By the end of the decade, artificial intelligence (AI) will likely be so widespread that it will be hard to imagine a time without it. Experts in the field expect AI to play a central role in a diverse array of industries such as pharmaceutical research, transportation, security, and waste management, among many others. As such, AI might represent a once-in-a-lifetime type of opportunity for investors.
Which AI stocks are top buys right now? The digital content creation specialist Adobe (ADBE 0.87%) and the high-speed networking juggernaut Arista Networks (ANET -0.02%) are both poised to directly benefit from the surge in demand for all things AI. Read on to find out more about these top AI growth stocks.
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Adobe: The leader in digital content creation
Adobe effectively created the digital content creation software market. And though numerous competitors have popped up over the years, it still dominates this high-growth market by a wide margin.
The company's remarkable ability to stave off competitors stems from its laser-like focus on innovation. For instance, Adobe was one of the first companies in the space to integrate artificial intelligence (AI) into its content creation ecosystem.
To wit, the software giant recently launched Firefly, a family of creative generative AI models designed to make popular programs like Photoshop and Illustrator more user-friendly. With Firefly, users can create, or refine, AI-generated content with simple text prompts.
Why is Firefly a big deal? While the basic functions of Adobe's digital content creation programs are fairly intuitive for first-time users, the more powerful features built into Photoshop, Illustrator, and Premiere Pro have fairly steep learning curves for those who lack a formal background in graphic design. Firefly makes these advanced features easily accessible to all users.
Bottom line, Adobe ought to experience healthy levels of growth in the years ahead thanks to generative AI tech like Firefly. Firefly, and future iterations thereof, should help the company both retain current users and compete effectively across the spectrum of emerging markets within the ever-expanding realm of digital content creation.
Arista Networks: AI represents a massive opportunity
Arista is the market share and technology leader in high-speed networking. The company services both cloud and enterprise networking customers. Its ability to penetrate these high-value markets, and subsequently retain customers, can be attributed to its novel Extensible Operating System, or EOS.
EOS simplifies network management by utilizing a single operating system across hardware components -- switches, routers, etc. Additionally, Arista also sports industry-leading profit margins due to its focus on proprietary software solutions and the use of merchant silicon in its hardware.
Arista's shares presently trade at 27 times forward earnings. Any way you slice it, that's not exactly a bargain valuation. However, the march to integrate AI into daily life should be a boon for Arista's top and bottom lines in the years to come.
The key reason is that most AI-based computation systems fundamentally require high-speed networks, with little downtime, to function properly. Providing customers with the components to build reliable, high-speed networks is Arista's bread and butter. Hence, the company should be well-positioned to benefit from the gradual integration of AI into nearly every aspect of computing.
That being said, Arista's commercial opportunity stemming from computationally intensive AI workloads is hard to quantify at this early juncture. As such, prospective investors should probably view the gradual spread of AI as a long-term tailwind for the company, not a fundamental pillar of value creation.
