of the biggest winners of the AI revolution. In addition to fantastic technological and capital resources, the tech giant has tremendous advantages when it comes to data access. The company's Android operating system currently has an estimated 3.3 billion users around the globe, Google is the far-and-away leader in online search, and platforms including Gmail and YouTube are also leaders in their respective service categories.
Additionally, the company continues to look rock solid on a financial basis, despite macroeconomic pressures currently impacting the digital-advertising industry. Alphabet recorded a 21% free cash flow (FCF) margin in the fourth quarter, recording FCF of approximately $16 billion in the period.
The company also closed out 2022 with $113.8 billion in cash and equivalents against long-term debt of $14.8 billion. This gives it a very strong financial position to fund operations, pursue new growth initiatives, and seek potential acquisitions that can strengthen its overall ecosystem and help it branch into new categories.
GOOGL PE Ratio (Forward) data by YCharts.
With the stock trading at roughly 20.5 times this-year's expected earnings, Alphabet looks like a smart buy for long-term investors aiming to capitalize on the AI revolution. The company has nearly unrivaled technology and data advantages, and its strong financial footing puts it in a good position to invest in new artificial intelligence technologies and pursue potentially beneficial acquisitions.
3. Snowflake
If increasingly powerful algorithms can be thought of as the machine that will push AI forward, data is the fuel. The ability to access and analyze valuable data plays a key role in improving algorithms and powering strong performance for artificial intelligence applications. Snowflake (SNOW 2.53%) is a company providing services that allow customers to get a much more comprehensive picture of their AI projects.
Snowflake's Data Cloud is a data warehousing platform that makes it possible to combine and analyze information that's generated from otherwise walled-off cloud infrastructure services. For AI-adjacent businesses using a combination of services from Amazon, Microsoft, and Alphabet's siloed cloud services, these combination and analytics capabilities will only become increasingly essential. Given that the vast majority of enterprises are already using multi-cloud setups, Snowflake is poised to play a key role in pushing AI forward.
Snowflake stock has pulled back in conjunction with macroeconomic pressures that have caused investors to move out of companies with growth-dependent valuations. Even though the company's stock fell roughly 62% from its high, the data services specialist still trades at roughly 17 times this-year's expected sales and roughly 34 times expected non-GAAP (adjusted) free cash flow.
There's no doubt about it: Snowflake is a high-risk, high-reward stock. And the company's category-leading data services have the business on track to play a crucial role in the AI revolution.
