In what seems like the blink of an eye, artificial intelligence (AI) took the world by storm. As a result, many companies with strong positions in this emerging technology field benefitted from impressive valuation gains this year. Still, this revolutionary tech trend is just starting to unfold and more stocks are likely to see a boost.
To help investors profit from this incredible tech shift, two Motley Fool contributors were asked to highlight a top AI company with unstoppable competitive advantages. Read on to see why investing in these category-leading companies will likely prove hugely rewarding over the long term.
Meta Platforms proved it can deliver excellent profits
Parkev Tatevosian: Meta Platforms (META 0.43%) is an attractive stock right now largely because it's been on a seemingly unstoppable tear in 2023. That stock is already up 131% year to date. Even with that run-up, it's not too late for investors to buy Meta Platforms stock for the long run.
Meta still has plenty of untapped potential related to its AI efforts. The company boasts more than 3 billion daily active users of its social media apps, a figure that is still growing year over year. That's impressive. It already uses AI to enhance those apps and is working to incorporate even more AI technology into them as well as into new initiatives.
With the help of AI, Meta can make its apps more engaging and that will attract advertisers. Meta makes money by showing ads to people browsing the platform. If it can get users to spend an extra 10 minutes by keeping them interested, that will boost its ad sales.
Meta has already proven it can run the business with excellent profits. Between 2013 and 2022, its operating income exploded from $2.8 billion to $28.9 billion. If it can use AI to keep users engaged incrementally longer over the next decades, its profits are likely to stay elevated.
META PE Ratio (Forward) data by YCharts
Despite Meta's stock price rising 140% this year, it still trades at a reasonable forward price-to-earnings ratio of 25. Investors looking to capitalize on stocks that will benefit from AI have an excellent option in Meta Platforms.
CrowdStrike is a step ahead in the cybersecurity arms race
Keith Noonan: CrowdStrike's (CRWD 2.03%) AI-based cybersecurity software gets smarter with each new threat that it encounters. Once a threat profile on an attack has been established with one customer, it can be reused as many times as needed to assist other customers, thus helping everyone CrowdStrike serves.
With cyberattacks expected to become more advanced and more numerous, the adaptive capabilities of CrowdStrike's software will help it stay ahead of the curve -- and it looks like the company is still in the early stages of capitalizing on a massive opportunity.
Based on management's target for revenue of $3 billion this year, CrowdStrike is on track to win just 4% of its $76 billion total addressable market. The cybersecurity market remains highly fragmented, but the cybersecurity specialist is on track to continue gaining share and outpace growth for its industry.
CrowdStrike anticipates that the total addressable market (TAM) for its current service offerings will expand at a 13% compound annual growth rate over the next two years, rising from $76 billion this year to $97.8 billion in 2025. But moves to branch into new service categories stand to broaden the company's TAM even further.
With new product launches, future initiatives, and untapped cloud security opportunities accounted for, management forecasts that the business's TAM will explode to $158 billion in 2026. Thanks to its AI-powered edge in cybersecurity, CrowdStrike is poised to continue winning more of a rapidly expanding market.
Meta Platforms and CrowdStrike stand out as great AI buys
Meta and CrowdStrike are already leaders in their respective corners of the tech industry, and it looks like artificial intelligence will help compound their competitive advantages. If you're a growth-focused investor seeking to capitalize on the AI trend, both companies are worth considering as foundation-level portfolio components.
While the potential for short-term volatility in the market means that it's impossible to predict exactly how their stocks will perform in the near term, there's a good chance that those who take a buy-and-hold approach to investing in these companies will see strong returns over the long haul.
