The rise of artificial intelligence (AI) presents a massive opportunity for growth investors. While some AI stocks have already generated tons of excitement, others still trade at big discounts compared to previous highs.
Snowflake (SNOW 3.69%) and CrowdStrike (CRWD 2.03%) are among the most intriguing names in today's batch of potentially underappreciated AI players. Snowflake stock is trading down roughly 60% from its high, while CrowdStrike is off approximately 55% from its valuation peak.
Read on to see why these two AI stocks could be worthwhile portfolio additions and which one is likely the better buy for most investors.
The case for Snowflake
Snowflake's data-warehousing platform and analytics tools were built from the ground up with machine-learning and AI applications in mind. The company's Data Cloud platform makes it easier to integrate data from otherwise walled-off sources, and this capability will likely be increasingly sought after as AI and machine-learning technologies become ever more important in the private and public sectors.
Data is the fuel that powers AI algorithms and allows them to generate useful results. The ability to access, analyze, and integrate data also plays a key role in improving algorithmic capabilities. Snowflake's position as a leading provider of data combination, storage, and analytics services has the company on track to be a big winner from unfolding AI trends. The business has been serving up strong results even with the benefits of the AI revolution likely in its early stages.
Last year, Snowflake grew its product revenue roughly 70% to reach $1.94 billion, and it posted roughly $485 million in non-GAAP (adjusted) free cash flow -- good for a margin of about 25%. While the company expects macroeconomic pressures to result in product revenue growth decelerating to 40% this year, that would still represent encouraging business momentum, especially given that management expects a repeat of last year's 25% adjusted free-cash-flow margin.
Snowflake is poised to play an influential role in the progression of AI technologies, and the data services provider is likely just scratching the surface of its long-term growth opportunity. For the 2026 calendar year, the company estimates that it will have a total addressable market of approximately $248 billion. Management forecasts hitting $10 billion in product revenue for the company's fiscal year ending January 2029. But Snowflake should still have a huge addressable market ahead of it, and early leadership in AI-related data services could give way to incredible long-term performance.
The case for CrowdStrike
While AI has recently blown up as a headline-dominating topic of discussion, the technology has been at the center of CrowdStrike's growth story since the company's founding. CrowdStrike's Falcon platform uses artificial intelligence to adapt to new forms of cyberattacks as it encounters them, and the platform's adaptive capabilities have already set into motion the benefits of a powerful network effect.
Once the Falcon software identifies and gathers data about a particular kind of attack, it can reuse that information in future encounters. Every customer on CrowdStrike's network benefits as new threat profiles are built, and the company's early leadership in AI-powered cybersecurity could develop into a nearly insurmountable competitive advantage. AI technologies can also be used by bad actors, and businesses and institutions will need every edge they can get to fend off a rising tide of threats.
The long-term demand outlook for top cybersecurity players is incredibly promising, and CrowdStrike's recent business performance shows that the company is scoring big wins in its category. Revenue increased 54% in the company's last fiscal year, and adjusted earnings per share jumped 130%. Even with a growth-dependent valuation, CrowdStrike is presenting an attractive risk-reward profile.
CRWD PE Ratio (Forward) data by YCharts
While both companies have growth-dependent valuations, CrowdStrike is at a more advanced stage of its profit-generating journey compared to Snowflake. Accordingly, the cybersecurity specialist's stock looks less risky on a price-to-earnings basis.
CrowdStrike also has an edge in terms of adjusted free-cash-flow margins. The company has recorded an adjusted free-cash-flow margin of at least 30% for three years running, and it expects to meet that performance benchmark once again in its current fiscal year. With impressive sales growth, strong margins, and promising industry tailwinds at its back, CrowdStrike could deliver huge wins over the long term.
So which stock is the better buy?
For risk-tolerant, long-term investors looking to build exposure to AI stocks that can deliver incredible returns, I think that buying both Snowflake and CrowdStrike stock would be a smart move. Both companies have category-leading service offerings and look poised to benefit from powerful trends, and each business has a potentially massive runway for long-term expansion.
But if you're only interested in owning one of these AI growth stocks, I would give the nod to CrowdStrike. Compared to Snowflake, the cybersecurity specialist's valuation profile looks less risky while still offering plenty of explosive upside potential. Both stocks are high-risk, high-reward plays, but CrowdStrike's balance looks more favorable right now.
